Short interest data released yesterday shows that for the most recent two-week period, there were three significant changes in our sentiment scorecard: CBRL, JACK, and CAKE.


Here is our most recent iteration of the Hedgeye Restaurants Sentiment Scorecard, updated for yesterday’s release.  Our call-outs are below.


RESTAURANT SENTIMENT: CBRL, CAKE, JACK - hedgeye sentiment scorecard


Sentiment Scorecard Callouts


CBRL: Cracker Barrel has been one of the best performing casual dining names over one week, one month, six month, and one year durations.  The stock’s outperformance versus the S&P 500 did not materialize until late April as investors gained conviction that gasoline prices were rolling over.  Investor sentiment on the stock has changed dramatically; as the sell-side has upgraded the name, the buy-side has covered shorts, bringing short interest from 10.1% 14 weeks ago to 6.9% as of the most recent period.  This is a call we missed but should have called; we have done so previously on the short side when gas prices were turning higher so it hurts to miss this one. 





CAKE:  Investors have been turning increasingly bearish on The Cheesecake Factory over the most recent period (settlement date 5/31).  Cheesecake Factory comps tend to correlate quite highly with the ISCS Chain Store Sales Index (YoY change) and that index has been declining since mid-May.  This would not fully explain the drop off in sentiment, but we will certainly be revisiting it as we near the company releasing guidance.  Last quarter, it helped us to find a more-accurate-than-consensus estimate for CAKE’s comps.  We will be publishing a comprehensive note on CAKE ahead of earnings on 7/20.


JACK: Jack in the Box continues to win over the bears but we think that there is sufficient skepticism on the Qdoba growth story that the stock still represents an attractive long-term investment under the current outlook.  From a “sum of the parts” perspective, we see plenty of upside (roughly 45%) over the next three years.  We posted a note on May 8th outlining our positive thesis on Jack in the Box and, since then, the stock has gained 11% as the S&P 500 declined 3%.  The quantitative setup, courtesy of Hedgeye CEO Keith McCullough’s quantitative models, is below.




Howard Penney

Managing Director


Rory Green


Day After Day

This note was originally published at 8am on May 29, 2012. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.

“Persistence – just sticking with this thing day after day after day.”

-Joseph Rochefort


Born on May 12th, 1900, in Dayton, Ohio, Captain Joseph Rochefort was one of America’s bravest. He was a “major figure in the United States Navy’s cryptographic and intelligence operations from 1925-1946, particularly in the Battle of Midway.” (Wikipedia)


Ian Toll introduces Captain Rochefort, his team, and their analytical process, in Chapter 9 of Pacific Crucible – a book I had the pleasure of finishing over Memorial Day weekend, and one that really resonated with what it is that we do here in New Haven each and every morning.


When it comes to time and patterns, these American military men had discipline. “If you observe something long enough, you’ll see something peculiar. If you can’t see something peculiar, if you stare at it long enough, that in itself is peculiar… you look at it until you see something that attracts your attention, your curiosity… The next day you come back and look at it again.” (pages 305-306)


Day After Day – again and again and again.


Back to the Global Macro Grind


Sometimes I think we are too selfish to take the time to contextualize the moments in life that we all share. I know that I certainly am. That’s why I try my best to take the time to study history.


The history of applying Chaos and Complexity Theory to what it is that we know about markets is relatively short. By the time we are all long gone, I suspect that what we think we know now will be as archaic as cryptography seemed in 1941.


Time and Patterns. They matter.


Last week’s intermediate-term TREND pattern of a Strong Dollar continued to Deflate The Inflation in what we call Bernanke’s Bubbles (Commodity Prices). With the US Dollar up for the 4th consecutive week, here’s how that was priced:

  1. CRB Commodities Index = down -3.1% (down -13.8% from its February 2012 high)
  2. Gold = down -1.4% (down -12.2% from its February 2012 high)
  3. Oil (WTIC) = down -0.7% (down -17.6% from its February 2012 high)

This morning, with the US Dollar Index down -0.14% to $82.26, most of Bernanke’s Bubbles are bid higher. But, when considered within the patterns of their Bearish Formations (Bearish on all 3 of our risk management durations, TRADE/TREND/TAIL), their no-volume bids appear fleeting.


Here are the broken TAIL lines of the aforementioned commodity bellwethers:

  1. CRB Index = 318
  2. WTIC Oil = $96.23
  3. Gold = $1676

In other words, if the US Dollar goes down (and commodities go up) every day this week, it doesn’t matter. Or at least it shouldn’t for “long-term” investors looking to manage the long-term mean reversion risks associated with these asset prices.


The longest of long-term risks to Commodities remains the biggest opportunity for not only American Consumers, but Global Consumers of food and energy.


