Takeaway: GMCR is "cheap" but it may get cheaper.

Discounting is a difficult strategy to evaluate.  It can be a sign of strength in one instance and a sign of weakness in another.  We view the heavy discounting of K-Cups as a clear sign of weakness in the Green Mountain Coffee Roasters business model. 


A walk around a Lucky Supermarket in Santa Rosa, California, revealed that K-Cups are being sold for $4.99 per box.  In light of this discovery, we would make the following observations:

  1. Discounting of this magnitude calls into question the accuracy of the company’s internal “demand model”
  2. It is almost certain that the company has ongoing inventory issues
  3. The margin structure of the company is under duress
  4. Given the cash flow and balance sheet of the company, as well as the competitive landscape, a turnaround is going to be a tall order from here

As we have written before, it is almost impossible to analyze this company in a conventional manner given the lack of coherence and disclosure in the company’s guidance, particularly with regard to its capex budget.  Whispers continue to occasionally spur bouts of short covering but our view is that the risk in this stock remains disproportionately to the downside. 





Howard Penney

Managing Director


Rory Green


Lolo Jones Doing The Bobsled

Takeaway: Track star Lolo Jones shows us why its so much more important to endorse the athlete over the event. Congrats to UA.

Track star Lolo Jones looks like her best prospect to medal in an Olympic event might actually be in a cold weather sport. In this photo, check out the wall, and the uniforms. Then answer yourself the it more important to endorse the athlete or the event? Congrats to UA. Sorry Adidas.

Lolo Jones Doing The Bobsled - 11 9 2012 5 30 46 PM

Weekly European Monitor: The Eurocrat Shuffle

Takeaway: Greece was on the center of the dance floor this week with Eurocrats lining the walls afraid to make a move.

-- For specific questions on anything Europe, please contact me at to set up a call.


No Current Real-Time Positions in Europe


Asset Class Performance:

  • Equities:  The STOXX Europe 600 closed down -1.7% week-over-week vs +1.6% last week. Bottom performers: Spain -4.2%; Italy -3.7%; Russia (RTSI) -3.0%; Germany -2.7%; Finland -2.7%; France -2.0%; Austria -2.0%; UK -1.7%.  Top performers: Turkey +0.6%; Slovakia +0.5%; Switzerland +0.2%. [Other: Greece +0.0%].
  • FX:  The EUR/USD is down -0.94% week-over-week.  W/W Divergences: TRY/EUR +1.01%; NOK/EUR +0.83%; SEK/EUR +0.43%; GBP/EUR +0.18%; CHF/EUR +0.10%; DKK/EUR +0.02%; HUF/EUR -0.44%; CZK/EUR -0.46%; PLN/EUR -1.17%.
  • Fixed Income:  The 10YR yield for sovereigns were mixed week-on-week. Portugal rose the most at +51bps to 8.86%, followed by Spain +23bps to 5.83%. Greece saw the largest decline at -34bps to 17.87%.  Germany, Belgium, and France were notable decliners, falling -12bps, -11bps, and -9bps to 1.33%, 2.31%, and 2.13%, respectively.    

Weekly European Monitor: The Eurocrat Shuffle - 11. yields


  • The EUR/USD hit its lowest level in 2 months this week. We maintain an immediate term TRADE range of $1.27 to $1.29 and a heavy intermediate term TREND resistance level of $1.31.

Weekly European Monitor: The Eurocrat Shuffle - 222. NEU EUR


Weekly European Monitor: The Eurocrat Shuffle - 11. cftc data



The Eurocrat Shuffle:


The Eurozone continues to take two steps forward and one step back, or is it, one step forward and two steps back?  Headline risk continues to be a governing factor. This week it largely revolved around Greece – waiting on the narrow passage of a €13.5B package of spending cuts, tax increases and structural reforms late Wednesday night and ahead of Sunday’s vote on its 2013 budget.


Markets remained constipated over Greece’s next lifeline aid tranche of €31.5B, as the European Commission, Eurogroup, and IMF are in disagreement about how to both reduce Greece’s debt load and set appropriate debt reduction targets for such far-out dates as 2020. On some level an agreement to both will be needed before the money is dropped from the skies. [See our note titled “November ECB Presser: No Surprises” for our commentary on the ECB’s decision to keep rates on hold this week.]


 Away from the politically compromised Eurocrats and structural flaws of the Eurosystem, Keith noted that his multi-factor quantitative model was flashing a major buy signal for the German DAX. [Note: we sold our Real-Time Position in German Bonds (BUNL) on Thursday (11/8) so we have no exposure to Europe].  He also said that the broader equity market of Denmark looks good; whereas the UK is flashing a negative set-up.


Weekly European Monitor: The Eurocrat Shuffle - 22. dax



Beyond the headline news, and broader negative data out this week (see below in the section “Data Dump”), there were a couple positive charts that caught our attention this week:

  • Target 2 exposure is actually slowly improving across the periphery.

