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Cartoon of the Day: Precious Metals

Cartoon of the Day: Precious Metals - gold cartoon 05.11.2016

 

It's been a tumultuous 2016 for investors but there's always a bull market somewhere. Gold is up more than 20% this year.


6 VIDEOS: 'About Everything' With Renowned Demographer Neil Howe

Takeaway: In the videos below, Neil Howe covers topics like the surge in mental health services & Millennial to Boomer behavioral differences.

6 VIDEOS: 'About Everything' With Renowned Demographer Neil Howe - neil howe headshot

 

In case you missed it, world-renowned demographer and Hedgeye Managing Director Neil Howe hosted the sixth installment of his About Everything series yesterday, discussing the long-term secular decline of the cable industry. For the record, Neil's work has garnered the resounding praise of such polar political opposites as Vice President Al Gore and former House Speaker Newt Gingrich. (Click here to read Howe's complete biography.)

 

During live About Everything broadcasts, Howe dissects a topic's key underlying demographic trends and distills the broader implications for investors and their portfolios. Below are the six complimentary video installments, in their entirety, along with Howe's accompanying written pieces. The wide-ranging topics covered include the surge in mental health services, the demographic drivers behind "less interest in things" and the behavioral differences between Millennials and Baby Boomers.

 

Enjoy!

 

1. About Everything: Does Cable Have a Future? (5/10/2016)

 

 

In this complimentary edition of About Everything below, Hedgeye Demography Sector Head Neil Howe writes about why the cable and satellite TV industry's glory days are behind it. In it, Howe dissects the underlying demographic drivers and explains the broader implications for investors. 

 

Click here to read Howe’s associated About Everything piece.

 

2. About Everything | The Surge in Mental Health Services (4/28/2016)

 

 

In this complimentary edition of About Everything, renowned demographer and Hedgeye Sector Head Neil Howe discusses why "mental health services spending is riding a long-term attitudinal shift that has brought mental health issues out into the open." Howe explains why it's happening and explores the broader societal and investing implications.

Click here to read Howe’s associated About Everything piece.

 

3. About Everything | The Golden Age of Home Improvement (4/24/2016)

 

 

In this complimentary edition of About Everything, renowned demographer and Hedgeye Sector Head Neil Howe explores why consumer spending on home improvement is outstripping GDP growth and the key demographic trends behind this shift.

 

Click here to read Howe’s associated About Everything piece.

 

4. About Everything | A Perfect Storm of Trends Points to Less Interest In "Things" (4/18/2016)

 

 

In this complimentary edition of About Everything, Hedgeye Demography Sector Head Neil Howe discusses why manufacturers and retailers should prepare for the possibility that “goods” aren’t coming back anytime soon. And, even when (and if) the industrial sector emerges from its long-term atrophy, the underlying framework of the “old economy” will look entirely different than what we see today.

 

Click here to read Howe’s associated About Everything piece.

 

5. About Everything | When Less Is More (4/13/2016)

 

 

In this complimentary edition of About Everything, Hedgeye Demography Sector Head Neil Howe discusses why "we’re entering a new era in which simplicity — not choice — is the hallmark of a cutting-edge brand." 

 

Click here to read Howe’s associated About Everything piece.

 

6. about everything | Millennials Gone Mild: The Investing Implications (3/30/2016)

 

 

In this complimentary edition of “About Everything,” Hedgeye Demography Sector Head Neil Howe discusses the sweeping behavioral changes of Millennials (“Generation Yawn”) compared to prior generations, and spells out what it all means for investors and companies around the globe.

 

Click here to read Howe’s associated About Everything piece.


Clinton's Latest Attack On 'The King Of Debt'

Below is a brief excerpt from Hedgeye Potomac Chief Political Strategist JT Taylor's Morning Bullets sent to institutional clients each morning. For more information on how you can access our institutional research please email sales@hedgeye.com.

IS IT JUNE 7 YET?

Clinton's Latest Attack On 'The King Of Debt' - hillary lates

 

With Bernie Sanders' victory in WVA last night, Hillary Clinton is looking to run the clock out this month - without attracting further damage to her general election chances.  We've said before that the May primary calendar favors Sanders, but with the Republican field cleared and Donald Trump the presumptive nominee Clinton is unexpectedly (and unpreparedly?) finding herself under attack by him as well as Sanders - precisely at the time when she needs to unite the Democrats. Sanders is poised to win in OR next Tuesday and Clinton is now refocusing her attention on KY (also next Tues) where the coal comments that cost her WVA - which she won in a landslide in 2008 -  are now cutting into her support there.

