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An audio-only replay of today's show is available here.
In this complimentary edition of About Everything, Hedgeye Demography Sector Head Neil Howe discusses the media hype surrounding virtual reality versus "the next big thing [that] may already be sitting in your pocket: augmented reality." Howe breaks down the key takeaways and explains the broader implications for investors.
“I don't know much about Americanism,
but it's a damn good word with which to carry an election.”
- Warren G. Harding
SHUFFLING THE DECK CHAIRS ON THE TITANIC: Donald Trump’s campaign is undergoing a major overhaul...again. This time with an addition of two top officials to oversee his sinking campaign and bringing aboard conservative Brietbart news head/former Goldman investment banker who will serve as chief executive as well as a veteran Washington pollster who will take the helm as the traveling campaign manager. Paul Manafort, who has been in the spotlight for damaging stories with respect to a former client, will stay on as campaign chairman. You’re going to hear a lot about the importance of Trump’s latest pivot in the coming days as he’s has come to the realization that his campaign is at a crisis point with the election slipping away and a change in strategy is needed. If Clinton is continuously hit with damaging email revelations and Trump stays mostly on message, a comeback could be in the making - but don’t count your chickens just yet - a teleprompter and a campaign shakeup don’t mean a thing unless he stays on a disciplined course.
CHANGE IN PLANS: Hillary Clinton and her super-Pac, Priorities USA, are suspending campaign ads in VA, CO, and PA as she’s posted healthy leads in quadrennial battleground states, making it an easy decision to decamp and focus resources elsewhere. Clinton and her team will alter her blueprint and reach out to new voters through expanded voter registration and GOTV efforts in many key states. They see an opportunity to not only win this election, but also the chance to increase the probability of Democratic victories down the road by registering voters now. Diverting funds to GOTV outreach is expected to help inoculate Clinton from Democrat complacency setting in should the race not tighten up going into Election Day.
TICK-TOCK, TICK-TOCK: With only 82 days left until Election Day, time is running out for Trump. Polls have him trailing Clinton by as much as 9 points nationally…and let’s not even get into state polls. But his victory over an impressive roster of Republican candidates during primary season showed that he can’t be fully counted out and underscores the political elites repeated underestimation of his strengths - yet his own troubles add to his sagging poll numbers daily. One opportunity to improve his standing may be right around the corner – the first of the three presidential debates scheduled for late September followed by two more in October.
DREAM ON: We don’t mention Bernie Sanders much anymore, but it’s worth noting that he and his supporters are still critical to winning the 2016 election. The Sanders camp is a prized possession for Clinton and is now committed to traveling all 50 states to stump and raise money for her in addition to down-ballot races. The harmony amongst the Sanders and Clinton campaigns and the DNC is vital to helping the party win the election (think unity, fundraising, message), especially after a rocky relationship between Sanders and former DNC Chair Debbie Wasserman Schultz throughout the primary. The 50-state strategy is set to build the party up for a massive influx of Senate, House, and “local sheriff races” that are up for grabs in 2018, 2020, and so on.
BILLS ARE COMING DUE: Congress returns to DC in just under three weeks and despite it being in the thick of election season, they must divert their attention to pass a continuing resolution by October 1 to prevent a government shutdown. Congress hopes to pass a six- to eight-month CR, setting budget caps at levels enacted from last year, but with the bulk of Washington devoted to the presidential race, we can only hope Congress keeps their eye on the prize and follows through.
THE TRUTH IS STRANGER THAN FICTION: You can’t make this stuff up. The Bank of Japan is now a top five holder in 81 of 225 companies in the Nikkei. Meanwhile, we’re up to $13.4 trillion in negative yielding bonds globally (up from $13.1 trillion last week). All hail central-market planning! This should end well. No matter the unique brand of central bank shenanigans we’re talking about, all have failed to alleviate slowing economic growth. The bond market knows this. A classic #GrowthSlowing indicator is the compression of the spread between 10-year and 2-year sovereign bond yields. On that score, the U.S. Treasury 10s/2s yield spread sits at 83 basis points (-39bps year-to-date), the U.K. equivalent is 42 bps (-89bps YTD), German is 58bps (-33bps), and Japanese is 12bps (-16bps). Can central planners save the day? Unlikely.
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Takeaway: We're buying into what we hope will be a bigger model transition, but if P doesn't execute, growing take-out pressure should buoy the stock
SUMMARY: We're not fans of P's ad-supported model, but mgmt's recent/recurring comments around up-selling its users along the demand curve suggest P may see the ad model as more of a funnel rather than a longer-term opportunity, even though mgmt would never publicly admit to it. We're hoping P's interactive foray is part of a concerted push to prioritize the sub model, but the longer-term sub opportunity really depends on how aggressively P plans to pursue it. However, we're going long the initial-year ramp of its interactive/expanded subscription launch, with expected headlines around direct license agreements likely propelling the stock higher in the interim. But if P can't get its interactive deals in place in order to launch by 4Q16/1Q17, we expect increasing take-out pressure and/or speculation to buoy the stock, if not force P to entertain offers. We're adding P as a Best Idea Long with an expected holding period through 2017. We will be hosting a call Thursday, August 25th at 1pm EDT to run through our analysis in more detail.
Let us know if you have any questions or would like to discuss in more detail.
P | Fixing the Story
04/06/16 08:47 AM EDT
P | Call Option? (2Q16)
07/22/16 08:05 AM EDT
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