prev

INITIAL JOBLESS CLAIMS RISE 21K - EXPECT A PAUSE IN IMPROVEMENT GOING FORWARD

Initial Claims Rise 21k

The headline initial claims number rose 21k week over week to 409k (18k after a 3k upward revision to last week’s data).  Rolling claims fell 3.5k to 411.25k.  We continue to remind investors that based on our analysis of past cycles, the unemployment rate won't improve until we see claims move into the 375-400k range. That said, it is worth highlighting an important caveat. This recession has been different in that it has pushed the labor force participation rate down by ~200 bps, which has had a correspondingly positive improvement on the unemployment rate. In other words, the unemployment rate isn't really 9.8%, it's 11.8%. So when we say that claims of 375-400k will start to bring down the unemployment rate, we are actually referring to the 11.8% actual rate as opposed to the 9.8% reported rate.

 

One thing worth pointing out is that in the last two years the first several weeks of the new year have seen raw SA claims rise. We would expect to see this trend continue. If not, it would suggest a stronger underlying improvement in the jobs environment.

 

INITIAL JOBLESS CLAIMS RISE 21K - EXPECT A PAUSE IN IMPROVEMENT GOING FORWARD - rolling claims

 

INITIAL JOBLESS CLAIMS RISE 21K - EXPECT A PAUSE IN IMPROVEMENT GOING FORWARD - raw claims

 

There is seasonality in initial claims, which the BLS makes an effort to remove via the seasonal adjustment factor.  Below we show the non-seasonally adjusted initial claims series for purposes of comparison.  

 

INITIAL JOBLESS CLAIMS RISE 21K - EXPECT A PAUSE IN IMPROVEMENT GOING FORWARD - claims NSA

 

Yield Curve Remains Wide

We chart the 2-10 spread as a proxy for the trend in industry NIM. Thus far the spread in 1Q is tracking 38 bps wider than 4Q.  The current level of 276 bps is up from 272 bps last week.

 

INITIAL JOBLESS CLAIMS RISE 21K - EXPECT A PAUSE IN IMPROVEMENT GOING FORWARD - spread

 

INITIAL JOBLESS CLAIMS RISE 21K - EXPECT A PAUSE IN IMPROVEMENT GOING FORWARD - spreads QoQ

 

Financial Subsector Performance

The table below shows the stock performance of each Financial subsector over four durations. 

 

INITIAL JOBLESS CLAIMS RISE 21K - EXPECT A PAUSE IN IMPROVEMENT GOING FORWARD - subsector perf

 

 

Joshua Steiner, CFA

 

Allison Kaptur


TALES OF THE TAPE: EAT, RT, DRI, CAKE, RRGB, PFCB, COSI, SONC, CBOU, CMG, MCD, SBUX

Strong performance yesterday, particularly in QSR, after well received earnings from Sonic on Monday and Ruby Tuesday yesterday after the close

 

Notable news items and price moves yesterday:

  • A notable divergence in price action yesterday was EAT up on accelerating volume, while DRI, CAKE, RRGB and PFCB were down on accelerating volume
  • RT posted strong results after the close last night, beating expectations with strong same-store sales results showing a healthy gap emerging between RT and the Knapp-Track casual dining benchmark.
  • Cosi outperformed once again and remains one of my favorite names.  Yesterday’s 13% gain was confirmed by strong volume and Cosi is now the top performing stock over the last month and week.
  • Sonic posted strong gains following Monday’s earnings results.
  • Some upgrades/downgrades from Piper Jaffray hit the tape: CAKE was raised to “Neutral" from "Underweight", CMG was raised to "Overweight" from "Neutral" CPKI was downgraded "Neutral" from "Overweight" and BJRI was downgraded to "Neutral" from "Overweight".
  • CBOU coffee upgraded at Jeffries.
  • RT upgraded by BofA/ML.
  • CMG article in Fortune: “Chipotle Mexican Grill is the hottest restaurant stock around”.  CMG founder Steve Ells said Wednesday he is developing an Asian fast-casual concept that he expects to debut in mid-2011.
  • MCD is selling Lattes in the Atlanta market for $1 until January 17th.
  • Year-over-year food prices rose 10 percent for the most popular store-bought grocery items, especially breakfast foods, according to the American Farm Bureau Federation.
  • SBUX removed the words “Starbucks Coffee” from its logo, seeking to emulate NKE and AAPL as a brand that is ubiquitous and instantly recognizable.  The move also reflects company’s shift from being purely about coffee to selling food and other beverages.  Much of the reaction online has been negative, which could make SBUX’s move look more like GAP than NKE.

