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JCP: Shorting Again

 

Keith just re-shorted JCP again in the virtual portfolio managing near-term risk around a very high conviction TREND and TAIL short idea. There is no change to our thesis on the name.

 

At $1.60 for the year, we remain 10% below consensus and bearish on the stock over the intermediate-term.

 

For more info on our thesis, see our Black Book, “JCP: What Ackmanists Are Missing.”

 

JCP: Shorting Again - JCP levels 9 9 11

 

 


THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP - September 9, 2011

 

As we look at today’s set up for the S&P 500, the range is 49 points or -0.41% downside to 1181 and 3.72% upside to 1230.

 

SECTOR AND GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - levels 99

 

THE HEDGEYE DAILY OUTLOOK - daily sector view

 

THE HEDGEYE DAILY OUTLOOK - global performance

 

 

EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: -1699 (2420)
  • VOLUME: NYSE 946.67 (-0.8%)
  • VIX:  34.32 +2.82% YTD PERFORMANCE: +93.35%
  • SPX PUT/CALL RATIO: 1.23 from 1.99

 

CREDIT/ECONOMIC MARKET LOOK:

  • TED SPREAD: 32.66
  • 3-MONTH T-BILL YIELD: 0.0102
  • 10-Year: 2.00 from2.05
  • YIELD CURVE: 1.81 from 1.84

 

MACRO DATA POINTS (Bloomberg Estimates):

  • 10 a.m.: Wholesale inventories, est. 0.7%, prior 0.6%
  • 11:45 a.m.: Fed’s Williams speaks at symposium in SF
  • 1 p.m.: Baker Hughes rig count

 

WHAT TO WATCH:

  • G-7 finance ministers and central bankers gather in Marseille, France, to discuss the European sovereign debt crisis and outlook for global growth
  • Tropical Storm Nate expected to strengthen to hurricane today as it forces energy cos. to begin evacuating platforms in Gulf of Mexico; final track still in question
  • NLRB holds hearings on Boeing 787 plant in South Carolina
  • Dish Network may be headed for split with ESPN over increasing rights fees: N.Y. Post
  • Amazon.com would drop quest to exempt itself from collecting sales taxes in Calif., state would forfeit ~$200m under pact lawmakers must act on today if it’s to be adopted
  • FDA AdCom on safety of osteoporosis drugs
  • Senate passed biggest change to U.S. patent law since at least 1952 yesterday, now heads to White House for Obama’s signature
  • No IPOs expected to price today

 

 

COMMODITY/GROWTH EXPECTATION

 

THE HEDGEYE DAILY OUTLOOK - daily commodity view

 

 

MOST POPULAR COMMODITY HEADLINES FROM BLOOMBERG:

  • Oil Drops a Second Day as Rising Dollar Counters Storm Concerns
  • Corn, Soy May Open Higher on Shrinking Crops; Wheat Seen Steady
  • Soybeans Advance, Reducing Weekly Decline, on Yield Estimates
  • Copper Erases Weekly Gain as Slowing Economies May Curb Demand
  • Gold Drops in New York as Dollar’s Rise Prompts Investor Sales
  • Coffee Falls on Demand Concerns Before Large Crops; Sugar Rises
  • Fortress Commodity Fund Said to Beat BlueGold in August
  • Wheat Supplies From India May Add to Surplus, Pressure Price
  • Refiners in U.S. Most Dependent Ever on Exports: Energy Markets
  • Copper May Decline 5.1% in Next Few Weeks: Technical Analysis
  • Aluminum Usage in Cars Will Double in Four Years, Novelis Says
  • Corn, Soybean Yields Cut on Adverse Weather, Goldman Says
  • Libya Said to Ship First Oil From West as Production Resumes
  • Africa’s New Friend China Finances $9.3 Billion of Hydropower
  • U.S. Soybean, Wheat, Soyoil Exports Fell Last Week, Survey Shows
  • Steelmakers Set to Curb Output as Costs Surge: Chart of the Day
  • India’s Cotton Exports May Jump 21% Next Year, Group Says

 

CURRENCIES

 

THE HEDGEYE DAILY OUTLOOK - daily currency view

 

 

EUROPEAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - euro performance

 

 

ASIAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - asia performance

 

 

MIDDLE EAST

 

THE HEDGEYE DAILY OUTLOOK - MIDEAST PERFORMANCE

 

 

 

Howard Penney

Managing Director

 


MCD TRENDS DISAPPOINT IN AUGUST

MCD’s global same-store sales results for August were, across the board, below expectations.

