While it appears this morning’s meeting is well-attended, I think others may be underestimating the importance of today’s meeting.


Today in Raleigh, N.C., senior management is showcasing a converted Chili’s.  14 of the 15 restaurants in the market have been converted.  It appears that management is very happy with the results they are seeing.  My feeling is that some members of the investment community could be underestimating the importance of this meeting; the entire Brinker management team is here including Chief Executive Officer, Doug Brooks.


Having spent the better part of yesterday evening in the remodeled Chili’s talking to regional managers and other employees, I get the sense that there is a lot of positive momentum at the Chili’s brand.  I understand that management has a lot riding on the turnaround but it seems that their enthusiasm is matched by the positive energy among rank-and-file employees.  It is one of those intangibles that are impossible to quantify but the turnaround initiatives would fail without it.


I estimate that October’s Knapp Track Comparable Sales two-year average slowed by 75 basis points from September to 0.85%.  I think that a greater proportion of this decline is attributable to Applebee’s than Chili’s.  Next to PFCB, EAT remains one of the more controversial names in the restaurant space as the sell-side remains polarized over the company’s ability to sustain current trends.  I believe that the company could be in the early stages of a sustained recovery.


Two net positives that could help the stock in the short run are:


(1)    The operating performance put it in “nirvana” which should allow for a multiple expansion over time.

(2)    The sell-side is very bearish on the name, despite the company taking market share from Applebee’s.


The meeting starts shortly.


EAT MEETING - eat quadrant


EAT MEETING - sentiment eat



Howard Penney

Managing Director


Rory Green







Forgetting Memories

This note was originally published at 8am on November 10, 2011. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.

“Nothing stands out so conspicuously, or remains so firmly fixed in the memory, as something you have blundered.”

-Marcus Tullius Cicero


I didn’t have a chance to watch the Republican Debate last night, but woke up to an email from a Republican operative contact intimating that Gingrich will benefit from Perry leaving the race.  This particular contact has been a vociferous supporter of Perry, so I was surprised by his comment.  After reviewing the transcript and key highlights this morning, I understand his point quite clearly. 


In an exchange in which he was asked which three federal agencies he would do away with, Perry confidently indicated that he would do away with the Department of Education, the Department of Commerce, and a third one which he couldn’t remember.   In the first attempt at trying to remember the third agency, he simply ended with “oops”.  In the second attempt, he ended with this statement:


                “I would do away with Education, the – Commerce and, let’s see, I can’t.  The third one, I can’t”


To Cicero’s point in the quote above, Perry will certainly remember his blunder, even as he couldn’t remember the three agencies. 


Normally, one bad exchange in a debate wouldn’t ring the death knoll for a candidate’s campaign.  In the case of Perry, his campaign was already on life support.  As we highlight in the Chart of the Day, the InTrade contract for his gaining the Republican nomination is now at 4.1%.  Not only is this the worst rating since he fully launched his campaign, but Perry is now trailing the embattled Herman Cain who is at 5.6%.


In general, last night’s debate likely will not alter the overall makeup of the race for the Republican nomination.  This is still Romney’s race to lose, and in a big way.  On InTrade, Romney is at 71%, while his second closest rival, Newt Gingrich, is at 9.1%.  In head-to-head polls amongst all the leading Republican candidates, Cain has led in some recent polls, but in aggregate since early October, Romney has either been first or second in every poll.  Finally, Romney has the money and team to stay deep in the war of attrition that is the Republican primary season.


Assuming Romney does get the nomination, the question is whether he can beat President Obama in a head-to-head matchup.  So far, at least, the numbers suggest that Romney will be the underdog in that matchup.  Currently, according to the Real Clear Politics poll aggregate, Obama, on average, beats Romney by +1.7 points.  To be sure, this is within the margin of error, though much closer than one would expect given Obama has an approval rating in the mid-40s and unemployment has a 9-handle.  Ultimately, as usual, turnout and motivation will be key and if the midterms were any indication, Republican turnout could be huge.


Flipping back to the market, undoubtedly yesterday was a day most investing minds would prefer to forget.  The SP500 was down -3.7% yesterday.  In particular, breadth was notably negative with one stock up on the day.  That stock was Bed, Bath and Beyond and the catalyst was a positive call from Cleveland Research.  If Cleveland Research is moving a stock, this is probably a decent flag for another important risk factor: light volume.  No surprise, to Hedgeye at least, financials were the weakest sector with the XLF down -5.4% on the day. 


Coincidentally, or not, our Financials Sector Head Josh Steiner held a call with Peter Atwater (former Treasurer of Bank One) yesterday to discuss the key new risks for financials.  Both Steiner and this industry veteran continue to believe that investors are underestimating the long term risks to financials, with Jeffries and MF Global potentially being canaries in the coal mine related to bank hedging.  If you’d like access to our Financials sector and a replay of the call, email


In Europe, the news and data flow appears to be going from bad to worse.  Front and center is the Italian bond market.  Italy sold €5 billion of 12-month bills this morning with average yield of 6.087%.  This compares to Italy’s last auction October when it sold the same duration of bills at 3.57%.  Further, Italian 10-year yields remain above the 7% line.  The Italian Senate is purportedly “rushing” to pass austerity measures with a vote tomorrow.  The likely outcome of incremental Italian action is accelerating stagflation in Europe.