CLINTON TALKS TYCOONS

 

The Clinton campaign floated a new attack on Trump, painting the billionaire as a heartless tycoon. No doubt this attack is an attempt to convince the "Never Hillary" Democrats, who feel Trump may provide the shakeup they so desperately want from Bernie, that Trump is less Bernie-like than Hillary. The jury is still out on whether this new approach will actually work to bring Bernie Democrats back into the fold (or backfire a-la-Goldman-speeches).

KING OF DEBT

Clinton's Latest Attack On 'The King Of Debt' - make america

 

Trump continued to blast past criticisms that his tax plan would raise the national debt by $45 trillion over 20 years and provide $3.2 trillion in tax breaks to millionaires, emphasizing that everyone would get tax breaks. He suggested he would increase taxes on the wealthy, but then said they would "pay less than they pay now" and then "On my plan they're going down. But by the time it's negotiated, they'll go up," which definitely cleared things up.  Ahem.  

 

He also reiterated his title as "King of Debt," with comments suggesting a Trump Administration might not fully honor Treasury Department bonds. Never one to create confusion, Trump clarified to, "I understand debt better than probably anybody. I know how to deal with debt very well. I love debt -- but you know, debt is tricky and it's dangerous, and you have to be careful and you have to know what you're doing." We're sure global markets are breathing a sigh of relief for the clarification.


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A Brief Update On Earnings Season & Sector Performance

Takeaway: As Macy's (M) & Disney (DIS) missed earnings numbers and shares implode this morning, here's a critical update on earnings season.

A Brief Update On Earnings Season & Sector Performance - Earnings cartoon 11.03.2015

 

A grand total of 446 of 500 S&P 500 companies have reported earnings, aggregate sales and earnings growth is down -2.4% and -8.5% respectively.

 

A few callouts:

 

  • 6 of 10 sectors have reported negative sales and earnings growth;
  • Energy leads the laggards, with sales and earnings plummeting -31.6% and -108.7% respectively;
  • Financials & Materials earnings growth is down -14.3% and -15.1% respectively;

 

A Brief Update On Earnings Season & Sector Performance - earnings season 5 11

 

Meanwhile, looking at sector Performance:

 

  • Our Macro team's favorite long sector of 2016, Utilities (XLU), continues to outperform, 13.1%;
  • Our favorite short, Financials (XLF), is down -2.3% and is the second worst performing sector;
  • Other callouts: Healthcare (XLV) is having a rough 2016 and Energy (XLE), which had a rough start to the year, is the second best performing sector. 

 

A Brief Update On Earnings Season & Sector Performance - sector performance 5 11


Daily Market Data Dump: Wednesday

Takeaway: A closer look at global macro market developments.

Editor's Note: Below are complimentary charts highlighting global equity market developments, S&P 500 sector performance, volume on U.S. stock exchanges, and rates and bond spreads. It's on the house. For more information on how Hedgeye can help you better understand the markets and economy (and stay ahead of consensus) check out our array of investing products

 

CLICK TO ENLARGE

 

Daily Market Data Dump: Wednesday - equity markets 5 11

 

Daily Market Data Dump: Wednesday - sector performance 5 11

 

Daily Market Data Dump: Wednesday - volume 5 11

 

Daily Market Data Dump: Wednesday - rates and spreads 5 11


M/FOSL | One is a Fossil, the Other is FOSL

Takeaway: Though FOSL is just scary, the franchise lost far more EV then its prospects suggest. Macy’s, however, hasn’t lost enough.

Now THIS Is A Massive Bifurcation

Most people admittedly don't look at Macy's sales trends in this rather simplistic way. But sometimes simplifying things is all it takes to see the truth. Specifically, we're looking at Macy's sales comps compared to Retail Sales as reported by the government -- and the historical correlation is rather spot-on. Macy's is a bit more volatile, as it should be, but much tighter than we think most people would otherwise suspect.  That is, until now. Macy's -- the bellwhether name in the group -- started to trend down in 2Q of last year while the rest of retail picked up. Not major -- but enough to notice. But year-to-date in 2016 that comparison completely blew out. We'd love to hear Terry Lundgren address this one. Maybe they'll give the 'ol "we don't sell what people increasingly want to buy" answer. We give 'em credit for owning up. But it does nothing to persuade us from shorting the stock. 

