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Employment data negative for quick service, positive for casual dining.


The overall jobs picture this morning was unequivocally negative with Nonfarm Payrolls coming in flat, way below expectations at 0k versus expectations of +68k.  The level of growth in employment among the 20-24 years of age cohort decelerated in August, which is a negative data point for QSR.  July employment growth among this age cohort came in at 1.4%.  The 55-64 years of age cohort saw strong employment growth in August, accelerating to 2.7% year-over-year versus 1.1% in the month prior.


Sentiment has clearly become more negative across the board recently, with consumer confidence plummeting in August and sliding home prices moving into the spotlight.  This data point is, on the margin, negative for QSR and positive for casual dining. 





The second chart below shows employment growth in the food service industry.  Hiring continues to be strong on a year-over-year basis but, on the margin, employment growth in both full service and limited service slowed sequentially.  We will continue to monitor this trend closely in the coming months.





Howard Penney

Managing Director


Rory Green


Insider buying in financials soared in August



Notable macro data points, news items, and price action pertaining to the restaurant space.






The most important macro statistic for the restaurant industry is job growth.  Today, jobs data is a complete bomb.  Payroll employment was flat during the month. Even if Verizon's 45,000 striking workers are added back into the mix, payroll gains were far weaker than was expected. 




THE HBM: WEN, DPZ, CBRL, MSSR - subsectors fbr





WEN traded strongly yesterday on the news that Emil Brolick will soon take over as CEO.


DPZ CEO Jerry Doyle made an appearance on CNBC yesterday.  Doyle said that cheese prices are in the $1.78-$1.79 range, the NFL strike settlement is positive for his company’s business, and that the company has used cash “efficiently”.





CBRL’s board has unanimously declined the demand to appoint Biglari to the board. The company, according to a press release issued last night, “endeavored to avoid proxy fight, and held numerous discussions with Biglari and offered him the opportunity to appoint two qualified independent directors.


MSSR rated “New Buy” at GFI Group


THE HBM: WEN, DPZ, CBRL, MSSR - stocks 92



Howard Penney

Managing Director



Rory Green



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TODAY’S S&P 500 SET-UP - September 2, 2011


With the SP500 closing 1 point above its immediate-term TRADE line of 1203 yesterday, this morning’s jobs print in the US becomes very relevant.   We have ZERO edge on what the number will be (the government makes up the birth/death adjustment), but we have a process/ plan post print.

  1. If the SPX breaks and holds below 1203, immediate term TRADE support becomes 1182
  2. On a breach of 1182 and a VIX breakout > 35.40, retest of the 2011 lows is in play
  3. If the SPX draws down and recovers 1203, immediate-term upside to 1234


As we look at today’s set up for the S&P 500, the range is 41 points or -1.86% downside to 1182 and 1.54% upside to 1223.






THE HEDGEYE DAILY OUTLOOK - daily sector view


THE HEDGEYE DAILY OUTLOOK - global performance




  • ADVANCE/DECLINE LINE: -1433 (-2334)  
  • VOLUME: NYSE 1017.95 (+19.54%)
  • VIX:  31.82 +0.63% YTD PERFORMANCE: +79.27%
  • SPX PUT/CALL RATIO: 1.78 from 1.40 +27.11%


  • TED SPREAD: 31.93
  • 3-MONTH T-BILL YIELD: 0.02% +0.01%
  • 10-Year: 2.22 from 2.19    
  • YIELD CURVE: 2.03 from 1.99

MACRO DATA POINTS (Bloomberg Estimates):

  • 8:30 a.m.: Unemployment rate, est. 9.1%, prior 9.1%
  • Change in non-farm payolls, est. 68k, prior 117k
  • 1 p.m.: Baker Hughes rig count



  • Bank of America, JP Morgan, other banks may be sued by the U.S. FHFA for misrepresenting quality of mortgage securities during height of housing bubble: NY Times
  • Bank of America told by Fed to show steps it would take if its financial condition worsens: WSJ 
  • BP, Exxon Mobil, others shut almost 6% of Gulf crude output ahead of tropical depression
  • Netflix said Starz walked away from talks on new streaming deal; contract ends next Feb.



COMMODITIES: big breakout lines in Gold and Silver = $1819 and $41.53


THE HEDGEYE DAILY OUTLOOK - daily commodity view




  • China Buries Obama’s Solar-Power Ambitions With $34.4 Billion
  • Gold Gains for Second Day as Equities Drop on Growth Concern
  • Oil Drops Before U.S. Jobs Data; Gulf Rigs Shut as Storm Builds
  • Saudi Oil May Gain as China Refineries Restart: Energy Markets
  • Shanghai Plans Fivefold Increase in Metal Bonded Warehousing
  • Baosteel Group Pays $1.95 Billion for Stake in Niobium Miner
  • Copper Falls for Second Day as Growth Concerns Weigh on Demand
  • Corn Rallies After Biggest Drop in Two Months Spurs Purchases
  • Glencore Proposes Cash Bid Valuing Optimum Coal at $1.2 Billion
  • Gold May Advance on Concern About Slowing Growth, Survey Shows
  • Palm Oil Gains as Widening Discount to Soybean Oil Lures Buyers
  • Ukraine’s Corn Exports Surge Capping Price Rally as U.S. Bakes
  • Australia Wheat Forecast Cut 4 Percent on Dry East, ANZ Says