On the last point, the EU lowered its Euro-region growth forecast due to the worsening debt crisis from +1.8% growth in 2012 to 0.5% growth.  Our view continues to be that European growth will likely be negative as inflation begins to accelerate alongside the eventual hum of the ECB printing presses.  Our view of Europe underscores one of our top macro ideas heading into 2012, which is to be long the U.S. dollar.


We will be holding our annual best ideas call tomorrow at 11am eastern.  This call will represents the best ideas, both long and short, across all seven of our coverage sectors.  We will be circulating all the materials to institutional subscribers later today.  For those that aren’t current Hedgeye institutional subscribers, please email for details around gaining access to the call.


Keep your head up and stick on the ice,


Daryl G. Jones

Director of Research


Forgetting Memories - Chart of the Day


Forgetting Memories - Virtual Portfolio


The Macau Metro Monitor, November 15, 2011




The number of Singapore private homes sold in October went down by 14.9%.  The Urban Redevelopment Authority showed 1,387 private units were sold in October, 244 units lower than September's. 



Visitor arrivals in package tours soared by 60.6% YoY to 597,903 in September 2011.  Visitors from Mainland China (422,292); Taiwan (45,138); Hong Kong (32,106) and the Republic of Korea (26,206) surged by 88.9%, 54.7%, 38.7% and 78.7% respectively.  On the contrary, visitors from Japan (19,085) decreased by 31.7%. 


At the end of September 2011, number of available guest rooms of hotels and guest-houses totaled 22,407, up by 2,561 rooms (+12.9%) YoY, with that of 5-star hotels accounting for 63.8% of the total.  The average length of stay decreased by 0.04 nights to 1.5 nights.

Early Look

daily macro intelligence

Relied upon by big institutional and individual investors across the world, this granular morning newsletter distills the latest and most vital market developments and insures that you are always in the know.

Fade Fear

“Fear is nothing more than a state of mind.”

-Napoleon Hill


Hedge Funds fear being short. Mutual Funds fear missing Santa Claus. Central planners fear-monger.


What is a Global Macro Risk Manager to do?


Fade Fear.


Last night, while the elephantine academic intellect of Larry Summers was engrossed in The Munk Debates in Toronto (I LIVE tweeted the entire debate from 700-830PM EST), at one point he paused and stated, “in a democracy, fear does the work of reason.”


Fade Larry Summers.


Last week, as the Euro was punching up against my $1.37-1.38 TRADE wall of immediate-term resistance, Goldman’s currency strategist said fear the short squeeze and buy the Euro.


Fade Thomas Stolper.


Last month, after the biggest stock market rally ever in October (ever is a long time), JP Morgan’s Thomas Lee said to stop thinking about everything else and chase beta.


Fade Thomas Lee.


With the US stocks down a full 1% yesterday, they are down for both November and 2011 YTD. Some Santa Claus rally we’re having here in mid-November…


I’m short the SP500 (SPY), long the Long-Bond (TLT), and long the US Dollar (UUP) – and relatively loud about all three of those positions. If you’ve been fading me since October 2007 or April 2011, you still have some Thanksgiving hay to bail (for November 2011 to-date, Hedgeye is 12 for 14 in the Hedgeye Portfolio).


To get back to SP500 breakeven:

  1. You’ll need to be up +25% (from here) to recapture the -20% from October 2007 watermark
  2. You’ll need to be up +8.9% (from here) to recapture the -8.2% from April 2007 watermark

Geometric math is hard to fade.


But since the Keynesians continue to attempt to ban gravity, I supposed they could move towards banning math after this morning’s drawdown in Global Equities too. If we’re fundamentally scared out of our bloody minds, there is no telling what central plan is possible.


Back to The Munk Debates - I thought David Rosenberg won last night. For those of you who missed it, the debate was between the teams of David Rosenberg/Paul Krugman and Larry Summers/Ian Bremmer.


What was crystal clear after the opening statements was that Krugman and Summers were actually on the same team.  Rosie, The Canadian, was quick to figure that out and proceeded to physically poke his debate partner (Krugman), then proceeded to tell Summers he was “dropping the gloves” … reminding Larry of how bad his economic “forecasts” have been…


Fade Keynesian Economics.


Summers was literally quoting Keynes during the debate as he and Krugman agreed that the only answer to this mess is to do a lot more of what has not worked.


If you’re going to fear anything this morning, fear that.


My immediate-term support and resistance ranges for Gold, Oil, France’s CAC, Germany’s DAX, and the SP500 are now $1, $96.13-99.73, 3031-3179, 5, and 1, respectively. If 1233 in the SP500 holds, I’ll consider covering SPY there.


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Fade Fear - Chart of the Day


Fade Fear - Virtual Portfolio

URBN: Mind the Bottom

If URBN holds onto the current trajectory in this graph for much longer, it will be setting new records for apparel retailers. We're not calling the bottom, but bottoms are processes, not points. In other words, it might be forming one now.



URBN: Mind the Bottom - 11 15 2011 5 53 10 AM

Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.46%
  • SHORT SIGNALS 78.35%