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The Cowboy Has Staying Power

Conclusion:  As we intimated in our last note, Governor Rick Perry may have staying power, as recent polls suggest such.  Meanwhile, President Obama’s approval numbers continue to deteriorate, which is positive for a politician juxtaposed against him (like a cowboy from Texas for instance).

In politics events often lead to poll bounces, which are typically not sustainable.  The most recent and major example of this was the killing of Osama bin Laden, which was ordered by President Obama.  In response to this decisive and successful action, the President’s approval numbers jumped up fairly dramatically in the short term, to a positive 10-point spread on the Real Clear Politics poll on May 26th.  This peak, which occurred just over three weeks after bin Laden’s death, was to be short lived.  In fact, Obama’s approval numbers have been on a downward trajectory since late May.


Currently, President Obama’s ratings are hitting new lows in almost every major approval index.  The Real Clear Politics aggregate has Obama at its widest negative spread of his Presidency at -8.7, with 52.2 percent disapproving and 43.5 percent approving.  The most recent poll of Likely Voters by Rasmussen, which was taken in the three days ending August 31sthas Obama at a shocking -13, with 56 percent of those polled disproving of his performance.   


The Cowboy Has Staying Power - a. RCP


Interestingly, and in contrast to our point above about the short term benefits of one specific event in political polls, Governor Perry, who officially entered the race for the Republican nomination a few weeks ago, continues to poll very well.  In fact, the two most recent polls, Quinnipiac and CNN, have Perry ahead of Romney by 6 and 13 points, respectively.  Even more interesting, especially for we stock market operators, is the futures contracts on InTrade, which has Perry winning the nomination at 38% and ahead of Romney’s 30% probability. This market-oriented measure has steadily ticked higher since Perry announced his candidacy.


The Cowboy Has Staying Power - a. 2 Perry contract


The most interesting recent poll to be released is a Rasmussen poll that shows Perry beating President Obama by a margin of 44 – 41.  Obviously, this is both only one poll and also within the margin of error, so it doesn’t necessarily inform, yet, how Perry would do against the President head-to-head.   The noteworthy takeaway of this poll is that Perry fares better than any of his Republican peers in a hypothetical match up.  In fact, the next closest to Perry, former Massachusetts Governor Mitt Romney, trails Obama by 43 – 39. 


Despite his favorable poll numbers, Perry’s most substantial competition may not be coming directly from his competitors or the Democratic party, but the Republican establishment.  There is the perception amongst many in the Republican party, especially the George W. Bush crowd, that Perry may be too extreme, too cavalier, and, yes, perhaps too much of a cowboy.  Certainly, Perry has made some outlandish statements at times, including his poor choice of words when recently criticizing Federal Reserve Chairman Bernanke, but he also is charismatic, has a successful electoral track record, has an enviable economic track record in Texas, and is very appealing to the Tea Party base.


As we think about Perry’s chances to attain the Presidency, we are reminded of the old John Wayne movie, “True Grit”, in which The Duke faces off against four gun men and yells, “Fill your hands you sonofaguns!”  We’ve attached a clip of the segment below:




All references to John Wayne aside, the true test for Perry will be coming in September as he faces off against his Republican competitors in a series of debates.  If he can hold his own and articulate his views in an even handed fashion, the Cavalier Cowboy may be riding tall into the general election.


Daryl G. Jones

Director of Research

The Re-test: SP500 Levels, Refreshed

POSITION: Short Financials (XLF), Long Utilities (XLU)


No matter where we go this morning, here we are – right back to the fundamentals. After another very low-volume rally into month-end markups, consensus is being forced to re-calibrate their expectations once again this morning.


I think the quote I used earlier this week from Dan Gardner’s book (“Future Babble – Why Expert Predictions Fail and Why We Believe Them Anyway”) sums up where we are right here and now quite concisely: “feeling good about a judgment is a prerequisite to acting on it.”


If Global Growth Slowing, tanking US Consumer Confidence, and no jobs isn’t making you feel less good this week than you may have at higher prices, then you really are contrarian!


As a reminder, the US stock market is in what we call a Bearish Formation (bearish TRADE, TREND, and TAIL): 

  1. TAIL = 1263
  2. TREND = 1292
  3. TRADE = 1234 

That’s not good.


What is good, however, is that I am registering a higher-low of immediate-term TRADE support than I could have flagged for all of August. I’m at 1146 support now (I used to be in the 1086-1108 range), so this is progress.


And as we all now, progress is important. Repeating prior policy mistakes in this country is not the answer.



Keith R. McCullough
Chief Executive Officer


The Re-test: SP500 Levels, Refreshed - SPX


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


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

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






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

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