Cartoon of the Day: $VIX Fireworks

"Front month VIX testing its all-time lows," wrote Hedgeye CEO Keith McCullough in today's Morning Newsletter. "Closing at 10.32 (it has never held below 10, sustainably).


Cartoon of the Day: $VIX Fireworks - VIX cartoon 07.07.2014

Expert Call: Net Neutrality/Title II Outcomes & Implications

Takeaway: We're hosting a call this Wednesday to discuss the progression of the major regulatory debates for the Internet & Media sector

Expert Call: Net Neutrality/Title II Outcomes & Implications - HE IM net

We are hosting a though leader call on Net Neutrality/Title II Outcomes & Implications with industry veteran, Jonathan Spalter, Chairman of Mobile Future. The call will be held on Wednesday, July 9th at 1:00pm EDT.



  • Net Neutrality Implications
  • Title II Internet Reclassification Implications
  • Various Scenarios for Internet, Media, & Telecom sectors
  • Handicapping Outcomes
  • What the Calendar Looks Like



  • Toll Free Number:
  • Direct Dial Number:
  • Conference Code: 286369#



Jonathan Spalter, the chairman of Mobile Future, the national mobile and wireless technology association, has a long track record building and leading innovative media, technology and policy research companies in the U.S, Asia-Pacific and Europe. He founded the policy-focused independent investment research company Public Insight and was CEO of Snocap, a digital music licensing company founded by the creators of Napster. Spalter also held senior management roles at the Paris headquarters of Vivendi Universal, the global media, telecommunications, and entertainment group. He was senior vice president of the company's worldwide public policy team and also served as executive vice president of business development and strategy for Vivendi Universal Net and CEO of affiliate Atmedica Worldwide. During the Clinton administration, the Senate unanimously confirmed Spalter as associate director of the U.S. Information Agency, where he was also appointed chief information officer. In addition, he served as an advisor to and spokesman for Vice President Al Gore, as well as having served as a Director on the National Security Council and Assistant Press Secretary for International Affairs at the White House.    


'Stunning' Weather Reversal Sends Cotton Prices Down 20%

Takeaway: What a difference a couple of months can make.

Editor's note: This is a brief excerpt from retail sector head Brian McGough's morning research. Click here for more information on how you can subscribe.


HBI, GIL - Cotton Boom Goes Bust as Rain-Soaked Texas Crop Sets Glut

  • "Two months ago, a drought threatened output in the U.S., the world’s largest exporter, and stockpiles were heading for a two-decade low. Then came the rains in Texas, the top grower, sparking a planting surge that the government said will send inventories to a six-year high before the 2015 harvest."
  • "The 'stunning' weather reversal may boost U.S. output by 32 percent, Plexus Cotton Ltd. said in a report. Prices that in March were the highest in 25 months are now down more than any commodity this year."

'Stunning' Weather Reversal Sends Cotton Prices Down 20% - cotton


Takeaway: Cotton is down almost 20% from its YTD highs. Increased yield forecasts from the US coupled with China's decision to release some its cotton reserves, which accounts for nearly 60% of global stocks, means that the supply side of the pricing equation looks relatively healthy.


Material cost deflation should help offset labor cost headwinds facing names like (Hanesbrands) HBI and Gildan Activewear (GIL).

Early Look

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Monday Mashup: Big Week for BOBE

Investment Ideas

Monday Mashup: Big Week for BOBE - chart1

Recent Notes

06/30/14  Monday Mashup: DNKN, NDLS and More

07/02/14  DFRG: A Castle-in-the-Air

Events This Week

07/08/14  BOBE earnings release 4:00pm EST

07/09/14  BOBE earnings call 10:00am EST

Chart of the Day

With BOBE set to release earnings tomorrow after the close, we thought we’d take a close look at the value destruction the current Board and management team have perpetuated since mid-2012.  We are expecting a disappointing release and would be buyers on any negative news.  BOBE remains our highest conviction long idea.  We run through our long thesis in this slide deck.


Monday Mashup: Big Week for BOBE - chart2

Recent News Flow

Monday, June 30th

  • DIN Applebee’s brought back its Take Two menu for a limited time, giving guests the ability to pair any two selections from its Taste of Summer menu, starting at $10.99.
  • NDLS debuted catering in Colorado.
  • RRGB eliminated the position of COO, currently held by Eric. C. Houseman, in an internal restructuring.  Houseman’s employment will end on or around August 1st.

Tuesday, July 1st

  • WEN announced the return of its #PretzelLoveSongs campaign, in which the company takes select social media posts and turns them into lyrics of songs. This year, the songs will be performed in a series of music videos by Boyz II Men and Jon Secanda.
  • NDLS unveiled plans to add a floating server at its stores in order to drive dessert and drink sales.  CEO Kevin Reddy expects this addition to the restaurants will result in a 3% boost in same-store sales.  Noodles & Company has been testing the floating server in select restaurants for the past two years and plans to roll out the program system-wide by 2016.

Wednesday, July 2nd

  • No significant news.

Thursday, July 3rd

  • BOBE holder Sandell reported a 8.4% beneficial ownership in the company.
  • CAKE announced plans to celebrate National Cheesecake Day on July 30th and 31st by offering any slice of cheesecake at half price.

Friday, July 4th

  • No significant news.

Sector Performance                      

The XLY (+1.7%) outperformed the SPX (+1.0%) last week.  Both casual dining and quick service stocks underperformed the SPX Index.


Monday Mashup: Big Week for BOBE - 33

Monday Mashup: Big Week for BOBE - chart4

XLY Quantitative Setup

From a quantitative perspective, the sector remains bullish on an intermediate-term TREND duration.


Monday Mashup: Big Week for BOBE - chart5

Casual Dining Restaurants

Monday Mashup: Big Week for BOBE - chart6

Monday Mashup: Big Week for BOBE - chart7

Quick Service Restaurants

Monday Mashup: Big Week for BOBE - chart8

Monday Mashup: Big Week for BOBE - chart9


Howard Penney

Managing Director


Fred Masotta


European Banking Monitor: Swaps Back-off on the Week

Below are key European banking risk monitors, which are included as part of Josh Steiner and the Financial team's "Monday Morning Risk Monitor".  If you'd like to receive the work of the Financials team or request a trial please email .




European Financial CDS - After widening steadily, swaps were predominantly tighter in Europe this past week. Part of the relief came from Portugal where initial reports of a Luxembourg investigation into Espirito Santo turned out to be wrong. Meanwhile, a temporary short-selling ban in the stock and management change all led to a relief rally. Espirito Santo swaps were 24 bps tighter on the week, closing at 294 bps, but remain +124 bps on the month. 


European Banking Monitor: Swaps Back-off on the Week - chart1 Financial CDS


Sovereign CDS – Sovereign swaps were little changed on the week outside of Portugal. Portguese swaps tightened 22 bps to 132 bps on the news that its largest bank, Espirito Santo, was not under investigation by Luxembourg. 


European Banking Monitor: Swaps Back-off on the Week - chart2 sovereign CDS


European Banking Monitor: Swaps Back-off on the Week - chart3 sovereign CDS


European Banking Monitor: Swaps Back-off on the Week - chart4 sovereign CDS


Euribor-OIS Spread – The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. The Euribor-OIS spread was unchanged at 15 bps.


European Banking Monitor: Swaps Back-off on the Week - chart5 Euribor OIS Spread



Matthew Hedrick



Ben Ryan





Keith's Macro Notebook 7/7: VIX USD UST 10YR

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.