THE HEDGEYE BREAKFAST MONITOR
MACRO NOTES
Commentary from CEO Keith McCullough
Plenty were hoping for a “China bounce” this morning, nope:
- PMI’s – China had two (1 beat, 1 missed – they probably made up both), but the rest of the world’s PMI prints (other than the UK’s, which beat by a 1 pt) were awful. Germany in particular was bad, down to 48.4 vs 50.2 in FEB (France = 46.7 vs 50 in FEB and Spain was nasty at 44.5); India’s missed too. #GrowthSlowing, globally
- GOLD – under pressure again this morning which surprises me given that bond yields stopped going down; Gold has had issues when Commodities broadly weaken – both the CRB Index and Gold are trading below their intermediate-term TREND lines of 312 and $1692, respectively. That’s new. Deflating The Inflation = in motion.
- BOND YIELDS – they’ve been the front runner in signaling Spanish credit problems and US Growth Slowing – no need to ignore that until they stop calling the broader intermediate-term TRENDS. UST 10yr yields failed at TAIL line resistance of 2.47% 3 weeks ago and are currently trading 2.22% (below immediate-term TRADE resistance of 2.26%).
Welcome to Q2.
KM
SUBSECTOR PERFORMANCE
QUICK SERVICE
WEN: Wendy’s ran advertisements in eight major U.S. newspapers stating that the chain has never used “pink slime” in its products. CEO Emil Brolick explained the advertising campaign by saying that the company has only used fresh beef in the 40+ years the company has been in existence.
YUM/MCD: Yum and McDonald’s were two brands named in a study by India’s Center for Science and Environment which alleged that popular “junk food” brands were misleading the public through “wrong health claims and insufficient labeling, according to Forbes. The companies deny that they are misleading the public with their labels.
SBUX: Starbucks is planning a bigger push into smaller cities in China as the world’s largest coffee-shop operator triples stores in the country. The country is set to become the company’s second-biggest market by 2014, Bloomberg news reports.
GMCR: Green Mountain was mentioned in an interview with Howard Schilit, forensic accountant, published in Barron's this weekend. On the company's accounting practices, he had the following to say: "When you are telling me the business is still booming, but in order to make that assertion, you changed how you are accounting, that's just not fair play. Is it illegal? No. The auditors signed off on it. But the auditors are part of the problem."
NOTABLE PERFORMANCE ON ACCELERATING VOLUME:
COSI: Cosi declined on accelerating volume.
CASUAL DINING
DENN: Denny’s COO Robert Rodriguez left the company for “unexplained reasons after 18 months, effective immediately”, according to a statement from the company.
NOTABLE PERFORMANCE ON ACCELERATING VOLUME:
BJRI: BJ’s restaurants gained 2.1% on accelerating volume after being rated Overweight at Morgan Stanley.
RRGB: Red Robin Gourmet Burgers declined -1.3% on accelerating volume. The company is reporting 3QFY12 earnings on Wednesday.
Howard Penney
Managing Director
Rory Green
Analyst
