THE HEDGEYE BREAKFAST MONITOR
MACRO NOTES
Beef Prices
An article on cattlenetwork.com today discusses the higher beef prices that the restaurant industry can expect in 2012. We have been writing about this for some time. Production and supplies are set to be down in 2012 with demand from emerging markets likely increasing.
Notes from CEO Keith McCullough
Fun and games with month-end markups on no volume. Beware of the US economic data Wednesday-Friday. Expectations are too high.
- INDIA – stocks decided a 1-day rally to a lower-high was enough. Inflation isn’t going away on EUR/USD up days because Oil prices aren’t going down (Brent $110/barrel last), and Indian stocks don’t like sticky stagflation – down -1% overnight, taking the Sensex to 16,002 (down -22% for 2011 YTD).
- ITALY - On its shortest duration (the 2014 bonds) Italy Sells another €3.5B at 7.89%; a few months ago 6% was the "critical" line, then 7%, now I guess its 8%? C’mon. Let’s get as serious as Spread Risk is telling you to be here – Italian stocks are barely up this morning – and more importantly, down -37% since FEB (crashing) – no support for the MIB Index to 13,422
- EURO – another day, another hope that a USD selloff and a Euro rally is real. Unfortunately, the math is getting in the way of that; EUR/USD has an important short-term line of resistance that it’s been fighting for 48 hrs at 1.34; ultimately, the bigger lines that matter are TRADE and TAIL resistance of 1.36 and 1.40, respectively.
If you want to get bulled up on something into the start of the new month, go with US Dollar (UUP) or Long-Bond (TLT) on red today.
KM
Consumer
The ICSC chain store sales index posted its largest weekly gain since April, up 1.7%. It appears that sales the weekly sales trends benefitted from additional store hours as many chain stores opened earlier; many stores opened late Thanksgiving evening. The implication is these sales were borrowed from sales in the coming weeks. According to ICSC, the strength came in the face of much warmer than normal weather, which should be a drag on sales of seasonal apparel. Year-over-year growth jumped to 4%, the strongest since late July.
As the Hedgeye Energy Team noted today – “AAA reported yesterday that the average US price of regular unleaded gasoline dipped below $3.30/gal for the first time since Feb 2011 (Libyan crisis). Weak demand has expressed itself in the gasoline market, not in the oil market. Our read is that the relative strength in WTI is due to the unwind of the bottleneck at Cushing; and the relative strength in the Brent market is because of Egypt/Iran/Israel geopolitical risk.”
While lower gas prices might be helping to keep consumer spending growth at a modest pace the strong Black Friday sales trends suggests that consumers remain very price sensitive, which not a good sign for the balance of the Holiday season.
SUBSECTOR PERFORMANCE
QUICK SERVICE
SBUX: The Starbucks mobile payment app is set to launch on January 5th, 2012.
CASUAL DINING
CAKE: Cheesecake Factory initiated “New Overweight” at Stephens, with a PT of $34.
DIN: Dine Equity was initiated “New Equalweight” at Stephens, with a PT of $50.
Howard Penney
Managing Director
Rory Green
Analyst