M/FOSL | One is a Fossil, the Other is FOSL - 5 11 2016 chart1

 

IS THIS FOSSIL PETRIFIED?

It's been a while since we've wanted to get behind a story this badly. Fossil is THE dominant player in the designer watch business. It's historically had very high, and (what we thought) were sustainable margins, with industry-leading ROIC and ROE. Management has always been easy to back -- as it's almost invariably made the right calls. But the past two years have simply been a slow-motion horror show. Consider this…

 

In 2014 FOSL earned $7.10, with consensus expectations  for 2016 above $9.00. Well...those two years have come and (almost) gone, and now the company is guiding toward a number as low as $1.80. That's an 80% cut in earnings expectations -- and roughly an 80% drop in the stock. In other words, it hasn't gotten any cheaper along the way. We'll see how it trades today, as we're likely to give up a few multiple points.

 

Analytically, this is the kind of name we LOVE standing behind on a major whiff like this. But our main concern is that the company does not appear to know what it wants to be. We don't agree with the shift to wearables (a fitBit/iwatch competitor), as it's a 'me too' category with low barriers to entry, that's attracting new competitors that use it as a loss leader for other parts of the business.

 

And then to hear management say "Our biggest objective in all of this technology stuff is really to disrupt the watch business."… What? Did they really say that?  That's like saying [Our core business is designer watches, but we're entering this low margin category with the sole purpose of disrupting the very business that pays for us to turn the lights on every morning].

 

Are we taking that out of context? We really hope so, because that's how it sounded.

 

But in the end, as long management gets its head screwed on straight, which we have a funny feeling its shareholders will make happen, the question comes down to what this watch franchise is worth. It was worth over $10bn 2 years ago. Did over $8bn in enterprise value justifiably vanish forever?  If you're going to make the argument that no future generations will ever wear a watch with an hour and a minute hand, then yes, it is gone forever. But we don't buy that extremely weak argument for a minute.

 

Are we anxious about this? Yes. We hate retail turnarounds. They're painful. But our gut on this is that it's not as broken as the stock price suggests.

 

FOSL is officially on our Vetting Bench -- Long Side.

M/FOSL | One is a Fossil, the Other is FOSL - 5 11 2016 chart2

 

RH - RH appointing Eri Chaya, Karen Boone, and Demonty Price as Co-Presidents

(http://ir.restorationhardware.com/phoenix.zhtml?c=79100&p=irol-newsArticle&ID=2167223)

 

SPLS, ODP - Staples and Office Depot merger agreement terminated -- SPLS initiates cost-cutting plan, will close at least 50 N.A. doors and explore strategic alternatives for Euro operations

(http://www.businesswire.com/news/home/20160510007030/en/)

 

UA - Stephen Curry became the NBA's first unanimous Most Valuable Player on Tuesday, Under Armour unveiled a new MVP shoe.

(http://footwearnews.com/2016/focus/athletic-outdoor/stephen-curry-unanimous-nba-mvp-under-armour-curry-mvp-back-2-back-pack-220160/)

M/FOSL | One is a Fossil, the Other is FOSL - 5 11 2016 chart3

 

WMT - Wal-Mart will sue Visa for right to require PIN # for more secure debit transactions --company pinching pennies as it invests to fend off growing online competition

(http://www.wsj.com/articles/wal-mart-sues-visa-over-chip-enabled-debit-card-transactions-1462906677)

 

SQBG - Sequential brands acquiring GAIAM Yoga brands for $146mm

(http://footwearnews.com/2016/business/mergers-acquisitions/sequential-buys-acquires-yoga-brand-gaiam-220328/)

  

AMZN - Amazon announces Video Direct, a self-service video streaming platform to be included in Prime package -- also introduced AVD Stars program, which will give content creators a share of $1mm/month bonus pool

(http://www.businesswire.com/news/home/20160510005558/en/)


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