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THE HBM: DNKN, WEN, BWLD

THE HEDGEYE BREAKFAST MONITOR

 

MACRO NOTES

 

Consumer

 

Initial jobless claims came in at 388k versus 395k consensus and a revised 393k the week prior. 

 

THE HBM: DNKN, WEN, BWLD - initial claims 1117

 

 

SUBSECTOR PERFORMANCE

 

THE HBM: DNKN, WEN, BWLD - subsector fbr

 

 

QUICK SERVICE

 

DNKN: Dunkin Brands priced its secondary offering, previously announced on November 1st, at $25.62.  In addition, the underwriters have been granted a thirty-day option to purchase up to an additional 3.3 million shares from certain of the selling stockholders.

 

WEN: Wendy’s is launching the “W” cheeseburger.  As we wrote in our Commodity Chartbook, published this morning, WEN and other companies exposed to spot market beef costs are likely to be impacted by what the supply and demand dynamics seem to suggest will be higher prices in 2012. 

 

 

CASUAL DINING

 

BWLD: Buffalo Wild Wings announced yesterday that it plans to buy 15 franchise units in Ohio and South Carolina. 

 

THE HBM: DNKN, WEN, BWLD - stocks 1117

 

 

Howard Penney

Managing Director

 

Rory Green

Analyst

 

 


JOBLESS CLAIMS CONTINUE TO IMPROVE; STARTS & PERMITS RISE OFF OF DOWNWARDLY-REVISED SEPTEMBER DATA

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Single-Family Housing Starts Rise 3.9%; Multifamily Continues Higher

Single-family housing starts rose in October, climbing 3.9% to 434k.  September data was revised down to 414k from 427k.  Single-family permits rose 5.1% to 430k. On a long-term basis, single-family activity remains very low.  The modest improvement in starts and permits is a positive sign for new homes, reported later this month.  

 

We had cautioned that excitement around the NAHB Housing Market Index print was misguided, as it often doesn't accurately forecast an increase in starts.  October starts did not change this conclusion.  

 

JOBLESS CLAIMS CONTINUE TO IMPROVE; STARTS & PERMITS RISE OFF OF DOWNWARDLY-REVISED SEPTEMBER DATA - single family

 

JOBLESS CLAIMS CONTINUE TO IMPROVE; STARTS & PERMITS RISE OFF OF DOWNWARDLY-REVISED SEPTEMBER DATA - multifamily

 

JOBLESS CLAIMS CONTINUE TO IMPROVE; STARTS & PERMITS RISE OFF OF DOWNWARDLY-REVISED SEPTEMBER DATA - single family LT

 

JOBLESS CLAIMS CONTINUE TO IMPROVE; STARTS & PERMITS RISE OFF OF DOWNWARDLY-REVISED SEPTEMBER DATA - contrary

 

JOBLESS CLAIMS CONTINUE TO IMPROVE; STARTS & PERMITS RISE OFF OF DOWNWARDLY-REVISED SEPTEMBER DATA - HMI and starts

 

Initial Claims Drop 2k to 388k

Initial claims fell 2k last week to 388k (-5k from the upwardly-revised 393k).  We have been looking for claims between 375-400k as the level that allows unemployment to improve, and an extended stay in this range will be a positive signal.  Rolling claims fell 4k to 397k.  

 

JOBLESS CLAIMS CONTINUE TO IMPROVE; STARTS & PERMITS RISE OFF OF DOWNWARDLY-REVISED SEPTEMBER DATA - Rolling

 

JOBLESS CLAIMS CONTINUE TO IMPROVE; STARTS & PERMITS RISE OFF OF DOWNWARDLY-REVISED SEPTEMBER DATA - Raw

 

JOBLESS CLAIMS CONTINUE TO IMPROVE; STARTS & PERMITS RISE OFF OF DOWNWARDLY-REVISED SEPTEMBER DATA - NSA chart

 

JOBLESS CLAIMS CONTINUE TO IMPROVE; STARTS & PERMITS RISE OFF OF DOWNWARDLY-REVISED SEPTEMBER DATA - Fed and Claims

 

JOBLESS CLAIMS CONTINUE TO IMPROVE; STARTS & PERMITS RISE OFF OF DOWNWARDLY-REVISED SEPTEMBER DATA - S P 07 10

 

2-10 Spread Indicates Ongoing Margin Pressure

The 2-10 spread widened 1 bps versus last week to 175 bps.  The ten-year bond yield increased 4 bps to 200 bps.

