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Notable news items and price action from the restaurant space as well as our fundamental view on select names.

  • CBRL has been cut to “Market Perform” from “Outperform” at Morgan Keegan.  The twelve month price target is $48 per share.
  • GMCR have entered into an amendment of their credit agreement that extends the maturity of its term loan facility, U.S. revolving credit facility, and alternative currency revolving credit facility to five years from June 9th, 2011.  Additionally, the amended agreement boosts the company’s revolver by $500 million.
  • PEET management said yesterday that coffee prices are “caught in a speculative bubble”.  The company also said that increasing packaged coffee sales will help margin.
  • KONA and CAKE traded higher on accelerating volume yesterday.
  • SONC underperformed QSR on accelerating volume.




Howard Penney

Managing Director


The Macau Metro Monitor, June 10, 2011




Clark County District Court Judge Elizabeth Gonzalez has dismissed the defamation claim filed by former Sands China CEO Steven Jacobs against Sands China and chairman Adelson. However, she declined to immediately dismiss a breach of contract claim against Sands China and will consider that issue later on a motion for summary judgment.  That claim involves stock options Jacobs says he's been wrongly deprived of.


Regarding the defamation claim, Judge Gonzalez concluded that Adelson was protected by the litigation privilege when he told media that Jacobs' allegations were outright lies and fabrications.  Jacobs’ lawyers have already announced they will appeal the decision.



LVS COO Michael Leven said in an interview, "We are basically told that as long as only about 30% of the people coming in are Singaporean, then it shouldn't be a problem. If the amount of Singaporean attendance gets much higher than that, there may be some cause for concern.  To this day, only about 3% of Singapore's population has ever played in a casino."  But a spokesman with the Ministry of Community Development did not confirm the 30% cap, saying only that the IR operators have been told very clearly that the casinos are tourist products and they are not to target the domestic market.


Leven added, "We have to have some local play in order to be consistent when we don't have conventions and we don't have tourists. Otherwise, you've got an awful lot of overhead sitting there not generating any revenue....In the early days, Genting won both the market share game in VIP gaming as well as mass market. We are now winning the mass market game and they continue to lead in the VIP game for a variety of reasons....On the VIP end, they're more aggressive than we've been and doing a better job. But they had a headstart on us because of all their contacts in Malaysia. And we'll eventually catch up and probably that market will be split, but I think we'll continue to dominate the mass market."


TODAY’S S&P 500 SET-UP - June 10, 2011


This morning’s early look on the data will look “quiet” to US centric investors, but the rest of the world doesn’t cease to exist. Asian Equities (and currencies) look flat out ugly right now as the data continues to support Growth Slowing.

  1. India’s Industrial Production dropped again in April to +6.3% y/y vs +8.8% last month (we’re short INP)
  2. Chinese imports were fine (internal demand) but Exports were another miss (external demand) at +19%
  3. KOSPI finally broke its intermediate term TREND line of support (2077), down -1.2% overnight

Oil and Russia both rallied yesterday to lower-highs but remain broken on intermediate-term TREND (WTIC Oil TREND resist = $102.96), so we’ll be looking to short Russian and Energy stocks today.  As we look at today’s set up for the S&P 500, the range is 43 points or -2.17% downside to 1261 and 1.16% upside to 1304.






THE HEDGEYE DAILY OUTLOOK - daily sector view


THE HEDGEYE DAILY OUTLOOK - global performance




  • ADVANCE/DECLINE LINE: +835 (+2272)  
  • VOLUME: NYSE 909.51 (-10.21%)
  • VIX:  17.77 -5.43% YTD PERFORMANCE: +0.11%
  • SPX PUT/CALL RATIO: 1.43 from 1.77 (-19.53%)



  • TED SPREAD: 21.39
  • 3-MONTH T-BILL YIELD: 0.05%
  • 10-Year: 3.01 from 2.98
  • YIELD CURVE: 2.58 from 2.59 



  • 8:30 a.m.: U.S. Import Price, est. (-0.7%), prior 2.2%
  • 9 a.m.: Fed’s Dudley to speak in Brooklyn
  • 1 p.m.: Baker Hughes rig count
  • 2 p.m.: Monthly budget statement, est. (-$136.0b), prior (-$135.9b) 


  • Bundesbank sees German 2011 GDP +3.1% and 2012 GDP +1.8%
  • German Bundestag votes in favour of motion to approve new aid for Greece -- wires
  • UK Apr Manufacturing output +1.3% y/y vs consensus +3.3% and prior revised +2.2 from +2.7%
  • Ally Financial delayed plans to start marketing an IPO until equity markets improve
  • Obama may name Thomas J. Curry head of the Office of the Comptroller of the Currency, the New York Times said
  • Samsonite sold shares at the bottom end of a revised price range in its Hong Kong IPO, raising $1.25b
  • The California Public Utilities Commission opened an investigation of AT&T Inc.’s proposed purchase of T-Mobile USA



