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THE HEDGEYE BREAKFAST MONITOR

MACRO NOTES

SoCal

Interesting story on Bloomberg today: Asian Buyers Buoy New-Home Demand in California’s Orange County.  Asian buyers, many paying, cash are boosting the local economy in Southern California, particularly in Orange County.  This could be providing some boost to PFCB, CAKE, BJRI and other restaurant companies with exposure to the area.

 

Commentary from CEO Keith McCullough

If your portfolio is 50% long SPY and 50% long AAPL, you are all set – Bonds, Gold, Currencies all getting crushed:

  1. STOCKS – fascinating, but maybe not surprising, that the lowest “quality” countries in the world are leading the upside this morn (Japan +1.5%, Greece +2.6%, Romania +1.5%). China and Hong Kong closed down -2.6% and -0.2% post the “stress test” squeeze into the US market close. We should hang out up here in the nosebleed seats, until we don’t – new SPX range = 1.
  2. BONDS – kaboom! 2-yr US Treasury yields are only up about +33% in 10 days, so there’s really no Global Macro interconnected risk w/ this Bernanke pancake plan, is there? Only if you are long anything Bonds, Gold, or FX – 10yr absolutely ripped after it crossed my 2.03% line. This is one of the biggest off-sides 1-day moves I’ve ever seen in Global Asset Class attribution.
  3. CURRENCIES – so the Japanese Yen is crashing (down -9.1% in 2 months) and now the Euro is back into a Bearish Formation. The best news we have here, but only for Americans, is that Strong Dollar is potentially back (until Qe4 whispers come on a 50bps SPY down move). But the globally interconnected risk to a sustained strong dollar (Gold hammered) is tangibly evident.

I have a 0% asset allocation to Commodities and Int’l FX. I finally re-shorted SPY at 1388 yesterday. I’ll definitely be trading these new ranges of risk. Being long VIX 14-15 has worked until it hasn’t – then this whole thing flips, violently, again. Long live the “Price Stability.”

KM

SUBSECTOR PERFORMANCE

THE HBM: MCD, SONC, CAKE - subsector

 

QUICK SERVICE

MCD: McDonald’s COO Don Thompson said this morning that about 20% of U.S. restaurants are remodeled and that most European stores will be remodeled by the end of the year.  U.S. remodeling is set to ramp up which, we believe, will pressure Wendy’s as it struggles to fix its asset base.

SONC: Sonic is tinkering with its marketing strategy as it adds new menu items to boost sales and new drive-in prototype to reduce franchise costs, according to NRN.com

NOTABLE PERFORMANCE ON ACCELERATING VOLUME:

COSI: Cosi gained 8.4% on accelerating volume yesterday. 

CBOU: Caribou was the only stock in QSR that posted a decline yesterday.

CASUAL DINING

CAKE: Cheesecake Factory’s move to introduce “Small Plates and Snacks” was mentioned in a story by the LA Times about customers’ increasing preference for “grazing” through smaller servings instead of sitting down to longer, more expensive meals.

THE HBM: MCD, SONC, CAKE - stocks

Howard Penney

Managing Director

Rory Green

Analyst