 

JOBLESS CLAIMS CONTINUE TO IMPROVE; STARTS & PERMITS RISE OFF OF DOWNWARDLY-REVISED SEPTEMBER DATA - 2 10 spread 1

 

JOBLESS CLAIMS CONTINUE TO IMPROVE; STARTS & PERMITS RISE OFF OF DOWNWARDLY-REVISED SEPTEMBER DATA - 2 10 spread QoQ 1

 

 

Financial Subsector Performance

The table below shows the stock performance of each Financial subsector over four durations. 


JOBLESS CLAIMS CONTINUE TO IMPROVE; STARTS & PERMITS RISE OFF OF DOWNWARDLY-REVISED SEPTEMBER DATA - Subsector Performance

 

Joshua Steiner, CFA

 

Allison Kaptur

 

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THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP - November 17, 2011

 

As we look at today’s set up for the S&P 500, the range is 28 points or -1.04% downside to 1224 and 1.22% upside to 1252. 

 

SECTOR AND GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - levels 1117

 

THE HEDGEYE DAILY OUTLOOK - daily sector view

 

THE HEDGEYE DAILY OUTLOOK - global performance

 

 

EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: -1594 (+795) 
  • VOLUME: NYSE 918.72 (+17.7%)
  • VIX:  +33.51 +7.3% YTD PERFORMANCE: +88.79%
  • SPX PUT/CALL RATIO: 2.54 from 1.51 (+68%)

 

 

CREDIT/ECONOMIC MARKET LOOK:

 

TREASURIES – KM is long both the Long-bond (TLT) and Growth Slowing (Treasury Flattener, FLAT) and have been using an immediate-term TRADE target on 10yr yields of 1.98% - we’re there this morning, so the gross exposure call now is to sell some Treasuries and start allocating assets to US Equities. Take your time.

  • TED SPREAD: 46.60
  • 3-MONTH T-BILL YIELD: 0.00%
  • 10-Year: 2.00 from 2.00    
  • YIELD CURVE: 1.75 from 1.76

 

MACRO DATA POINTS (Bloomberg Estimates):

  • 8:30am: Jobless claims, est. 395k (prior 390k)
  • 9:45am: Bloomberg Consumer Comfort, est. -50.4 (prior -51.6)
  • 10am: Philadelphia Fed, est. 9.0 (prior 8.7)
  • 10am: Freddie Mac mortgage rates
  • 10:30am: EIA natural gas storage change
  • 12:30pm: Fed’s Pianalto speaks on economy in Kentucky
  • 12:50pm: Fed’s Dudley speaks on economy at West Point
  • 1pm: U.S. to sell $11b 10-yr TIP reopening
  • TBA: Mortgage Delinquencies (prior 8.44%)

 

 

WHAT TO WATCH: 

  • Spain sold 3.56b euros of 10-yr bonds with avg yield of almost 7%, the most since the euro’s creation
  • Builders probably began work on fewer homes in Oct; median est. starts fell 7.3% to 610k annual rate
  • Energy Secretary Steven Chu said final decisions on Solyndra were mine”; Chu to testify before House panel this morning
  • American Airlines pilot talks may recess for 2 wks with sides “far apart”
  • Northern Rock agreed to be sold to Virgin Money Holdings for $1.2b
  • AT&T’s Glenn Lurie says co. in talks to start selling Nokia’s WP smartphones next year
  • Guggenheim Partners said to seek buyers for Claymore Investments
  • MF Global subpoenas said to be issued by Chicago U.S. Attorney
  • Gartner sees inventory correction in semiconductor industry to damp sales at least thru 2011
  • House Democratic group urging Congress to overhaul the tax code by lowering corporate rates, removing breaks and easing the burden on U.S. companies’ overseas operations
  • Obama said cutting the U.S. budget won’t reduce the nation’s military and economic commitments to the Asia-Pacific region
  • Olympus pledges $3.3b debt cut, will report earnings by Dec. 14

