prev

WEN: STORIED WENDY’S FAMILY SELLING OUT

There may be one other restaurant analyst covering Wendy’s that attended an analyst meeting held by the late Jim Near. 

 

Background

 

Mr. Near worked at Wendy’s for twenty-one years and was appointed COO by the founder of Wendy’s, Dave Thomas, in 1986 to help turn the then-ailing restaurant chain around.  At that point, the restaurant was suffering from failed attempts to launch breakfast as well as declining morale within the Wendy’s system.  In 1989, Near was named CEO of Wendy’s and the legacy of his six-year tenure was encouraging Dave Thomas to become the face of the company; advertisements featuring Thomas became highly successful.  Near and Thomas died in 1996 and 2002, respectively, and the company has struggled to replace the considerable impact they both had, individually, on the business.

 

 

Getting Out

 

On June 11, 2012, Wendy’s International, Inc. completed the purchase of 30 Wendy’s restaurants in the Austin, Texas area from David and Jason Near, two sons of Jim Near, for $19.8 million in cash.  Wendy’s International agreed to lease the real estate, buildings and improvements related to 23 of the acquired restaurants from the Sellers and to assume the leasehold interests in the real estate, buildings and improvements related to the other 7 acquired restaurants.

 

The Near family has been involved with Wendy’s since 1974 when Jim Near purchased his first Wendy’s franchise.  There could be numerous reasons why the family is selling but we believe that it could be a sign of the times given the family’s deep ties to the chain.  Beyond Jim Near’s intimate involvement in the evolution of the company, his son David Near was named as Chief Operations Officer of the Wendy’s brand in 2006 by then-CEO and President Kerrii Anderson.

 

 

Conclusion

 

Part of the Wendy’s turnaround efforts will be centered on the company buying back stores from underperforming franchisees who cannot afford to carry out the reimaging program.  We see it as a possible negative that one of the most significant families in the company’s history is selling out.  It’s certainly a headline that the folks in Dublin would like to have avoided.

 

 

Howard Penney

Managing Director

 

Rory Green

Analyst


Failed Policy

This note was originally published at 8am on June 05, 2012. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.

“The fact that this policy had failed spectacularly in 1973 did not deter the weak dollar crowd.”

-Jim Rickards

 

Between today’s G-7 meeting, tomorrow’s ECB decision, and Thursday’s Bernanke testimony, there will be plenty of opportunity for politicians and their pandering economists to beg and fear-monger for more of what simply has not worked.

 

That’s the short-run. The conflicted and compromised will do whatever it takes for their short-term political survival. In the long-run, apparently Keynes had the duration of the policy trade wrong – the rest of us aren’t all yet dead.

 

Taking a step back, the last 60 years of history are obviously littered with examples from Charles de Gaulle to Richard Nixon where sovereign currency devaluation and debt monetization did not work. If you’d like to get back up to speed on that, Jim Rickards does a great job walking through part of this  history in Chapter 5 of Currency Wars (1967-1987).

 

Back to the Global Macro Grind

 

Real-time market prices don’t lie; politicians do. Within hours of last week’s US Growth Slowing double-header (US GDP slowed to 1.9% in Q1 versus 3% in Q4, then the May Employment Report bomb detonated), the US Dollar stopped going up.

 

Why? Because the rest of the world fully expects an un-elected central planner in Washington (Ben Bernanke) to launch an iQe4 Upgrade. He did it on January 25th (pushing 0% rates out to 2014) and there’s no reason to expect he doesn’t do something again between Thursday’s Joint Economic Committee meeting and the FOMC meeting on June 20th. He’s fighting for his political life.

 

All that said, we have no idea what he is going to do. So don’t look for us to give you the super-secret whisper on that. Our strategy remains playing the game that’s in front of us, Embracing Uncertainty. We think the US Election puts him in a box.

 

Right, the man walked on water during 2008 and we should perpetually give him thanks and praise. But seriously, what Bernanke should have done and what he did have been 2 very different things since 2010.  

 

By the summer of 2010 Bernanke had bi-partisan support (the Republicans wanted to win the mid-term elections) to move to Quantitative Easing (Policy To Inflate). Both parties wanted the stock market up. Now only one of them do.