 

MCD global comparable sales growth in August was +3.5%.  By segment, U.S. comps were up +3.9% versus StreetAccount consensus of +4.7%, Europe comps were up +2.7% versus StreetAccount consensus of +5.5%, and APMEA comps declined -0.3% versus StreetAccount consensus of +3.9%.

 

The U.S. comparable sales number was a mere 10 basis points below expectations as the McCafé beverage line-up continues to drive strong sales.  Breakfast, including Fruit & Maple Oatmeal, and the new Premium Chicken sandwiches were also highlighted at strong points for the U.S. business.

 

MCD TRENDS DISAPPOINT IN AUGUST - mcd us august

 

 

As macroeconomic concerns weigh on confidence in the Eurozone, MCD’s performance has suffered in the region as evidenced by the +2.7% print for August.  This result implies the lowest two-year average comp (+2.5%) since December 2010 (2.3%) and the steepest sequential decline, of 285 bps, in the two-year average trend since August 2010.  The U.K. and Russia were highlighted as performance leaders in August.  Germany was included, alongside the U.K. and Russia, in the July release but was not mentioned in the August results.

 

MCD TRENDS DISAPPOINT IN AUGUST - mcd europe august

 

 

In APMEA, Japan sales weighed on the overall results.  Japan SSS declined -8.2% in August while China, Australia and other markets saw sales growth.  This was clearly a significant miss versus expectations and is likely a key reason why MCD share are trading down pre-market.

 

MCD TRENDS DISAPPOINT IN AUGUST - mcd apmea august

 

 

Howard Penney

Managing Director

 

Rory Green

Analyst


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THE M3: INDIA

The Macau Metro Monitor, September 9, 2011

 

 

DELTA SCOUTS FOR CASINO PARTNER; IN TALKS WITH LAS VEGAS-BASED MGM RESORTS INTERNATIONAL AND CAESARS ENTERTAINMENT  Economic Times

 

Delta Corp founder Jaydev Mody said,Delta Corp is in talks with MGM and CZR for a possible strategic investment.  The potential investors are currently studying foreign investment, technical collaboration and licensing norms. 

 

"We continue to monitor developments in India and we would welcome the day when a legal and regulatory structure emerges that would permit our company to invest there.  It would be inappropriate for us to comment on any discussions we may have had with any specific company," Gordon M Absher, vice-president of public affairs at MGM Resorts, said. 

 

Delta is the biggest casino firm in India, where the gaming business is growing 50% YoY.  The gaming business has few licenses and is concentrated in Goa, a popular global tourist destination.  But casino owners are now expanding to Sikkim, Daman and even in Sri Lanka, with demand on the rise.


LODGING: REVPAR REVS UP

RevPAR growth has started to reaccelerate but not because of the economy.  Hotels look more attractive than gaming or leisure.

 

 

While the global markets experienced one of the most volatile months in stock market history, hotel performance—not that of hotel stocks—actually improved throughout the month of August.  Is this because hotels do better in tough and volatile economic times?  Certainly not.  It’s just the sequential math.  We estimate August Upper Upscale REVPAR will come in at $102 or 5.5% YoY growth.  This growth is impressive considering August included a hurricane-battered week and that the 1st half of August averaged a mere 4% growth.   If you look at the chart of 3-week rolling UUP REVPAR YoY change (shown below), REVPAR accelerated in the 2nd half of August, which our math predicted in our note, “IT’S NOT THE ECONOMY STUPID! (8/25/11)”. 

 

LODGING: REVPAR REVS UP - uup

 

So where do we go from here?  According to our model, which tracks sequential, seasonally-adjusted dollar RevPAR, we still expect a sustained pickup in REVPAR growth for the rest of the year—as long as the US economy continues to chug along at a snail’s pace or better but not double dip.  So far so good.  Last week’s RevPAR increased 8.6%. 

 

With the stocks down 40% year to date, a RevPAR reacceleration should help investor sentiment tremendously.  Hotel stocks almost across the board are looking attractive to us.  Of course, we would still need a stable or up stock market for hotel stocks to work.  Although MAR doesn’t have the same ownership leverage to RevPAR growth as the REITs or HOT and H, sentiment around MAR is as low as we’ve seen it.  Moreover, MAR has the least downside relative to its March 2009 trough valuation among the lodgers and some potential positive catalysts such as a very aggressive stock buyback and potentially higher than expected FCF growth.



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