 

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • Candy-to-Fuel Demand Cuts Oil Inventory to ‘75 Low: Commodities
  • Gold Demand Rose 6% in Third Quarter on European Debt Crisis
  • Oil Falls From Five-Month High on Signs Europe Crisis Spreading
  • Gold Imports by India Drop 20% as Record Prices Deter Buyers
  • Buffett’s Burlington Exploits Boxed Asia Grain Up 29%: Freight
  • Copper Declines Most in a Week as European Crisis May Spread
  • Gold Falls in New York, London as Equities Drop May Spur Sales
  • Wheat Falls for Second Day as Syria Rejects Tender on Prices
  • Sugar Falls to Seven-Week Low on Indian Exports; Cocoa Slides
  • Gold Top Pick at Morgan Stanley as Europe Debt Spurs Demand
  • Soybean Imports by Japan May Drop 11%, Ministry Says
  • Severstal CEO Mordashov Says Company Deserved U.S. Vehicle Loan
  • Orange Juice May Climb on ‘Cup and Handle’: Technical Analysis
  • U.S. Crude Discount Versus Brent May End Soon: Chart of the Day
  • COMMODITIES DAYBOOK: Candy-to-Fuel Demand Cuts Oil Inventories
  • China’s Gold Jewelry Demand Gains 13% to Make It World’s Largest
  • Japan Restricts Some Rice Shipments After Radiation Found

THE HEDGEYE DAILY OUTLOOK - daily commodity view

 

 

CURRENCIES

 

THE HEDGEYE DAILY OUTLOOK - daily currency view

 

 

EUROPEAN MARKETS

 

SPAIN – their bond auction was a mess (3.6B of 10yr fiat at 6.97%) and now both Spanish and French Equities are moving to immediate-term TRADE oversold alongside the Euro. That Goldman call to buy the Euro last week is now officially the worst FX call on Old Wall St of the year; 1.34 last.


THE HEDGEYE DAILY OUTLOOK - euro performance

 

 

ASIAN MARKETS

 

ASIA – we’ve been the 2011 Bear on Growth Slowing and now the high-frequency data is slowing even faster than we thought; I haven’t seen the legacy media lead w/ this yet and I don’t expect them to, but Singapore just printed a DOWN -16.2% y/y export # for OCT vs what was already startling at -4.6% in SEP. Indian stocks joined HK in crash mode overnight.

 

THE HEDGEYE DAILY OUTLOOK - asia performance

 

 

MIDDLE EAST

 

THE HEDGEYE DAILY OUTLOOK - MIDEAST PERFORMANCE

 

 

 

The Hedgeye Macro Team

Howard Penney

Managing Director

 

 

 


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THE M3: NO IMPORTED CROUPIERS; MANILA; LAN KWAI FONG

The Macau Metro Monitor, November 17, 2011

 

 

GOVT SAYS NO TO IMPORTED CROUPIERS Macau Business, Macau Daily Times

Macau CEO Chui promised that Macau won't have any imported croupiers as long as he is in charge.  Currently, only locals can work as croupiers in the casinos.  Chui also called on employers to raise employees' wages in 2012.  "Whether in private or public sectors, all workers expect their wages to be adjusted this year [2012]," Chui said.

 

EX-SANDS EXECUTIVES INK DEAL TO RUN CASINO IN MANILA Macau Business

According to Cristino Naguiat, the chairman and CEO of PAGCOR, Las Vegas’ Global Gaming Asset Management LLC has just signed a management contract with Filipino port magnate Enrique Razon’s Bloombury Investments Holding Inc. to run gaming and hotel operations at one of the integrated resorts under development at the Entertainment City project at Manila Bay.