THE HEDGEYE DAILY OUTLOOK - daily commodity view




  • Crop Weather Mayhem Delays U.S. Corn, Rice Planting as Prices Extend Gains
  • Oil Near Highest This Month Heads for Weekly Gain on U.S. Economy, OPEC
  • Copper Declines on Reduced Imports Into China, World’s Biggest Consumer
  • Soybeans Fall for Second Day as Stocks Estimate May Signal Weaker Demand
  • Soybean Imports Climbing in China Poised to Increase Domestic Inventories
  • Gold May Advance on Concern About Europe’s Debt Crisis, Weakening Growth
  • Copper Imports by China Drop in May as Consumers Run Down Local Stockpiles
  • Cocoa Output From Indonesia May Slump 13% as Black Pod Spreads, Group Says
  • U.S.-South Korea Trade-Accord Delay to Hurt Pork Exports, Official Says
  • Oil May Decline Next Week on Signals Economic Growth to Slow, Survey Shows




THE HEDGEYE DAILY OUTLOOK - daily currency view




  • EUROPE: an ugly day away from DAX (up small on better CPI), Spain/Italy/Greece remain broken and now Russia failing at the TREND line 1,959.
  • Germany: May final CPI +2.3% y/y vs prelim +2.3%; May wholesale price index +8.9% y/y vs consensus +8.6%
  • France Apr Industrial Output (0.3%) m/m vs consensus +0.4%
  • UK Apr Manufacturing output +1.3% y/y vs consensus +3.3%; Industrial output y/y (1.2%) y/y vs consensus +1.3%
  • UK May PPI Core +3.4% y/y vs consensus +3.4%, prior revised +3.6% from +3.4%


THE HEDGEYE DAILY OUTLOOK - euro performance




  • ASIA: mixed except Japan; KOSPI down -1.2% breaking its TREND line of 2077; India down another -1% to -11.2% YTD (were short); China no bounce; HK broken

THE HEDGEYE DAILY OUTLOOK - asia performance








Howard Penney

Managing Director

American Optimism

“He had shown himself to be … a young man who took great pride in his perseverance and steadiness of purpose.”

-Stephen Ambrose


A month or so ago I referenced researching more about the roots of Jeffersonian thought (an alternative to British Keynesianism). Being a Canadian who is constantly thirsting to be educated in American history, I often lean on my American-born colleagues for reading recommendations.


One of our analysts, Allison Kaptur, pointed me towards Stephen Ambrose’s “Undaunted Courage” – the story of Meriwether Lewis, Thomas Jefferson, and the Opening of the American West. It was easily one of the most gripping and inspirational stories I have ever read.


The way the best storytelling is told is when the author personalizes the experience and reaches in and grabs you. Many of you will be familiar with the late Stephen Ambrose for his work in “Band of Brothers.” Many of you may not be familiar with the passion Ambrose had for backpacking every step of the Lewis & Clark Trail with his family.


“Of courage undaunted” was the opening description of Thomas Jefferson’s praise for Meriwether Lewis. It’s where Ambrose’s wife, Alice, came up with the idea for the title of the book. As Ambrose acknowledges best in answering the question, “what is the secret to being a successful author?” – “Marry an English major.”


Lewis never married. He died, tragically, at the very young age of 35 years old in Hohenwald, Tennessee, shortly after being appointed by Jefferson as the Governor of Louisiana in 1806. While it would be easy to tell stories about how messed up Meriwether’s mind became in his final years, I think it’s best for Americans to celebrate the confidence and courage it took for him to change the world.


“At eighteen years old, he was on his own. He had travelled extensively across the southern part of the Unites States. He had shown himself to be a self-reliant, self contained, self confident teenager…” (Ambrose, “Undaunted Courage”, page 29)


After 6 consecutive down weeks for US stocks, I’m calling attention to this story after being inspired by a great American Olympian who I have the pleasure and privilege of working alongside at Hedgeye – Bob Brooke.


On Wednesday night, Bob, Big Alberta, Darius Dale, Kevin Kaiser, and I were having a few beverages watching Game 4 of the Stanley Cup Playoffs with our summer interns. After proudly attending his son’s graduation at a very patriotic ceremony at Notre Dame, Bob told me it was a good time to think about a way to communicate to our clients how optimistic we are about the future.


You see, Wall Street and Washington like to put people like us in boxes. When you’re always thinking inside of the box – I guess that makes sense. You’re either a Bull or a Bear, a Democrat or a Republican – and it’s easier for these group-thinkers to generalize and not take the time to understand what something new could mean.


Just because I am bearish on US Equities, old Wall Street, and Keynesian Central Planning in Washington, doesn’t mean I don’t have the confidence and courage to put my own capital at risk to build a great team in this great country.


In fact, it’s quite the opposite – everything I am pessimistic about, gives birth to my optimism.


At the Hedgeye Holiday Party this past December, I cited a very popular American country song titled “Bless the Broken Road” (recent rendition by Rascal Flatts) to better explain why it’s our industry itself that gives me reason for optimism:


Every long lost dream led me to where you are
Others who broke my heart they were like Northern stars
Pointing me on my way into your loving arms
This much I know is true
That God blessed the broken road
That led me straight to you


Without giving away Hedgeye’s strategy to continue to be the change we want to see in this profession, that’s all I have to say about that. If Wall Street and Washington don’t realize that the most simple solution to all of this is to stop what they are doing, then the rest of us will just have to keep plugging away until we’ve reached the new open frontier of American Optimism that’s as old as America itself.


My immediate-term support and resistance ranges for Gold, Oil, and the SP500 are now $1, $98.46-102.91, and 1, respectively.


God Bless America,



Keith R. McCullough
Chief Executive Officer


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