Weekly European Monitor: The Eurocrat Shuffle - 11. target 2


  • Current Account Balances are showing improvement across countries that have historically had heavy deficits.

Weekly European Monitor: The Eurocrat Shuffle - 11. current acct bal




The European Week Ahead:

Monday: Eurogroup Meeting in Brussels; Oct. Germany Wholesale Price Index (Nov. 12-13); Oct. UK RICS House Price Balance; Sep. Spain House Transactions


Tuesday: Nov. Eurozone ZEW Survey Economic Sentiment; Nov. Germany ZEW Survey Current Situation and Economic Sentiment; Oct. UK PPI Input and Output, CPI, Retail Price Index; Sep. UK ONS House Price; Oct. France CPI - Final; Sep. France Current Account; 3Q France Wages and Non-Farm Payrolls – Preliminary; Oct. Italy CPI - Final; Sep. Italy General Government Debt


Wednesday: Sep. Eurozone Industrial Production; BoE Inflation Report; Oct. UK Claimant Count Rate, Jobless Claims Change; Sep. UK Weekly Earnings, ILO Unemployment Rate, Employment Change; Oct. France Consumer Price Index; 3Q Greece GDP - Advance


Thursday: ECB Publishes Nov. Monthly Report; Oct. Eurozone CPI; 3Q Eurozone GDP – Advance; 3Q Germany GDP – Preliminary; Oct. UK Retail Sales; 3Q France GDP – Preliminary; Spain Catalonia Regional Election; 3Q GDP - Final 3Q Spain GDP – Final; Sep. Italy Current Account; 3Q Italy GDP - Preliminary


Friday: Sep. Eurozone Current Account, Trade Balance; Sep. Italy Trade Balance



Extended Calendar:

NOV 19  –            Eurozone Finance Ministers Meeting

NOV 22 –             EU Summit and ECB Governing Council Meeting

NOV 26  –            Finance Ministers may sign off on Greece’s next bailout tranche, 31.5B EUR

NOV 27 –             AFME 4th Annual Spanish Funding Conference in Madrid

DEC 1 –                Beginning of the Russian Presidency of G20

DEC 3 –                Eurogroup Meeting in Brussels

DEC 6 –                ECB Governing Council Meeting

DEC 12-13 –          First public consultation between the Russian government, B20 Coalition and international civil society representatives on G20 agenda for 2013 (in Moscow)

DEC 20 –               ECB Governing and General Council Meeting

APR 2013 –           Parliamentary elections in Italy

MAY 2013 –           Presidential elections in Italy



Call Outs:


Turkey - received its first investment- grade ranking since 1994 after Fitch Ratings raised the country by one level (BB+ to BBB-), citing an easing in economic risk and lower debt.


Italy - Italian Treasury officials rejected proposals to create a so-called bad bank for the non-performing loans of the nation’s lenders amid concern the plan would strengthen the link between sovereign and bank debt, said people with knowledge of the matter.


France - the IMF warned that France risks falling behind the likes of Spain and Italy if it does not reform its economy. It called for a comprehensive program of structural reforms, citing the country's significant loss of competitiveness.



Data Dump:


Weekly European Monitor: The Eurocrat Shuffle - 22. PMIs


Eurozone PPI 2.7% SEPT Y/Y vs 2.7% AUG

Eurozone Retail Sales -0.8% SEPT Y/Y vs -0.9% AUG

Eurozone Sentix Investor Confidence -18.8 NOV (exp. -21) vs -22.2 OCT


UK Halifax House Price -1.7% OCT Y/Y vs -1.2% September

UK New Car Registrations 12.1% OCT Y/Y vs 8.2% September

UK Industrial Production -2.6% SEPT Y/Y vs -1.0% AUG

UK Manufacturing Production -1.0% SEPT Y/Y vs -1.2% AUG


Germany CPI 2.1% OCT Final Y/Y UNCH  [0.1% M/M UNCH]

Germany Exports -2.5% SEPT M/M vs 2.3% AUG

Germany Imports -1.6% SEPT M/M vs 0.4% AUG

Germany Industrial Sales -1.2% SEPT Y/Y vs -1.3% AUG

Germany Factory Orders -4.7% SEPT Y/Y vs -4.6% AUG   [-3.3% SEPT M/M vs -0.8% AUG]