THE HEDGEYE DAILY OUTLOOK - daily currency view




  • EUROPE: broadly lower lead by Greece and Germany down 3.6% and 2.8%, respectively. 
  • Greek Finance Minister denies that EU/IMF talks are suspended, says new cycle of talks will begin on 14-Sept -- Reuters
  • Eurozone July PPI +6.1% y/y vs consensus +6.1% and prior +5.9%; Eurozone July PPI +0.5% m/m vs consensus +0.5% and prior +0.0%


THE HEDGEYE DAILY OUTLOOK - euro performance




  • ASIA: mixed last night (Japan and China down 1.2% and 1.1%), but the Philippines (which I am long) was up 0.6% moving to up +1% for September









Howard Penney

Managing Director

CHART OF THE DAY: Contemplating Inevitabilities


CHART OF THE DAY: Contemplating Inevitabilities - 1. DJ

Contemplating Inevitabilities

“Old age is a shipwreck.”

-Charles de Gaulle


In life, there are certain inevitabilities, with aging at the top of the list.  No amount of money, fame, or religion prevents the reality that we will all grow old, at least physically, one day.  While in his quote above de Gaulle could easily have been talking about the fiscal discipline of Greece, he was, in fact, appropriately describing the reality of our bodies naturally aging and eventually deteriorating.


Now that I’ve started your morning off on a completely somber note, I’ll offer another reality, which is that aging and longevity research suggests that all of our life spans will be extended versus prior generations.  Not only that, we will age more gracefully and comfortably as well.  In her new book, “100+ : How The Coming Age of Longevity Will Change Everything, From Careers And Relationships To Family and Faith”, Sonia Arrison, a fellow Canadian and senior researcher at the Pacific Research Institute, provides an insightful overview of the technology of longevity.


In fact, as Arrison notes, human life has generally been extending since human life began.  During the Cro-Magnon era, humans could have expected to live just long enough to graduate from high school, or to the ripe old age of eighteen.  By the time of the European Renaissance life expectancy had almost doubled to thirty.   By 1850, just as the U.S. population hit 23.1 million, the average age reached forty-three.   Today, with the acceleration of medical breakthroughs, the average person in the Western world can expect to celebrate his, or her, eightieth birthday.  In the future, according to Arrison:


“The first person to live to 150 years has probably already been born.”


The pursuit of longevity has been ongoing since the beginning of recorded history.  One of the first contemplations of death actually occurs in Genesis, the first book of the bible.  After willfully disobeying God by eating the forbidden from the Tree of Knowledge of good and evil, Adam and Eve were kicked out of the Garden of Eden, a place of immortality, into the real world where they faced sickness, death, and the threat of crazy New York taxi cab drivers.


I don’t need to restate the entire history of human aging to assure you that it is a topic that has been and likely always will be front and center for mankind.  As a result, a vibrant growth industry has risen around areas of extending lives and more gracefully aging.  In her book, Arrison discuss some of the key areas of development and investment, which we’ve borrowed and outlined in the table below:


Contemplating Inevitabilities - 1. DJ


The key question that arises of any discussion of the extension of human life is whether the earth has the physical resources to support a growing population.  Obviously, an important question given that human population has grown from 900 million in 1800 to just under 7 billion people today.  The most famous critic of the earth’s ability to sustain population growth is Thomas Malthus, who in 1798 wrote in his “Essay on the Principle of Population”:


“Population, when unchecked, goes on doubling itself every 25 years, or increases in a geometrical ratio.”


Interestingly, Malthus’ thesis ended up being spot on for the growth of the earth’s population.  Where Malthus ultimately failed was in his belief that subsistence could only grow arithmetically, which, according to his theories, would create a major issue in the future as there wouldn’t be enough resources to support the population.


Long term commodities bulls are obviously major advocates of Malthusian theories, as they describe a natural tightening of supply and demand for food, energy, and building materials. Ultimately this supply and demand will lead, according to commodity bulls, to long term favorable real price performance for commodities and impending disaster for those humans who can’t afford the accelerating price of commodities.


This is an interesting theory, but it hasn’t really played out in practice.  The most prominent modern advocate of Malthusian theories is Stanford professor Paul Ehrlich, author of “The Population Bomb”.  In the 1970s, he predicted that the world would run out of food (it didn’t) and in 1980 bet Julian Simon that over the next ten years, five specific metals would increase in price. So, what was the outcome?  As Arrrison writes:


“During the decade from 1980 to 1990, world population grew more than 800 million – a huge increase that, according to Ehrlich, should have spelled disaster . . .  Without fail, every single metal decreased in price, and Ehrlich was forced to admit defeat.”


The moral of the story is that even as the population has grown geometrically, humans have continued to innovate, live longer and healthier, and decreased their dependence on finite resources.  (Incidentally, as shown in the Chart of the Day, the decade from 1980 to 1990 was also a period in which the U.S. dollar was flat (albeit with huge strengthening in between), versus trending down thereafter, which likely served to keep commodity inflation in check.)


So, as you head into the long weekend contemplating your longevity, I’ll offer a few tips.  To start with, there does appear to be some credence to the health benefits of red wine, especially for those who are a little overweight, but the single and simplest tip to living a long and healthy life . . . . caloric restriction. Not sexy, but eating less works.


Enjoy the long weekend with your friends and families.


Keep your head up and stick on the ice,


Daryl G. Jones

Director of Research


Contemplating Inevitabilities - Chart of the Day


Contemplating Inevitabilities - Virtual Portfolio

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