In this Capital Brief video Q&A, Hedgeye Potomac Chief Political Strategist JT Taylor the recent shakeup in Donald Trump’s campaign team and a shift in strategy for Hillary Clinton.
"The chief executive and former chairman of Monte dei Paschi di Siena are under investigation for alleged market manipulation and false accounting, casting a cloud over Italy’s embattled lender nearly three weeks after it agreed to a dramatic €5bn rescue package," the FT reports.
"It is with confidence in the judicial system and serenity about the correctness of our actions that I await the quick clarification of the situation," writes CEO Fabrizio Viola in a statement. "I cannot hide that it is emotionally difficult for me as well as for the bank, considering the enormous efforts of these past four years to restore the bank to health, to witness further negative effects from past events and other people's actions."
Check out the struggling Italian banks dragging down the EuroStoxx 600 Bank index, with Italian banks such as UniCredit, Banca Popolare dell'Emilia Romagna and Banca Popolare di Milano Scarl down as much as 6%.
And yet, the ECB Minutes from July 21 show continued use of phrase “it [ECB] would act by using all instruments available within its mandate.” To be sure, the ECB's negative interest rate policy will continue to exacerbate existing problems in the Eurozone's banking system.
Look out below!
Takeaway: Winners find a way to win. But TGT points fingers while #failing to reinvest for growth.
Editor's Note: Below is a brief excerpt from an institutional research note written by Hedgeye Retail analyst Alexander Richards. For more information about our institutional research contact firstname.lastname@example.org.
The obvious place to start the conversation on TGT would be on the numbers, and the company gave us plenty of ammo to poke holes in the print this morning. But we think the far greater concern for the long-term health of this company is the lack of definable plan or any clear insight by the management team as to what actually caused the worst quarterly comp number since the data breach and subsequent guide down for 2H16.
We heard a lot of excuses, everything from Apple products losing their cache, to deflation, e-commerce pressure, and soft Rx traffic. Which all may be legitimate in their own right – but we have a NEWSFLASH for Cornell and team...
This is something we like to call RETAIL. The environment/consumer isn’t going to throw anyone a bone, especially at the tail end of a seven year economic expansion. In this sport, only losers point fingers. Stocks that make investors money on the long side find a way to win. Target is doing the opposite.
All in, we think this is all very characteristic of a management team playing defense instead of offense. Need further evidence? How about 2 consecutive quarters of earnings beats generated by cost cuts and share buy-backs with the stock at or near all-time highs. We’d argue that the team in Minneapolis would be better served missing expectations and taking down numbers by 2x the rate we saw today in order to build a superior platform from which to grow.
That may sound harsh, but after running through the numbers and sitting through the 60-minute conference call, we were still left asking what actually happened? In the absence of a clearly articulated answer from the TGT C-Suite. Meanwhile, we think Target is underinvesting in its business at a time when the Retail industry is becoming more competitive.
We expect Target to continue to lose market share.
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Takeaway: Mail Call; Scorched Earth Policy; Fish Or Cut Bait
Editor's Note: Below is a brief excerpt from Hedgeye Potomac Chief Political Strategist JT Taylor's Capital Brief sent to institutional clients each morning. For more information on how you can access our institutional research please email email@example.com.
Inboxes on Capitol Hill are full of unread Clinton emails having received the Clinton-FBI interview notes. The Republican caucus is now sifting through pages of detailed summaries, inspecting every nook and cranny for a smoking gun. You could see this coming from a mile away - it’s an election year and Republicans are slipping and have little to show on the accomplishment front for the past seven months. No new findings are expected, but the House Judiciary Committee plans to press the FBI in next month on allegations that Clinton committed perjury. As we’ve seen in the past, Republicans do have a tendency to overextend, and while it truly does deserve a vetting, let’s hope it doesn’t supplant the duties of Congress (pass a budget).
SCORCHED EARTH POLICY?
Freshly-minted Campaign Chair Steve Bannon’s mission is almost perfectly aligned with Trump’s – he’s a rabid fighter, enraged by Washington and Wall Street insiders, the Republican establishment and the Clintons. Known as a devil-may-care conservative, Bannon’s populist and nationalist sympathies reflect his longstanding disgust with both major political parties, which perfectly outlines his overall objective - disrupt the narrative. Bannon has been floating around the campaign for a while now, and is expected to be an expansion of Trump’s mind and values. With the Republican party also in his crosshairs, the Trump campaign may widen the gap between themselves and the party, and run their campaign however they may choose.
FISH OR CUT BAIT
Usually a campaign shakeup this late in the game shows a struggling candidate righting the ship, but not here - more Trump is expected, and the move is irking Republicans. A letter, signed by more than 120 Republicans, warned the RNC that Trump is a threat to House and Senate seats, and the RNC should refocus resources to down-ballot races instead. The RNC is standing by Trump…for now, and won't make a decision until the fall. Not wasting any time, Republican PACs are investing heavily in down ticket races, while ignoring the presidential campaign. With the final leg of the election kicking off after Labor Day weekend, the RNC will need to make a final decision – keep him or toss him back in the water. Either way, the party is likely to feel the repercussions for cycles to come.
Takeaway: A closer look at global macro market developments.
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Takeaway: Lipper is reporting another -$4B in outflows from U.S. equity mutual funds while passive equity funds took in another +$4.3B WoW.
The war on active management continues with U.S. equity beta trouncing most strategies YTD.
This morning, Lipper is reporting another -$4B in outflows from U.S. equity mutual funds while passive equity funds took in another +$4.3B WoW. We’ve written extensively about the upside capitulation we’re seeing in the SPX futures and options data and via the reversal in style factor performance – which itself reeks of a massive career-risk driven chase.
With high beta stocks up +19% and Utes down -30bps since the June 27th Brexit v-bottom, we’re again starting to see opportunity on the long side of lower-for-longer strategies for those investors who’ve missed the big move.
Take a look at the style factor breakdown below:
***Editor's Note: The snippet above is from a note written by our Macro team and sent to subscribers this morning. Click here to learn more.
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