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Keith – YUM - is one of the tougher ones, big support down at 24.28, Chinese chickens?

Howard – YUM - I’m warming up to YUM, but I would really like to get past 4Q08. So far in the 4Q08 we are hearing that sequentially KFC and PH sales trends have slowed, while TB remains more resilient. Over all, the US business is in a secular decline and the international business is having a difficult time making up the difference. Financial engineering is the only way they can get to the EPS guidance.

Keith – SBUX - under $8, I buy the triple shot

Howard – SBUX - As I said in my last SBUX post, I see fundamental support at $7-$8 and that has not changed.

Keith - CAKE - Take your CAKE and eat it too! 6.28 next

Howard – CAKE – CAKE’s real estate strategy over the past 5 years is really hurting them: a mall based concept with a high concentration of stores in FL, AZ and CA. Also management does not give you a warm and fuzzy feeling that they are being proactive about the macro environment.

Keith - WEN starting to show some + divergences, if it holds 3.48, I like it on the long side

Howard - WEN - The Wendy’s concept had a decent same-store sales performance in 3Q08. Management needs to prove the cost cutting/margin story, and that will take time. I have a positive bias, too.

Keith – EAT - has been eaten, looks like it could eat the shorts however if we buy it down at 6.33

Howard – EAT - is the poster child for casual dining. Management is doing everything they can do to offset the macro, including a liquidity event, but who cares. Three of Chili’s competitors in the bar and grill segment are in serious trouble – Applebee’s, O’Charley’s and Ruby Tuesday’s – but who cares.

SP500 Levels Into The Close...

Since Thursday afternoon, I have made 19 consecutive sales (long sales and short sales) in the 'Hedgeye Portfolio'... with the SP500 at the top of my trading range, I am incrementally bearish. At the bottom of that range, I am incrementally bullish. This isn't my religion. This is my investment process with volatility (VIX) running in the high 60's. This is a market that needs to be traded.

See chart below for my updated levels post the 3PM refresh of my model's pricing:

BUY "Trade" = 839
SELL "Trade" = 901

The "Shark Line" is the great white dotted one on this chart up at 927. Beware of it.

Japan's Bottom Is Not In...

See the chart below. While it is not new news that a country that gives its people zero interest rates on their life savings ends up wallowing in their own economic misery, it was apparently new to the media this morning that Japan could drive itself into another recession...

Do not mistake the 2008 Japanese recession for the one we witnessed in 1998 (where the Nikkei looked past the news and ripped higher ahead of accelerating economic growth). This Japanese bailout policy is going result in protracted economic stagnation.

We remain short Japan via the EWJ etf. This is a position we have held since opening the firm in May.

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UA: Eye On Insider Buying

Amidst all the market noise, most people probably missed the insider buying at UnderArmour last week. Was it massive in size? Nah… But notable in that it was only the second insider buy all year. Harvey Sanders, member of the Board since 2004 and Chair of the Compensation Committee, boosted his stake in UA by 19% at $21.68 (i.e. where it is now). Equally as important is that Mr. Sanders has been a reasonably astute buyer and seller over time. – having lost money on 1 out of his 5 trades. In addition, his largest trade to date was 1,900 shares. This transaction was for 10,000.

Charting EU Credit Divergences, By Country...

Sometimes simple charts like this can reveal critical truths. While the EU has created a common currency, not all credit quality in the European bond market is considered equal. This is one more reason to like German Equities. We are remain long Germany, via the EWG etf.

China: Best Looking Country Chart In The League

The fundamental picture in China continues to improve (growth expectations have been reigned in, and inflation continues to abate). In the face of a $586B stimulus spending plan and the cutting of taxes on exports, this is not a macro train many can afford to miss.

China's SSEC closed up another +2.2% overnight at 2030. The Composite Index has had a better than +15% move in the last week of trading. The chart below shows the impact of breaking out through our "shark line", which rests comfortably underwater now at 1866.

We remain long China via the FXI exchange traded fund. We were the bears for the better part of the last year, so we are well aware of their pitching our stale thesis.

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%