 

What Bernanke does next must also be contextualized on a relative basis. This is not 2008 or 2010 in that regard either. Today you have a currency war between the 3 major currencies of the world (Dollar, Euro, and Yen). They trade relative to the expedience of the latest Fiat Fool (failed) Policy that is designed to debauch them. The Fed, ECB, and BOJ don’t get paid to act unilaterally.

 

So what are currency markets signaling happens next?

 

1.   The US Dollar – remains in what we call a Bullish Formation (bullish across all 3 of our risk management durations, TRADE/TREND/TAIL) with immediate-term TRADE support at $81.55 and next resistance = $83.31.

 

2.   The Euro (vs USD) – remains in what we call a Bearish Formation (bearish across all 3 of our durations) with an immediate-term TRADE support/resistance range of $1.22-1.25.

 

3.   The Yen (vs USD) – is in a neutral position with long-term TAIL resistance at $77.68 and immediate-term TRADE support at $79.05.

 

In other words, if we had to pick one and #TimeStamp our highest probability scenario right now (we do), we’d be long the US Dollar and short the Euro (which we re-shorted on yesterday’s bounce).

 

It’s another way of saying that both Hedgeye and Global Macro markets think that the Europeans are in a much more dire situation (for now) than the United States of America is.

 

That could change at literally any minute of any day now – and that, of course, is why most sane people don’t trust these markets or the politicians attempting to centrally plan them.

 

Back to the ‘for now’…  

 

We still aren’t all brain dead, and we have to deal with whatever tomorrow’s European move to debauch the Euro back down to $1.22 brings. Then we have to react to Bernanke’s reaction to the reaction. Then we all have to pray.

 

Prayer, in markets, is obviously not a risk management process. Neither is hope. That said, my only long-term hope for this country and the free-market economy that we used to have is to get Ben Bernanke out of the way of expectations, let prices at the pump clear, and let US Consumption Growth recover again.

 

With Bernanke having not been able to really do anything for the last 5-6 weeks, the US Dollar has risen steadily and Oil, Gold, Copper, etc. prices have fallen precipitously. That’s good for American consumers.

 

That’s bad if you are long Energy stocks (the Energy ETF (XLE) is down -10.3% for the YTD). That’s good if you are short them and long Consumer Discretionary stocks (the Consumer ETF (XLY) is +7.4% for the YTD).

 

Strong Dollar = Strong America (via Stronger Consumption). That’s not more of a 1973 like Failed Policy. That’s a new idea.

 

My immediate-term support and resistance ranges for Gold, Oil (Brent), US Dollar, EUR/USD, and the SP500 are now $1599-1625, $97.21-102.78, $1.22-1.25, and 1258-1283, respectively.

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Failed Policy - Chart of the Day

 

Failed Policy - Virtual Portfolio


Italy, not Spain or Greece, should be on the mind at G20 meetings


investing ideas

Risk Managed Long Term Investing for Pros

Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.

THE M3: GENTING INCREASES ECHO STAKE

The Macau Metro Monitor, June 19, 2012

 

 

GENTING RAISES ECHO STAKE TO NEAR 10% Reuters

Genting has raised its stake in Echo Entertainment to almost 10%, on par with Crown's James Packer.  Genting bought 2% of Echo, or 13.8 million shares worth around A$60 million, in a single trade on Tuesday morning with Malaysian broker CIMB facilitating the deal, according to one of the sources and brokers in Sydney.  That follows a block trade by Genting's Hong Kong unit on Monday for 19.26 million Echo shares, or about 2.8% of the Australian company, worth A$82.6 million, according to a stock market filing by Genting Hong Kong.  Genting Singapore previously held an unspecified amount of Echo shares, which analysts say amounted to 4.9%.  By that calculation, the latest deals would take Genting Group's stake through various group firms to 9.7%.

 

Under Echo's constitution, no single party can hold more than 10% and will need a regulatory nod to go further.




Play Tomorrow

“First rule is to be able to play tomorrow.”

-Warren Buffett

 

That’s what Warren Buffett said on May 5th at the Berkshire Hathaway 2012 Annual Meeting. While you don’t hear him focus the marketing message on risk management like he used to, it was nice to hear him highlight a version of his longstanding Rule #1 of investing – “Don’t lose money.”