TALES OF THE TAPE: EAT, RT, DRI, CAKE, RRGB, PFCB, COSI, SONC, CBOU, CMG, MCD, SBUX - sbuxlike

 

TALES OF THE TAPE: EAT, RT, DRI, CAKE, RRGB, PFCB, COSI, SONC, CBOU, CMG, MCD, SBUX - stocks 16

 

Howard Penney

Managing Director


THE M3: SITES 7 & 8

The Macau Metro Monitor, January 6, 2011


PARCELS 7 AND 8 IN COTAI FOR NON-GAMING: MEDIA REPORT macaubusiness.com

According to Jornal Tribuna de Macau, a source close to the situation said the Macau government do not have plans for casinos on sites 7 & 8.  The government is instead looking at “projects related to economic diversification,” the source added.  It is also reported that the government has started proceedings to get back five undeveloped land parcels granted to private developers.


GET THE HEDGEYE MARKET BRIEF FREE

Enter your email address to receive our newsletter of 5 trending market topics. VIEW SAMPLE

By joining our email marketing list you agree to receive marketing emails from Hedgeye. You may unsubscribe at any time by clicking the unsubscribe link in one of the emails.


Us vs. Them

“For some of them, inflation is not so bad; they even ask for a continuation of it, because they are the first to profit from it.”

-Ludwig von Mises

 

“For some of them” – that’s a critical preface, to a critical economic statement, during critical global economic times. If you’re reading this right now, consider yourself just like me . We are the fortunate ones. We can make money being long inflation.

 

If you haven’t read von Mises’ Fourth Lecture titled “Inflation”  yet (in Economic Policy, Ludwig von Mises speeches; Argentina 1959), you should. On page 45 he goes on to write that:

 

“And there are always people who favor inflation because they realize what is going on sooner than other people do. Their special profits are due to the fact that there will necessarily be unevenness in the process of inflation… But of course, the politician in power who proceeds toward inflation  does not announce: I am proceeding toward inflation.”

 

Unlike the Big Government monetization of debt experiments gone bad of Jimmy Carter (and then Bernanke-Lite Fed Head, Arthur Burns), how appropriate the lessons of history are that stand the test of time…

 

I’m long inflation.

 

In fact I got longer of inflation on the “buying opportunities” I have seen in commodities and currencies throughout the week. I have taken my asset allocation to Cash down in the Hedgeye Asset Allocation Model from 61% (at the beginning of the week) to 49% as of yesterday’s close.

 

How does one get long of inflation?

  1. Buy Commodities (we’re long oil, OIL, corn, CORN, and sugar, SGG)
  2. Buy Currencies whose countries have inflationary trends and an upward bias to interest rates (we’re long US Dollars, UUP, and Chinese Yuans, CYB)
  3. Short Bonds (we’re short short-term US Treasuries, SHY)

Of course, you can be long stocks too, which we are in both Germany and the US (admittedly too light in the shoes on the US side as we are long Healthcare and Energy, but short Tech and Consumer Discretionary).

 

That said, too light on Equities when the rest of the world wakes up to what we are really doing to world populations with trivial things like food inflation is definitely the place that the risk manager in me wants to be.

 

What are we (“some of them”) doing to most of them?

 

We’re starving them.

 

Now maybe Wall Street couldn’t give a damn about this. But I do. Here’s the data on world food prices (per the United Nations, not The Ber-nank):

  1. World Food Prices hit record ALL-TIME highs in December (on historical matters, ever is a long time).
  2. The commodities basket (55 commodities in the UN’s calculations to smooth out what’s “core”) has eclipsed the 2008 all-time high.
  3. Global grain production will have to rise at least 2% in 2011 to meet demand and avoid further depletion of stocks (UN agency).

The wizardry of the US Government’s calculation of inflation (CPI) is in the data as well. Ben Bernanke stares into the 60 Minutes cameras and does God’s work, under oath, saying that he didn’t see 2008 inflation with $150/oil or 2010 inflation with all-time record high world food prices. Charlatanism redefined.