Weekly European Monitor: The Eurocrat Shuffle - 11. German fact orders


France Bank of France Business Sentiment 92 OCT vs 92 SEPT

France Industrial Production -2.5% SEPT Y/Y vs -0.9% AUG

France Manufacturing Production -2.5% SEPT Y/Y vs -0.3% AUG


Italy Industrial Production SA -1.5% SEPT Y/Y vs 1.7% AUG

Italy Industrial Production WDA -4.8% SEPT Y/Y vs -5.2% AUG

Italy Industrial Production NSA -10.5% SEPT Y/Y vs -5.1% AUG


Spain Industrial Output NSA -11.7% SEPT Y/Y vs -2.5% AUG

Spain Unemployment Change 128.2k OCT M/M (exp. 110k) vs 79.6k SEPT


Norway Industrial Production -5.0% SEPT Y/Y vs 1.9% AUG

Norway CPI 1.1% OCT Y/Y vs 0.5% SEPT

Norway CPI incl. oil 1.7% OCT Y/Y vs 1.4% SEPT

Finland Industrial Production -1.7% SEPT Y/Y vs -1.4% AUG

Sweden Industrial Production -5.0% SEPT Y/Y vs 2.7% AUG


Switzerland Unemployment Rate 3.0% OCT vs 2.9%

Switzerland CPI -0.1% OCT Y/Y vs -0.3% SEPT

Austria Wholesale Price Index 4.2% OCT Y/Y vs 4.2% SEPT


Netherlands CPI 2.9% OCT Y/Y vs 2.3% SEPT

Netherlands Industrial Production -0.2% SEPT Y/Y vs -0.6% AUG


Greece Unemployment Rate 25.4% AUG vs 24.8% JUL

Greece Industrial Production -7.3% SEPT Y/Y vs 2.5% AUG

Greece CPI 1.6% OCT Y/Y vs 0.9% September


Ireland CPI 2.1% OCT Y/Y vs 2.4% SEPT

Ireland Industrial Production -12.7% SEPT Y/Y vs -0.5% AUG

Portugal Industrial Sales -8.1% SEPT Y/Y vs -1.3% AUG


Russia Consumer Prices 6.5% OCT Y/Y vs 6.6% SEPT


Czech Republic Unemployment Rate 8.5% OCT vs 8.4% SEPT

Czech Republic Retail Sales -3.3% SEPT Y/Y vs -0.8% AUG

Czech Republic CPI 3.4% OCT Y/Y vs 3.4% September


Romania Retail Sales 5.1% SEPT Y/Y vs 4.7% AUG

Hungary Industrial Production 0.6% SEPT Y/Y vs 1.8% AUG

Slovenia Industrial Production -0.2% SEPT Y/Y vs 4.2% AUG

Latvia Preliminary Q3 GDP 5.3% Y/Y vs 5.0% in Q2   [1.7% Q/Q vs 1.3% in Q2]


Turkey Consumer Prices 7.80% OCT Y/Y vs 9.19% SEPT

Turkey Producer Prices 2.57% OCT Y/Y vs 4.03% September

Turkey Industrial Production 6.2% SEPT Y/Y vs 0.9% AUG



Interest Rate Decisions:


(11/8) BOE Main Interest Rate UNCH at 0.50% (and asset purchase program UNCH)

(11/8) ECB Main Interest Rate UNCH at 0.75%

(11/8) Serbia Repo Rate HIKED to 10.95% from 10.75% (exp. 11%)

(11/9) Russia Refinancing Rate UNCH at 8.25%

(11/9) Russia Overnight Deposit Rate UNCH at 4.25%

(11/9) Russia Overnight Auction-Based Repo UNCH at 5.50%


Matthew Hedrick

Senior Analyst

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.


Today we bought Och-Ziff Capital Management Group (OZM) at $9.06 a share at 9:42 AM EDT in our Real Time Alerts. Och Ziff remains one of our favorite long-term stocks in financials. The firm is capable of preserving capital and generating alpha in a market where other asset managers are losing money. As always, we bought on the red and will sell when it’s green.




The Economic Data calendar for the week of the 12th of November through the 16th is full of critical releases and events. Attached below is a snapshot of some (though far from all) of the headline numbers that we will be focused on.





Best Ideas Call November 15th

Best Ideas Call November 15th - BESTIDEAS


Hedgeye Risk Management invites you to join us Thursday, November 15th, for our bi-annual BEST IDEAS CALL at 1:30pm EST. We will be outlining the top investment ideas, both long and short, across each vertical of our world-class research team. In aggregate, we will offer one high conviction and differentiated investment idea from each of our 8 verticals over the intermediate term duration.  


Below is a list of speakers:

  • Keith McCullough, CEO
  • Daryl Jones, Macro
  • Brian McGough, Retail
  • Todd Jordan, Gaming, Lodging and Leisure
  • Howard Penney, Restaurants
  • Tom Tobin, Healthcare
  • Josh Steiner, Financials
  • Jay Van Sciver, Industrials
  • Kevin Kaiser, Energy

Please dial in 5-10 minutes prior to the 1:30pm EST start time using the number provided below, a copy of the presentation will be distributed before the call. If you have any further questions email .

  • Toll Free Number:
  • Direct Dial Number:
  • Conference Code: 666651#


"You just need a solid bench of analysts and inventory of long/short ideas to pick from"      



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.