The Economic Data calendar for the week of the 5th of September through the 9th is full of critical releases and events. Attached below is a snapshot of some (though far from all) of the headline numbers that we will be focused on.
We think the high end is slowing, but if so someone forgot to tell the footwear space. Shoes $130 and above are running 40% ahead of last year. Great for FL and NKE.
We’ve been getting very mixed reads on the state of the high-end consumer. Tiffany looking good, some European Lux brands softening, and high hardgoods (watches, etc…) slowing meaningfully. But if there is, in fact, a slowdown, someone forgot to tell the footwear industry.
We’re seeing a clear bifurcation between high-end vs. lower end footwear. Simply put, the high end is crushing it. Out of all the price categories the strongest sales performance is $130 and above. While only 10% of the industry in aggregate, its data that we won’t ignore – especially when trending about 40% ahead of last year.
Check out charts below.
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.
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 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
This indispensable trading tool is based on a risk management signaling process Hedgeye CEO Keith McCullough developed during his years as a hedge fund manager and continues to refine. Nearly every trading day, you’ll receive Keith’s latest signals - buy, sell, short or cover.
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):
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
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.
The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.