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REPLAY PODCAST & SLIDES: 2Q12 MACRO THEMES

Earlier today, the Hedgeye Macro Team, led by CEO, Keith McCullough, and DOR, Daryl Jones, hosted its 2Q12 Macro Themes Call.

 

Topics included:   

  • The Last War: Fed Fighting - We take a historical look at U.S. Federal Reserve policy to contextualize the impact of Ben Bernanke's Policy to Inflate, Extend & Pretend rock-bottom interest rates, and Burn the Buck on the broader economy and financial markets from Main Street to Wall Street.
  • Bernanke's Bubbles - A highlight of the top ten leverage price bubble charts perpetuated and encouraged by The Bernank's policy stance.
  • Asymmetric Risks - In a macro environment of slow global growth and historically low interest rates we present asymmetric risks to capitalize on over the intermediate term. Low equity market volatility is but one signal of what's ahead for investors. 

To access the replay podcast and the presentation materials, please copy/paste the following two links into the URL of your browser:

Have a great weekend, 

 

The Hedgeye Macro Team



DIAL IN & MATERIALS: 2Q12 MACRO THEMES AND PRESENTATION

Valued Client,

  

5-10 minutes prior to the 11AM EST start time please dial:

 

(Toll Free) or (Direct)

Conference Code: 135512#

  

Materials: http://docs.hedgeye.com/Q22012.pdf

                  

To submit questions for the live Q&A, please email

 

******************************************************************************  

 

Today Friday, April 13th at 11am EST, the Hedgeye Macro Team, led by CEO, Keith McCullough, and DOR, Daryl Jones, will be hosting our 2Q12 Macro Themes Call.

 

Topics will include:   

  • The Last War: Fed Fighting - We take a historical look at U.S. Federal Reserve policy to contextualize the impact of Ben Bernanke's Policy to Inflate, Extend & Pretend rock-bottom interest rates, and Burn the Buck on the broader economy and financial markets from Main Street to Wall Street.
  • Bernanke's Bubbles - A highlight of the top ten leverage price bubble charts perpetuated and encouraged by The Bernank's policy stance.
  • Asymmetric Risks - In a macro environment of slow global growth and historically low interest rates we present asymmetric risks to capitalize on over the intermediate term. Low equity market volatility is but one signal of what's ahead for investors. 

Please contact if you have any questions. As always, the replay podcast will be made available shortly after the call.

  

Regards, 

 

The Hedgeye Macro Team


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THE REGIONALS: Q1 THOUGHTS

Could be a mixed bag but given the calendar and weather, they should’ve done better.

 

 

Given the favorable Q1 calendar, we thought the regional markets would’ve performed better.  With the exception of BYD and maybe PNK, Q1 earnings/EBITDA are likely to come in-line or even down for the regional gaming operators.  Q1 contained 3 extra weekend days, 91 days overall, due to Leap Year, and the weather was fantastic.  Remember that the Midwest was hammered with snowstorms last year in Q1.

 

THE REGIONALS: Q1 THOUGHTS - 33

 

BYD

 

BYD looks like the standout for Q1.  The Street’s $125 million EBITDA estimate looks light by about 5%.  We are still awaiting Louisiana’s results but it’s hard to imagine they will move the needle enough to prove the Street correct.  While BYD’s regional properties mostly had decent Q1s, the big properties made the difference this quarter – LV locals, Borgata, and even Downtown LV.  On an EPS basis, the Street is at $0.08, guidance was for $0.05-0.09, but we think $0.11 is more likely.

 

ASCA

 

ASCA looks like the loser this quarter.  We think the company could miss EBITDA expectations by $2 million for Q1 and EPS by $0.03.  ASCA is a good operator with well maintained, quality facilities.  However, we think they are more a victim of sluggish market conditions, new competition in the Kansas City market, and high gas prices. 