The #1 risk factor pricing that risk/reward scenario is the US Dollar Index’s price itself. I’ve said this Day After Day after day, and I’ll say it again and again and again – get the US Dollar right, and you’ll get a lot of other things right.


Getting real (inflation adjusted) US Consumption right would solve for the number one thing that the world needs right now – unlevered growth. US Consumption represents 71% of US GDP.


Strong Dollar = Strong Consumption, on the margin. Unfortunately, that’s not what you are going to get as long as the conflicted and compromised cheer on higher gold and oil prices. That’s just what they need to get paid.


This week’s Macro Catalyst Calendar will be just another reminder of that:

  1. Tuesday: US Consumer Confidence for the month of May should improve as food and energy prices fall
  2. Thursday: Q1 2012 US GDP should continue to be revised to the downside, reflecting higher commodity prices in Q1
  3. Friday: US Employment Report for May should continue to see the soft results of a country that debauched its currency

We, as a country, have a tremendous opportunity to learn from our mistakes. That’s why we study history. That’s why, when it comes to “full employment and price stability”, we understand that the Down Dollar and Treasury Debt Monetization policies of Bush/Obama yielded no better results than those of the Nixon/Carter Administrations.


The 1970’s had Arthur Burns at the Fed. The last 6 years have had Ben Bernanke. Day After Day, both he and the President want to remind you of the war we all fought in 2008. I just want to talk about today, and what we can do for a better tomorrow.


My immediate-term support and resistance ranges for Gold, Oil (WTIC), US Dollar, EUR/USD, and the SP500 are now $1566-1601, $104.69-108.12, $81.63-82.49, $1.24-1.26, and 1296-1335, respectively.


Best of luck out there this week,



Keith R. McCullough
Chief Executive Officer


Day After Day - Chart of the Day


Day After Day - Virtual Portfolio


The Macau Metro Monitor, June 12, 2012




Hotel industry says occupancy rate in May dropped and average occupancy rate for three-star hotels stood between 40-60%, while some recorded an occupancy rate of 70-80%, a decline from last year.  The hotel industry is pessimistic about occupancies during the summer holidays due to an increase in hotel rooms at Sands Cotai Central.  In spite of this, most expect hotel occupancy of Macau hotels can maintain 80%.  The President of the Macao Hoteliers and Innkeepers Association said the global economic downturn and the decline in stock prices have affected tourism. He expects the occupancy rate in June may return to the level between February and April.


10,400 MORE HOTEL ROOMS IN 4 YEARS Strait Times

Singapore may open 10,422 more rooms by 2016.  But the potential 26% increase in rooms will still lag behind the number of tourists Singapore aims to bring to its shores.  The gap has led travel agents and analysts to foresee higher room rates, with average rates predicted to go up by 10% from last year to $270 a night this year.  This, despite 1,572 new rooms expected in 2012, adding nearly 4% to total capacity of 49,719.

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Potent Weapon

“Fear is a potent weapon in the hands of the power elite.”

-Chris Hedges


That’s an important quote in Death of The Liberal Class by Chris Hedges. If you believe, like I do, that risk management starts and ends with being empathetic to all politically polarized positions, I highly recommend this book. The first 50 pages will really make you think.


Imagine that, thinking for yourself within the context of how other people think. Instead of doing more of the same – more of what has not worked (print, bail, print), imagine a world where we aren’t centrally planned by Republican/Democrat economic policy dogma. Imagine a world where America wasn’t inching toward becoming Japanese European.


The power elite may have landlocked how Bernanke’s Fed and Geithner’s Treasury think about letting losers win, but they have not yet suffocated the rest of us free market capitalists into silence. Yesterday’s market reaction to the latest bailout scheme was a stiff reminder of that. For them.


Back to the Global Macro Grind


If you saw my market debate with the ING strategist on The Kudlow Report last night, you can see that I am pretty much #Fedup. I am tired of incompetent forecasting on both US and Global growth. I am done with letting these guys from the Old Wall change their perma-bull thesis to new ones every time they get the prior one wrong.




I think The People are done with it too. That’s why you see these outflows from stock and commodity funds. That’s why you see this American Zeitgeist of distrust in any idea that comes out of the Fed, Treasury, or IMF. That’s why you saw pretty near every pundit who was spewing about how high the market was going to go on yesterday’s bailout “news” get run right over.


“Fear is a potent weapon.” And our being right on Growth Slowing is not the fear I am talking about. That’s called being accurate. Fear is what both the Bush and Obama administrations run on. So did Nixon and Carter. Fear of Big Government Interventions and all their conflicts of political interest are what puts a confident and optimistic guy like me on hiring hold.


The Fed has a “full employment” mandate, so they think doing more of what has not worked is their job. To a degree, that’s their own problem – the inability to re-learn, re-work, re-think. But, from a bigger picture perspective, this is really a leadership problem. The Fed and Treasury take their policy making lead from the President of The United States.


