The Economic Data calendar for the week of the 31st of October through the 4th of November 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.
Lani Kane-Hanan (Chief Growth and Inventory Officer)
Joe Bramuchi (VP Capital Markets, Treasury and Financial Risk Mgmt)
John Geller (CFO of MVCI)
Here is part one of our notes
Timing of timeshare spin-off:
Carl Berquist (CFO of MAR)
Steve Weisz (President and CEO of MVW)
Lee Cunningham (COO of MAR)
Brian Miller (Sales, Marketing and Service Operations EVP)
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Personal Income growth in September came in at +0.1% versus expectations of +0.3% while Personal Spending came in at +0.6%, in line with Street expectations. PCE Core came in at +1.6% y/y in September versus +1.7% expectations. Consumers are decreasing their savings rate to spend. This is not sustainable but, as we have seen in the past, stimuli can come via many different levers. Nevertheless, the slow quarter-over-quarter personal income growth – worst since 2009 – is a looming cloud over the economic data this morning.
One of the top stories on Bloomberg this morning is titled “Restaurants Lift Prices to Catch Food-at Home Inflation”. As we have been highlighting for some time, restaurants have some room to raise prices given the much bolder price hikes being taken in the grocery aisle. The article is an interesting read, highlighting the “low cost entertainment” that eating out represents.
ARCO: Arcos Dorados reported third quarter earnings and cut its revenue and EBITDA growth ranges. Company sees full-year revenue growth 21-23% and adjusted EBITDA growth of 14-16%.
EAT: Brinker was the target of many skeptics over the past 24 or 36 hours. Sterne Agee’s take on the stock was known yesterday but republished in Barron’s subsequently. As we had suspected before seeing the details, caution on “Brinker’s ability to grow top line on a sustainable basis” is the reason behind the downgrade. We take the other side of that bet, see our post from yesterday.
MRT: Morton’s Restaurant Group reported a 3Q loss of -$0.11 versus expectations of -$0.112. Comps came in at +5.1% which, as the chart below illustrates, implies a decline in two-year average trends. On beef prices, Morton’s sees 5-10% inflation in 2012 but “have no real basis” for that number yet other than the bullishness they perceive from the beef processors on their pricing power. Even as beef prices continue to go higher, MRT has 70% of beef needs for 2011 on a floating basis. 70% of 4Q needs are contracted, however. In terms of demand and/or mix, Morton’s has not seen any substitution to seafood or other substitutes. Of course, the consumer profile at Morton’s is not analogous to the general U.S. consumer but it is an interesting data point nonetheless that could indicate further pricing power for the brand. Wall Street and Corporate America layoffs may be changing this however.
CPKI: Golden Gate Capital has closed its latest fund at $3.5 billion, according to the NYT. The fund had purchased a wide range of companies over the last twelve months, including California Pizza Kitchen.
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TODAY’S S&P 500 SET-UP - October 28, 2011
We’ve just seen the biggest 4 week rip in US stocks in 40 years and that’s a long time. As we look at today’s set up for the S&P 500, the range is 24 points or -1.45% downside to 1226 and 0.42% upside to 1290.
SECTOR AND GLOBAL PERFORMANCE
Keith traded SPY as well as he could have this week (short Monday at 1258, covered Wednesday 1227, re-shorted Thursday 1290) but got killed in the long US Dollar position:
CREDIT/ECONOMIC MARKET LOOK:
MACRO DATA POINTS (Bloomberg Estimates):
WHAT TO WATCH:
COMMODITIES - with USD down hard, I’m happy I wasn’t short anything Commodities yesterday, but looking at the short side again today as the core 3 lines of resistance (CRB Index TREND = 327, Oil’s TAIL of $93.87, and Copper’s TREND of 3.91 remain intact).
MOST POPULAR COMMODITY HEADLINES FROM BLOOMBERG:
US DOLLAR – closing below my 75.37 TREND line of support on a meltdown day for the US Dollar Index (squeeze in the Euro) is the #1 factor in all of my Global Macro model (the USD has a -0.95 and -0.97 inverse correlation to US and European stocks, respectively = one way risk that works both ways). If the USD can’t recover by TREND line in the next 3 weeks, I’m out.
ASIA – after closing down -4.7% last week, China closed up every day this week… having fun w/ the China is going away thesis yet? We have not been in that camp, but we do think Chinese GDP doesn’t bottom sequentially until Q1 of 2012, so watch the Shanghai Comp closely now that it has recovered it’s TRADE support line of 2411 (still bearish TREND up at 2563.
The Hedgeye Macro Team
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