 

When a professional politician or anyone who gets paid on inflationary terms tells you there is no inflation in the US, this is what they mean:

 

Top 6 Current US CPI Weighting:

  1. Housing: 41.96%
  2. Transportation: 16.69%
  3. Food and Beverage: 15.76%
  4. Recreation: 6.44%
  5. Medical Care: 6.51%
  6. Education and communication: 6.51%

*they’ve changed the CPI calculation 9x since 1996 (I wonder why)

 

So, obviously, the takeaway here is that Bernanke doesn’t see inflation because, like Hedgeye, he is bearish on US Housing. Unlike Hedgeye, he must think that the entire world works in NYC or Washington DC, where you don’t cook or drive to work.

 

Here’s another way to think about Global Inflation Accelerating and its impact on an interconnected global economy:

 

World Populations:

  1. China 1.341B people = 19.5%
  2. India 1.192B people = 17.3%
  3. USA 310M people = 4.5%
  4. Indonesia 237M people = 3.5%
  5. Brazil 190M people = 2.8%
  6. Pakistan 171M people = 2.5%

And across the world’s populations, here are this morning’s fresh off the Macro Grind global inflation reports for December:

  1. India food inflation reported at +18.32% year-over-year growth
  2. Russian inflation (CPI) hitting another new high at +8.7% DEC vs +8.1% NOV
  3. Kazakhstan inflation (CPI) +7.8% DEC vs +7.7% NOV
  4. Uruguay inflation (CPI) +6.93% DEC vs +6.87% NOV

I know – who cares about them people in Uruguay and Kazakhstan anyway. Nice trade Heli-Ben.

 

My immediate term support and resistance lines for the SP500 are now 1262 and 1284, respectively.

 

Trade inflation and roll the bones out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Us vs. Them - Ben


THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP - January 6, 2011


As we look at today’s set up for the S&P 500, the range is 22 points or -1.14% downside to 1262 and 0.58% upside to 1284.   Equity futures are trading higher mirroring trading in Europe and Asia following good US employment data yesterday ahead of the non-farm payrolls Friday.

 

MACRO DATA POINTS:

  • 8.30am, Initial jobless claims, Jan 1, est. 408k; continuing claims, Dec. 25, est. 4080k
  • 8.30am, Net export sales (cotton, corn, soybeans, soy meal, wheat), Dec. 30
  • 10am, Freddie Mac 30-year mortgage
  • 10.30am, EIA natural gas storage change, Dec. 31, est. -131

TODAY’S WHAT TO WATCH:

  • LinkedIn plans to file for an IPO during 1Q - WSJ 
  • Goldman Sachs Healthcare CEO Unscripted Conference in NYC features Bristol-Myers, Medco Health, Medtronic, Amerigroup, Merck, Teva Pharma, Stryker, Celgene.
  • Boeing releases annual order, delivery figures, pre-mkt
  • Defense Secretary Robert Gates briefs Congressional leaders
  • AMR (AMR) said Dec. traffic increased 1.8%
  • Massey Energy (MEE) 4Q coal shipments missed forecast
  • Microsoft (MSFT)’s next Windows version will support System on a Chip (SoC) architectures, including ARM- based systems from Texas Instruments.
  • Resources Connection (RECN) 2Q adj EPS, rev. beat est.
  • Ruby Tuesday (RT) 2Q EPS, rev above est.
  • Sourcefire (FIRE) acquired Immunet for $21m, purchase will add to earnings after 2012
  • Symantec (SYMC) rated new market perform at Morgan Keegan
  • Tanger Factory Outlet Centers (SKT) announced two- for-one share split for Jan. 24 

PERFORMANCE: ALL 9 SECTORS BULLISH ON TRADE & TREND

  • One day: Dow +0.27%, S&P +0.50%, Nasdaq +0.78%, Russell 2000 +1.18%
  • Last Week: Dow +0.03%, S&P +0.07%, Nasdaq (-0.48%), Russell (-0.67%)
  • Month/Quarter/Year-to-date: Dow +1.26%, S&P +1.50%, Nasdaq +1.86%, Russell +1.46%
  • Sector Performance - BULLISH (Only 1 sector negative) - Financials +1.20%, Consumer Disc +0.82%, Tech +0.59%, Industrials +0.51%, Energy +0.40%, Healthcare +0.22%, Consumer Spls +0.03%, Materials 0.23%, Utilities (0.62%)               

 EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: 626 (+1413)  
  • VOLUME: NYSE 1042.92 (-4.35%)
  • VIX:  17.02 -2.07% YTD PERFORMANCE: -4.11%
  • SPX PUT/CALL RATIO: 1.80 from 1.50 (+20.94%)  

CREDIT/ECONOMIC MARKET LOOK:


Treasuries were on the defensive today with the better-than-expected private payrolls and service sector data.

