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THE HEDGEYE BREAKFAST MONITOR

MACRO NOTES

Coffee Costs

Brazil’s next coffee crop will be 2.6% larger than estimated in November, according to Terra Forte Exportacao e Imporacao de Café Ltda. Brazil is the world’s largest producer of coffee.  As we can see in the chart below, coffee costs have been coming down which will benefit PEET and other coffee retailers.  Starbucks has been locking in coffee costs for FY13 (ending September) having locked in all expected requirements for FY12 during calendar year 2011.

THE HBM: DNKN, SBUX, DRI - coffee

Comments from CEO Keith McCullough

2 of the Top 3 Most Read on Bloomberg this morn are about China – no Greece. Analytical progress:

  1. INDIA – obviously a country that is short oil is a country that is going to have a stagflation problem with oil prices ripping like this. That wasn’t new to the Indians last week, but evidently it mattered  to their stock market today – at down -2.8% in a straight line, that’s the problem w/ bearish market SKEW. India’s Yield Curve has gone to flat.
  2. FRANCE – another +0.6% sequential ramp in producer prices this month is only going to perpetuate the stagflation we see in France, Spain and Italy. Who cares about Greece when these 3 majors will have a much larger say in global growth expectations. The CAC’s TAIL remains broken and now the immediate-term TRADE line is under fire (3439). We re-shorted France (EWQ) late last wk.
  3. 10YR – its been a while since the 10-yr bond yield was more wrong than the US stock market on growth expectations. At every turn in the last year, bond yields have told you all you need to know about US Growth Slowing. After failing at the 2.03% TREND line last wk, snapping the 1.97% TRADE line puts 1.91% back in play.

Friday’s close > 1363 SP500 was bullish for a few hours. Prices need to confirm though, so we’ll see about that this week. I’ve not yet re-shorted the SPY or any Sector ETFs. We’re long Financials XLF – and I’m worried about it.

KM

 

SUBSECTOR PERFORMANCE

THE HBM: DNKN, SBUX, DRI - subsector

 

QUICK SERVICE

DNKN: Dunkin’ Brands was rated “New Buy” at Citi, price target $36.

SBUX: Starbucks Europe President, Michelle Gass, said in an interview published over the weekend that the company is to announce a multi-million pound overhaul and expansion of its European business which will see hundreds more cafes opening in both the UK and across the continent. 

NOTABLE PERFORMANCE ON ACCELERATING VOLUME:

JACK: Jack in the Box traded higher on accelerating volume.  The company is hosting an Investor Day tomorrow in California.

 

 

CASUAL DINING

DRI: Darden’s Analyst Day in New York on Friday provided a high level of detail on the company’s future plans.  We will be posting our thoughts on the event in a separate post shortly.

NOTABLE PERFORMANCE ON ACCELERATING VOLUME:

TXRH: Texas Roadhouse traded down -2.7% on accelerating volume after a strong day’s trading Thursday on strong 4Q EPS.

THE HBM: DNKN, SBUX, DRI - stocks

Howard Penney

Managing Director

Rory Green

Analyst