Here’s what one of their chief group-thinkers (Chicago Fed Head, Charles Evans) had to say after yesterday’s market reaction:


“I’ve been in favor of pretty much any accommodative policy I’ve heard about.”


Great. Just really great, Chuck. You have got to be kidding me. If Obama created a tax shelter whereby I could hire you for free, I’d probably go for it just so that I could fire you. You and your cronies from Chicago who want Policies To Inflate commodity prices need a real life wake-up call.


I’m certainly not alone in feeling this way. And since I built this company with my own risk capital, I’ll write whatever I want. Chapter 1 of Death of The Liberal Class is called “Resistance.” That’s what I am doing. I have American kids, and I resist the institutional pressure to put short-term politics and stock/commodity market performance ahead of the long-term future of this country.


“Earnest Logan Bell, an unemployed twenty-five year old Marine Corps veteran, walks alone Route 12 in Update New York. A large American flag is strapped to the side of his green backpack… he is on a six-day, ninety mile self-styled “Liberty Walk” from Binghamton to Utica. He plans to mount a quixotic campaign…” (Death of The Liberal Class)


“Anger and a sense of betrayal: these are what Ernest Logan Bell and tens of millions of other disenfranchised workers express…” (page 6). If you don’t get that, you are completely out of touch with the real world in which central planners are forcing us to live.


So go ahead, get the US taxpayer to start back-stopping European and Japanese government losses through the IMF. Tim Geithner, I personally dare you to do that and explain it, as you like to say “deeply”, to the American people. Explain to us, with all your fear-mongerings, why we should trust you this time.


Sadly, for Bernanke and Geithner, this time is not different. The market gets that too.


In other Keynesian central planning news this morning:

  1. The IMF says the Japanese Yen is “overvalued” and that the Japanese should “stimulate”
  2. Italy’s Monti (who forecasted the European Sovereign Debt Crisis as “ending” in March) to meet with France’s Hollande
  3. India’s debt to likely lose “investment grade status” (whatever that still means)

Great. Just great. The Washington, DC based (and US tax payer backed) IMF now has market opinions on “valuation”, and Geithner is pushing Lagarde to pull a Krugman on Japan and Europe (1997 he told the Japanese to “PRINT LOTS OF MONEY”).


Great. (link to the CNBC debate


So was my 0% US Equity asset allocation yesterday. My unlevered and un-invested position Cash can be a Potent Weapon too.


My immediate-term support and resistance ranges for Gold, Oil (Brent), US Dollar, EUR/USD, Spain’s IBEX, Italy’s MIB, and the SP500 are now $1, $96.59-99.98, $82.01-83.17, $1.24-1.26, 5, 121, and 1, respectively.


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Potent Weapon - Chart of the Day


Potent Weapon - Virtual Portfolio


TODAY’S S&P 500 SET-UP – June 12, 2012

As we look at today’s set up for the S&P 500, the range is 42 points or -1.90% downside to 1284 and 1.30% upside to 1326. 












  • ADVANCE/DECLINE LINE: on 6/00 NYSE -1830
    • Down from the prior day’s trading of 1238
  • VOLUME: on 6/11 NYSE 740.42
    • Increase versus prior day’s trading of 6.91%
  • VIX:  as of 6/11 was at 23.56
    • Increase versus most recent day’s trading of 10.98%
    • Year-to-date increase of 68bps
  • SPX PUT/CALL RATIO: as of 6/11 closed at 1.44
    • Up from the day prior at 1.34 


  • TED SPREAD: as of this morning 39
  • 3-MONTH T-BILL YIELD: as of this morning 0.05%
  • 10-Year: as of this morning 1.61
    • Increase from prior day’s trading at 1.59
  • YIELD CURVE: as of this morning 1.34
    • Up from prior day’s trading at 1.32 

MACRO DATA POINTS (Bloomberg Estimates):

  • 7:30am: NFIB Small Bus. Optimism, May, est. 94.0 (prior 94.5)
  • 7:45am/8:55am: ICSC/Redbook retail sales
  • 8:30am: Import Price Index (M/m), May, est. -1.0% (prior -0.5%)
  • 8:30am: WASDE
  • 10am: IBD/TIPP Economic Optimism, June, est. 47.3 (prior 48.5)
  • 11am: Fed to purchase $1.5b-2.25b notes in 2/15/2036 to 5/15/2042 range
  • 11:30am: U.S. to sell 4-wk. bills
  • 12pm: DOE short-term energy outlook
  • 1pm: U.S. to sell $32b 3-yr notes
  • 1pm: World Bank Releases Global Economic Forecast
  • 2pm: Monthly Budget Stmt., May, est. -$125.0b (prior - $57.6b)
  • 4:30pm: API inventories 