  • TED SPREAD: 17.33 0.539 (3.212%)
  • 3-MONTH T-BILL YIELD: 0.14%    
  • YIELD CURVE: 2.79 from 2.73

COMMODITY/GROWTH EXPECTATION:  

  • CRB: 329.20 +0.45%
  • Oil: 90.30 +1.03% - trading -0.41% in the AM
  • Oil Trades Above $90 Amid Signs of Economic Expansion, Fuel Demand Growth  
  • COPPER: 440.80 +0.89% - trading -0.24% in the AM
  • Copper Rises on Speculation Stronger U.S. Growth May Boost Metals Demand
  • GOLD: 1,376.72 +0.01% - trading 0.30% in the AM
  • Gold Drops for a Fourth Day as Stronger Dollar Curbs Demand From Investors

OTHER COMMODITY NEWS:

  • Rubber Futures Advance to a Record as U.S. Economy Improves, Yen Weakens
  • Australian Floods Mean Asian Steelmakers May Pay 33% More for Coking Coal
  • Wheat Declines on Speculation Higher U.S. Acreage May Ease Supply Concern
  • China Rare Earths Leave Toxic Trail to Toyota Prius, Vestas Wind Turbines
  • Robusta Coffee Gains on Speculation Higher-Quality Beans in Short Supply
  • Zimbabwe Can Hold Two Diamond Auctions This Year Under Kimberley Process
  • Nickel May Drop to $22,509, According to Commerzbank: Technical Analysis
  • Palm Oil Advances Gains as Dry Weather Threatens Argentina Soybean Harvest
  • Cotton Output in India May Exceed Estimate on Bigger Crop Area, Board Says
  • Australian Floods Slow Start of Beef Processing in Queensland, Swift Says
  • Copper Output From Sumitomo Metal Smelter May Be Reduced on Maintenance

CURRENCIES:

  • EURO: 1.3183 -0.99% - trading -0.53% in the AM
  • DOLLAR: 80.258 +1.02% - trading +0.14% in the AM

EUROPEAN MARKETS:

  • European Markets: FTSE 100: +0.71%; DAX +1.15%; CAC 40: +0.89%
  • European indices have started the day on a firmer footing as yesterday's strong US ADP jobs report raises expectations for a supportive for todays non-farm payroll number.
  • Investors are still very much in buying mode and most sectors appear to be participating. A rebound in Basic Resource plays, plus ongoing strength in Oil are providing the main support in what has been a broad based move to the upside.
  • China has said it is willing to buy about €6B of Spanish public debt, according to Spanish newspaper El Pais.
  • Ireland would only be able to force losses onto holders of senior bank debt with the approval of the ECB, the main opposition party, Fine Gael, said today.  
  • UK Dec Services PMI 49.7 vs cons 53 and prior 53
  • Eurozone Nov Retail sales +0.1% y/y vs cons +2.2% and prior revised to +1.2% from +1.8%
  • Eurozone Dec Consumer Sentiment (11) vs cons (10) and prior revised (9.4)

ASIAN MARKTES:

  • Asian Markets: Nikkei +1.44%; Hang Seng +0.12%; Shanghai Composite (0.51%)
  • Japan rallied, but other Asian markets were mixed today.
  • Japan went up, with exporters leading the way on a weaker yen. JVC Kenwood soared 26% on an announcement it will raise equity capital.
  • Singapore +0.78%, Kim Eng Holdings was halted on reports that Maybank will offer to buy a 44% stake in a deal valuing the company at S$1.8B.
  • On a late recovery by miners and energy companies, Australia rose +0.21% slightly in light volumes.
  • Hong Kong +0.12%, with property developers extending yesterday’s gains, but mainland Chinese companies following China down. Chinese banks fell on a report that the country will not set a lending target for them this year. Li & Fung fell 2% on a midday report it will take over 490K sq ft in the base of the Empire State Building for an undisclosed price.
  • South Korea dipped -0.24%. Hyundai Motor rose 3% on raising its 2011 capex target 14% y/y.
  • Tokyo December office vacancies (13 bp) m/m, +82 bp y/y to 8.91%. 


THE HEDGEYE DAILY OUTLOOK - setup


the macro show

what smart investors watch to win

Hosted by Hedgeye CEO Keith McCullough at 9:00am ET, this special online broadcast offers smart investors and traders of all stripes the sharpest insights and clearest market analysis available on Wall Street.

next