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Helicopter Ben Sighting...

Here is an hourly overlay of the timing of Bernanke extending the duration of the bailout window with commodity prices. The correlation is marked to market, and crystal clear.


GMCR beat on the bottom line, but not the top…

COGS up 540 bps and SG&A down 610 basis points – You can only cut SG&A so much to make up for lower gross margins!. Despite incremental promotional expenses and a new manufacturing facility in TN, the company expects to get additional leverage on SG&A in 2009.

I still contend that by Q4 the signs of stress will be much more evident that they are today.

Did I mention they don’t generate enough operating cash flow to cover their capital needs and the stock trades at 17x EV/EBITDA!

Demand destruction at its best!

Scary Charts: 2 year and 10 year US Jobless Claims

Within the context of my last posting that contextualizes where 448,000 fits within the historical US economic cycles, you can tell me where you think these charts are headed next.

Sometimes pictures of facts are more poignant than prose.
10 Year
2 Year

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Watch Out, The (E) In Our RIPTE Model Is Getting Crushed

The is NO need to split atoms about this morning’s jobless report. It was a horrendous number, assuring us that the (E), as in employment, in our RIPTE Consumer Spending Model is heading into a darker hole.

Weekly jobless claims spiked this morning up to 448,000, taking the 4 week moving average up for the 2nd week in a row to 393,000. In order to understand macro, I always look back before I take a shot at looking forward. In a historical context to prior US recessions and consumer spending depressions (1), this run rate of unemployment claims is alarming.

Peaks in jobless claims in 1990 and 2001 were reported at 500,000 and 480,000, respectively. There is little doubt in my mind that this cycle sees those prints. The big question is can the US employment picture deteriorate to the 560,000 and 620,000 levels in claims that we saw at the peaks of 1972-74 and 1981-83 cycles, respectively.

The US Consumer is hostage to deteriorating RIPTE “Trends” until the facts bear out otherwise.

KSWS: Keep This One on Your Screen Today

Decent number out of KSWS this morning. EPS about in line, and revenue beat. But the company took down revenue guidance for 2H as I suspected. How I am doing the math, backing out the impact of the $30mm PSS settlement (which helps by about $0.58ps) KSWS took the year down as low as a loss of $0.08 (range of -0.08 to +0.07) versus the current consensus of $0.18. I think this is conservative guidance. Importantly, it masks the cash flow growth to come in '09. Check out the comment I posted yesterday afternoon for better context.


LVS may have struck out in Las Vegas in Q2 and higher corporate expense is never a hit. However, these issues shouldn’t overshadow some home run trends at Venetian Macau. Adjusted Q2 property EBITDAR of $140.2 million exceeded expectations. More importantly, the trend is higher. The property should generate its highest VIP volume this month since November. On the mass market side, July should exhibit the best gaming volume month ever at the property. The data confirms our 7/24/08 call that foot traffic at The Venetian Macau picked up considerably in July. What’s driving the improvement? On the VIP side, higher junket commission rates and more direct marketing and credit have been the key drivers. Within the mass market, the ramp up of LVS’s ferry service appears to be the main catalyst. The following chart shows the number of ferry passengers carried daily by LVS to the Cotai Strip. The trends are obviously encouraging and have driven visitation to The Venetian up 28% in July. I remain very cautious on Las Vegas and some aspects of the Macau market, but with a huge short interest, LVS’s stock could continue to drive in some runs over the near term.

Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.46%
  • SHORT SIGNALS 78.35%