Domestic Pigs (Continued)...

One of the great advantages of being in my seat now versus the one I sat in while I was on the buy-side is that I have the opportunity to position myself at the hub of an exclusive research network – our own.


Many buy-side analysts and portfolio managers often share their research findings/anecdotes with our team real-time. Given that we don’t have a prop desk or run our own fund on the other side of client trades, I tend to get better information than I used to get.


Here’s a great note from one of Boston’s star senior buy-side analysts about how state finance really works.

Thanks again for all of your research contributions. We appreciate every one of them.




Unedited –




I have been looking at a house in Boston suburb, but realized that close to 1 acre of the 1.3 acres is on wetlands or restricted land.  So I went to town hall and had a # of eye opening discussions.   


First I went to Conservation and learned that the assessed value was already using a 5% discount b/c of the restrictions on the land, so I wouldn’t be able to get a tax break.    Then I went to the people that do assessments, and confirmed the assessed value of the house is $1.15 mm, while the asking price for the house is $850k.  (only 1 house in this town has ever sold for more than $1 mm).   This house has been on the market for 4-weeks with no bids.  I asked how soon I could get the assessed value lowered for tax purposes if I paid 25% less than assessed value.  I learned an interesting thing.  She said “the sale prices is not necessarily a good indicator of fair value”.  I said “really, what is a better indicator of fair value?”   She wasn’t sure, but said sometime people are forced to sell.  I asked if there were ever times when sale prices were higher than fair b/c of a price bubble caused by low interest rates.  She looked cross eyed.  I knew I’d gone too far. 


I conceded her argument and asked when could we evaluate the assessed value.  Evidently the assessed value is calculated once per  year and is based on comparable home sales 2 years ago.  The tax payments are made monthly, so the payments in for the Sept and Dec qtr are based on theoretical value – which they calculate by increasing the previous run rate 2%.  I asked – so basically you assume home values go up ever year.  She said “yes, but we don’t want to pass the whole increase through right away, so that’s why we only apply a 2% increase.”  I then said – “so you assume home values go up more than 2% every year”…. She agreed.


I went to tax collectors department and got the tax payments the house has made in the last 2 yrs.  I said, “If I buy this house for 25% less than the assessed value, don’t you think I’ll be paying lower taxes in a few years?”   She said, “no, probably not, because if the value were to actually fall, they’d just have to increase the tax rate because the town’s budget is dependent on those tax dollars.”


I couldn’t believe it.  I know I wasn’t dealing with the most educated people – but the assumption is still prices go up every year.  What is going to happen in 2 years when we are using comps that show falling market values?   Many states are already insolvent and it is only going to get worse, or they jack up tax rates and those overlevered families get squeezed out.  Am I missing something??? I know the market can rise and fall 80% a number of times in the next few years, but with this secular challenge…. How do we not keep moving lower?



7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more