 

Several former LVS executives compose Global Gaming Asset Management LLC management.  The CEO of Global Gaming Asset Management is William Weidner, who was previously president and COO of LVS.  Also involved are Bradley Stone, who used to be connected with LVS; Garry Saunders, a former executive of LVS and MPEL; and Dennis Andreaci, until recently senior vice-president for gaming operations of Galaxy Macau, and also a former vice president of table games for the Sands Macau and Venetian Macau.

NEGOTIATIONS ON THE POSSIBLE ACQUISITION OF 50% INTEREST IN LAN KWAI FONG China Star Entertainment Ltd

China Star Entertainment is under preliminary negotiations relating to the possible acquisitions of the remaining 50% equity interest in Hotel Lan Kwai Fong (Macau) Limited (“Lan Kwai Fong (Macau)”), a 50% owned subsidiary of the Company.  The possible acquisitions involve (a) acquisition of 1% equity interest in Lan Kwai Fong from SJM - INVESTIMENTOS LIMITADA; and (b) acquisition of 49% equity interest in Lan Kwai Fong (Macau) from a connected person.

 


Lazy Conformism

This note was originally published at 8am on November 14, 2011. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.

“This lazy conformism is one of the big dangers of this country today…”

-Siegmund Warburg

 

In Niall Ferguson’s “High Financier”, that’s what Warburg had to say about British political leadership in 1957. “There is a frightening amount of mediocrity … and there should be a crusade against complacency…” (page 136).

 

In 2011, anytime we call Old Wall Street out on these types of structural issues, they either block us or get really upset. That means we’re being the change we all want to see in this business. Groupthink is dying on opacity’s vine.

 

If the American financial empire wants any chance at seizing this global debt crisis as an opportunity to change, we better start now. Post WWII Britain had to learn this lesson the hard way - time is not an entitlement.

 

Back to the Global Macro Grind

 

Pressure packed with volatility and hope, last week was exciting. While hope is not a risk management process, fading the market’s beta is – and we’ll look for direction from King Dollar on that front once again this week (we have a 12% asset allocation to the US Dollar Index in the Hedgeye Asset Allocation Model).

 

Week-over-week Macro moves:

  1. US Dollar Index $76.94 = flat
  2. Volatility 30.04 = flat
  3. Commodities 320 (CRB Index) = flat

That’s a lot of flat.

 

In US Equities, the message wasn’t as flat:

  1. SP500 = up +0.8%
  2. Nasdaq = down -0.3%
  3. Russell2000 = down -0.3%

But, this weekend, there was a Lazy Conformism in analyzing what, precisely, all of this interconnectedness might mean to Global Macro investors. I saw a lot of pundits go as far as to say things like ‘when you really think about it, US stocks are flat this year.’

 

If you really don’t think about anything at all, that probably sounds right. Who needs to analyze anything or charge a fee for proactive anything if we could have all just closed our eyes during a +101% rip in Volatility (VIX) since May, and gone back to bed?

 

Whether it’s the Nasdaq or Russell 2000 having closed down for the last 2 weeks or US Treasury Yields dropping to 6-week lows as the SP500 tries to sustain low-volume 6-week highs, there is plenty to think about. Excellence in your risk management process is required.

 

Being excellent is ok. So is not losing money. In fact, for my money, that’s Rule #1 in this game – and rather than subscribe to some form of centrally planned mediocrity in this business that dares people to chase yield, we’re going to stick with what’s been working since late 2007.

 

Since making lower long-term and intermediate-term highs:

  1. The SP500 is down -19.3% since October 2007
  2. And down -7.3% since April 2011

Lower long-term highs in stock prices with higher long-term lows in volatility is what’s crushing both the economic cycle and investment returns. The Old Wall and Washington’s analysis of as much is broken.

 

Change needs to happen now. And no, hiring a lifer bureaucrat and Keynesian economist to run Italy isn’t the change Americans want to see in this world. Out with the whiners - Americans want to start winning again.

 

My immediate-term support and resistance ranges for Gold (bullish), Oil (bullish), German DAX (bearish), French CAC (bearish), and the SP500 are now $1766-1818, $95.39-99.89, 5969-6146, 3047-3176, and 1248-1269, respectively.

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Lazy Conformism - Chart of the Day

 

Lazy Conformism - Virtual Portfolio



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