 

The preface to his comment was addressing how early he was telling you to buy stocks during the thralls of 2008. “In October 2008, I wrote that article, should have been a few months later, but stocks were cheap.”

 

Not to keep score, but it wasn’t until 6 months later that “cheap” stocks got a lot cheaper. I’m not Buffett. I am just a small town Canadian who has never received a bailout dollar and would rather retire before accepting one. I went to 96% Cash in Q3 of 2008 and 91% cash yesterday. I may not be the best player in this game, but I will Play Tomorrow.

 

Back to the Global Macro Grind

 

With the SP500 recovering from its early session lows yesterday, US Equity Volatility (VIX) dropped -13.2% on the day and the US stock market moved to a 3 week closing high.

 

Was it a bird, a plane – or another iQe4 upgrade rumor? Could it be Geithner, Bernanke, or Obama? Sadly, being able to Play Tomorrow also requires an acute sense of hearing. Can you hear the bailout whispers now?

 

No one ever went broke booking gains, so instead of joining the circus, that’s what I’ll continue to do across asset classes on up-moves to lower highs. I’m not getting wacky net short. I’m just getting out.

 

After yesterday’s sales of the US Dollar, German Bunds, US Treasuries, Cattle, and Pigs (the COW ETF), here’s where the Hedgeye Asset Allocation Model stands for this morning’s US open:

  1. Cash = 91% (up from 61% yesterday)
  2. US Equities 9% (all Consumer Staples – XLP)
  3. International Equities = 0%
  4. Fixed Income = 0%
  5. Commodities = 0%
  6. International Currencies = 0%

Why sell everything other than US Equities (I might sell those this morning too)?

 

That’s simple:

 

A)     I have absolutely no idea what Bernanke (Fed) and Geithner (Treasury/IMF) are going to do next

B)      If you gave me the whisper (inside information), I wouldn’t know what the market’s reaction would be to it either

 

That, in a nutshell, is also why I’m going to stop hiring for the next couple of months.

 

You see, I not only run my mouth, but I run my own business. I backstop the company’s credit line. I know what meeting a payroll meant during the thralls of 2008, and I’m not going to be the greater fool rolling the bones on my firm and family’s future for the sake of other people’s short-term political pressures now.

 

But that’s just me.

 

I know there are many more important people in many higher places in this country that need to get paid. I’m not the only person who gets that. So have at it boys, centrally plan away.

 

President Obama is no one’s fool. His economic advisors have reminded him that if he gets the short-term moves in the stock market right, he’ll get the election right. In this morning’s Hedgeye Election Indicator (Chart of The Day), you can see that:

  1. Obama’s odds of re-election bounced by +200bps week-over-week to 56.1%
  2. Obama’s odds of re-election are now at their highest level in nearly a month
  3. Obama’s odds of re-election are still down, hard, from their peak (March 26th) of 62.3%

Now what?

 

Obama gets this. If he has his boys continue to debauch the US Dollar in the short-term, both commodities and stocks will like that. The People will have to take that in the pump, but that doesn’t really matter – because Bernanke says that’s “transient.”

 

Something else (that was not so funny) also happened on the way to the US Political Forum on March 26th. Both the Russell2000 (broad measure of US stocks) put in its YTD high and the US Equity Volatility Index (VIX) put in its YTD low.

 

Which begs the question– why am I not at 96% Cash again?

 

At 18.22 the VIX is immediate-term TRADE oversold at another higher-low. At 1344 and 772, the SP500 and Russell2000 aren’t yet immediate-term TRADE overbought. But they will be today. Both are also making lower long-term highs (on no-volume).

 

No Trust; No Volume. So we’ll see what this morning brings. Either way, and no matter what they throw at us next, we will be positioned to Play Tomorrow.

 

My immediate-term support and resistance ranges for Gold, Oil (Brent), US Dollar Index, EUR/USD, and the SP500 are now $1, $95.07-98.26, 81.59-82.16, $1.24-1.26, and 1, respectively.

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Play Tomorrow - Chart of the Day

 

Play Tomorrow - Virtual Portfolio


Attention Students...

Get The Macro Show and the Early Look now for only $29.95/month – a savings of 57% – with the Hedgeye Student Discount! In addition to those daily macro insights, you'll receive exclusive content tailor-made to augment what you learn in the classroom. Must be a current college or university student to qualify.

next