This note was originally published at 8am on February 14, 2014 for Hedgeye subscribers.
“You must be new to this town, Mister. Only Al Capone kills like that.”
Bugs was a Chicago gangsta, yo. And that’s all I have to say about that. We aren’t making a market call today. Like the entire Connecticut school system (that closes when it drizzles), we’re shutting the office down today for the Valentine’s Day Massacre at Chelsea Piers in Stamford.
Not to be confused with Capone’s made for movies stuff, this is going to be the real deal. At 1PM sharp (attendance is free), we have @HedgeyeRetail analyst (Bugs’ 3rd cousin and former Chicago Blackhawks prospect from Robbinsdale, Minnesota, Alec Richards) between the pipes versus The Dan Holland.
Not to be confused with the 20yr old Holland who you’ll find on HockeyDB.com (who plays for the New Hampshire Monarchs - 5 games played, 8 PIMS, and 1 assist), Hedgeye’s Holland hails from parts unknown. Scouts from Charlestown say he’s a killer. And all he has to do to win is score 1 goal in 10 breakaway tries on Richards. If he does that, he’ll make Big Alberta, Daryl Jones, a lot of dough.
Back to the Global Macro Grind…
Oh, you don’t care about Hedgeye hockey and want to make some dough in the market do you?
Heyer: “Hello, boys – something I can do for you?”
Gangster: “Yes, you can shut up!”
Ok, be that way.
While this whole attitude thing may not be what you were looking for on Valentine’s Day, that’s just too bad isn’t it.
Despite people on TV getting all lovey-dovey with the US stock market (on no-volume-lower-highs again) yesterday, I don’t like you buying the US stock market today anymore than I didn’t yesterday.
- US DOLLAR – down again this morning (-1.5% in the last 2 weeks and bearish on our long-term TAIL risk duration)
- US RATES – after failing @Hedgeye TREND resistance of 2.80% this wk, falling again this morning to 2.72%
- GOLD – ripping, alongside the CRB Commodities Index, to fresh new YTD highs of $1308 = +8.8% YTD!
Oh, you don’t like the #InflationAccelerating call because you aren’t long inflation?
Capone: “Wanna know something… I like a guy who can use his head for something more than a hatrack.”
Other than the explicit US #GrowthSlowing signal that has always been Dollar Down + Rates Down = Gold Ripping, what else is going on out there today that has me in such a mood?
- JAPAN – Yen breaking out now vs USD and the Nikkei is getting crushed (-3.3% in the last 2 days to -12.4% YTD)
- RETAIL SALES – reported yesterday as the worst 1 and 2 year growth rate in 2 years (and everyone blames weather)
- RISK RANGES – both the SP500 and VIX risk ranges of 1726-1848 and 13.39-20.41, respectively, are wicked wide
And, btw, #InflationAccelerating in the two things I drink/eat for breakfast every morning has me surly too:
- COFFEE = +25.7% YTD
- OATS = +17.8% YTD
But, whatever you do, don’t tell me there’s never going to be inflation in this world, ever.
Don’t go there because, as the Interrogator in the Valentine’s Day Massacre told Franky Gusenberg, “I’ve got to tell you Frank, you’re not going to make it. Want me to call a preacher?”
Yep. For Danny Holland versus one of the best goalies in Yale Hockey history, I am officially recommending prayer.
Our immediate-term Risk Ranges are now:
UST 10yr Yield 2.60-2.80%
Brent Oil 107.69-110.41 (
Best of luck out there today,
Keith R. McCullough
Chief Executive Officer
Do you believe that management's plan to spin-off Red Lobster will create value?
We certainly have a strong opinion on the matter, but we’d like to hear from you. CLICK HERE to vote.
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Earlier today we hosted a conference call to discuss why it may finally be the right time for investors to reallocate capital to Brazil. With the Bovespa Index down -54% in USD terms since peaking in APR ’11, we now think it’s appropriate to explore whether or not the currently distressed prices of Brazilian assets represent real value or if they remain a value trap. Per usual, we concluded the call with a live Q&A session.
A brief synopsis of the key takeaways can be found here on our @HedgeyeTV YouTube channel: http://www.youtube.com/watch?v=baUM6Z69FN8.
KEY TOPICS INCLUDED
- A review of our bearish thesis and key risks over the next few quarters
- Scenario analysis on whether or not this is a good time buy
- Is the bottoming process underway for Petrobras (PBR) and Vale (VALE)?
CLICK HERE to access the replay podcast.
CLICK HERE to access the associated slide deck (72 slides of in-depth analysis).
Please email us if you have any follow-up questions that you’d like us to address.
Have a great evening,
Associate: Macro Team
This note was originally published February 27, 2014 at 14:49 in Restaurants
Earlier this week Starboard announced that they intend to call a special meeting to halt the spinoff of Red Lobster. We have expressed our concerns with management’s plan because, to us, it makes little strategic sense and doesn’t get at the heart of the problem.
Darden is still a company with an inefficient operating structure.
On the day Darden’s strategic plan was announced, the stock closed down 4% to $51. This didn’t exactly strike us as a vote of confidence in management’s plan to create value. Two days later, Starboard Value announced a 5.5% position in the company and the stock rallied 6%. For the most part, the stock has traded sideways since then, until rallying 3% on the news that Starboard retained former Olive Garden president Brad Blum to serve as an advisor in its battle against Darden.
The takeaway from stock action and, in our opinion, sentiment since 12/20/13 is the stock rallies when there is movement toward replacing management and sells off when management publicly digs their heels in.
We’ve heard management talk about a plan to fix Olive Garden for five years now, but, they continue to over promise and under deliver. The current team has had ample time to fix the brand and has failed miserably.
It is time for significant change.
To review, we’ve included some brief thoughts on why management’s strategic plan makes very little strategic sense and could actually end up destroying value.
- Red Lobster may become less profitable and, as a result, less valuable.
- The plan does not address the issue of managing multiple brands.
- Management’s proposed initiative simply removes one underperforming brand from a large portfolio.
- Clarence is building a moat around his castle.
- They are not cutting unit growth or costs as aggressively as they should.
- There is no real plan to fix Olive Garden.
- Management has lost all credibility to hit targets.
We certainly have a strong opinion on the matter, but we’d like to hear from you.
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