 

PNK

 

Louisiana supplies most of PNK’s EBITDA and since that state hasn’t reported March gaming revenues yet, it’s difficult to make a call on Q1 earnings.  Their other properties appear to be tracking ahead of the Street.  It’s subject to change, but we think Q1 EBITDA could come in 2-3% higher than the Street’s $68 million estimate and EPS 1c above the Street’s $0.20 EPS estimate.  River City has been the positive differentiator so far.

 

PENN

 

PENN looks in-line to us, which is actually a disappointment.  After a better than expected January and February, PENN was cruising for a sizable beat.  March was weak for them, particularly in Illinois where they have too much exposure, and in Kansas City.  Their new property in Kansas has experienced disappointing results in its first two months while cannibalization of their Riverside casino on the Missouri side has been higher.  


THE HBM: COSI, EAT

THE HEDGEYE BREAKFAST MONITOR

 

HEDGEYE VIRTUAL PORTFOLIO POSITIONS

 

LONGS: JACK, SBUX

 

Comments: Keith sold EAT yesterday based on our concerns about casual dining sales starting to slow.  We have liked this name for a long time, as we wrote yesterday, but these stocks trade together and Chili’s will not be immune to any slowdown in industry trends.

 

SHORTS: BWLD, DNKN, MCD

 

MACRO NOTES

 

CPI data for March was released by the Bureau of Labor Statistics yesterday.  Inflation for Food Away from Home slowed to 3% from 3.1% and inflation for Food at Home slowed to 3.6% from 4.5%.  The spread between the two narrowed from 140 basis points to 60 basis points.  The benefit that restaurants received from grocery aisle inflation being so rampant on a relative basis last year is quickly going away.

 

THE HBM: COSI, EAT - food at home vs food away from home

 

 

Commentary from CEO Keith McCullough

 

Someone saying Growth Slowing, globally:

  1. CHINA – GDP growth slows from 8.9% Q4 to 8.1% Q1, missing whatever whisper found its way into the mo mo community yesterday (someone should tell them Global Macro isn’t like small cap rumoring); Chinese stocks acted fine on that b/c they act inversely w/ Commodity inflation and Chinese bank lending. Commodities bulls freak out.
  2. EUROPE – certified train wreck remains in motion – its not different this time – you can’t ban economic gravity when imposing Stagflation on your people (Italian CPI +3.3% with Growth flat to down); Sold my long Germany position yesterday and re-shorted France b/c I think the gap b/t Spain -12% YTD and France’s CAC +2% YTD is going to narrow #Mean Reversion
  3. GROWTH SLOWING – away from the economic data (which now includes US employment gains slowing), Copper and 10yr UST yields are the most obvious signals this morning w/ Copper moving into a falling knife formation (-1.6%) and 10yr slicing back through my intermediate-term TREND support of 2.03% to 2.01% last.

SP500 failing at my 1391 line yesterday keeps my entire intermediate-term Growth Slowing thesis intact.

KM

 

 

SUBSECTOR PERFORMANCE

 

THE HBM: COSI, EAT - subsecto

 

 

QUICK SERVICE

 

COSI: Cosi is planning to launch a rights offering for up to 19.9% of the company’s common stock to its shareholders.  Assuming the rights offering is fully subscribed, the company currently expects to receive gross proceeds of approximately $15m.

 

NOTABLE PERFORMANCE ON ACCELERATING VOLUME:

 

CMG: Chipotle gained 2.5% on accelerating volume.

 

CBOU: Caribou declined 2.6% on accelerating volume.

 

 

CASUAL DINING

 

EAT: Brinker was pleased with the opinion released yesterday by the California Supreme Court that, according to the company, “effectively truncates the Hohnbaum class action lawsuit” that the company was facing and “resolves the legal standards to be applied to California meal period and rest break actions”.

 

NOTABLE PERFORMANCE ON ACCELERATING VOLUME:

 

EAT: Brinker gained 1.3% on accelerating volume.

 

 

THE HBM: COSI, EAT - stocks

 

 

Howard Penney

Managing Director

 

Rory Green

Analyst

 



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