    • FDIC Board of Governors meets on implementing Basel III provisions on defining which companies are “predominantly engaged in financial activities,” 10am
    • SEC holds meeting of Dodd-Frank Advisory Committee, 10am
    • Senate in session, House meets in pro forma session
    • Senate Judiciary hears from Attorney General Eric Holder at oversight hearing, 10am
    • Senate Finance holds hearing on impact of tax reform on energy policy, 10am
    • DOE holds meeting of Nuclear Energy Advisory Committee on small modular reactors and used nuclear fuel, 8:30am
    • IMF Managing Director Christine Lagarde speaks at “Back to Rio, The Road to a Sustainable Economic Future” conference, presented by Center for Global Development, 10am
    • Postmaster General Patrick Donahoe discusses outlook for the U.S. Postal Service in keynote speech at PostalVision 2012 event of customers and shippers, 10:15am 


  • U.S. employers plan to add jobs in 3Q: Manpower survey
  • Europe’s AAA members at risk as debt crisis worsens: Fitch
  • Buffett pounces in private-jet slump with record $9.6b order
  • TomTom gains after Apple agreed to use its digital maps in new mobile services
  • Kodak says 20 patent bidders sign non-disclosure agreements
  • China’s new loans exceeded ests. in May, more money went into longer-term lending
  • Unitas Capital, Stanley Black & Decker, Carlyle Group said to be invited to make 2nd-round bids for Infastech
  • JPMorgan knew of London trading risks two years ago: WSJ
  • JPMorgan could have spotted trouble at its CIO long before traders there racked up at least $2b in losses; one reason it didn’t: CEO Jamie Dimon.
  • Rajat Gupta lost a bid to have a jury hear wiretaps of Goldman executive David Loeb tipping Galleon co-founder Raj Rajaratnam
  • U.S. Commerce Secretary John Bryson to take medical leave
  • U.S. media industry rev. rises 2nd straight yr: PWC
  • Goldman brings back Mark Schwartz as chairman for Asia
  • Lilly targets Sanofi’s top diabetes drug with weight loss effect
  • World Bank releases semi-annual global economic forecast
  • Morgan Stanley, other global banks undergoing credit review by Moody’s; decision expected by end of month 


    • FactSet Research Systems (FDS) 7am, $1.16
    • Michael Kors (KORS) 7am, $0.16
    • Casey’s General Stores (CASY) 4pm, $0.67 



COMMODITIES – despite Chucky telling you it’s still time to dance, the USD is holding its bid and Commodities continue toward crash zones (20% peak to now declines); Oil’s reversal yesterday was impressive; Brent will finally be immediate-term oversold at $96.29.

  • Pink Slime No Brake to Beef Rally as Herd Contracts: Commodities
  • Gold Hinges on Emerging Markets, Not Inflation: Chart of the Day
  • Oil Declines for a Fourth Day on Naimi Comments, Iran Exemptions
  • Japan May Take Indonesia to WTO Over Ban on Ore Shipments
  • Copper Seen Declining on Skepticism About Spanish Bank Rescue
  • Robusta Coffee Falls to One-Month Low as Indonesian Sales Rise
  • Thai Mills to Boost Refined Sugar Output as Premium Climbs
  • Palm Oil Falls on Speculation Malaysian Production Set to Climb
  • Shanghai Rubber Support Seen at 22,000 Yuan: Technical Analysis
  • Soybeans Gain as U.S. Crop Conditions Deteriorate; Corn Rises
  • Oil Supplies Fall Most in Five Months in Survey: Energy Markets
  • Japan Seeks Least Milling Wheat in Seven Weeks in Tender
  • Rinehart Seeks to Reclaim 3 Billion-Ton Iron Deposit Stake
  • Gold Drops First Day in Three on Europe
  • Gold Drops With Commodities on Concern Europe Crisis Escalating
  • Cooking-Oil Imports by India Set to Advance for Fourth Month
  • Rubber Declines on Concern European Debt Crisis Is Deepenin











ITALY Geithner/Lagarde forgot to tell the Italians they’re going to get bailed out; MIB Index hammered for the wk to-date, adding to losses this morning (don’t forget Italy is also in crash mode, down -24% since March 19th) and economic stagflation continues to be a reality of a centrally planned life. Not 1 European stock market has recovered 1 of our immediate term TRADE lines on this no volume bounce.






JAPAN – Japan is suspiciously out of the news (other than in Japan or for those that are risk managing it) but Japanese stocks led losers again last night, down another 1%, inching closer to their own fiscal cliff and a market crash zone (Nikkei -17% since March). The IMF now has an opinion on the Japanese Yen’s “valuation” (not kidding) and has joined Krugman in telling the Japanese to print/stimulate. Won’t end well.










The Hedgeye Macro Team

Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.