Macro Consensus Remains Royally Flummoxed Over Epic Move in Treasuries

Takeaway: Macro consensus still doesn’t get it.

The UST 10YR Yield of 2.34% drives our Best Macro Idea (TLT) to a +17.2% gain for 2014 (and that’s pre dividends, the absolute return is even better). We can’t understand why macro consensus still doesn’t get the rate of return on slow-growth vs. Russell 2000 which is 0.0% YTD.


Watching too much TV, perhaps?


Macro Consensus Remains Royally Flummoxed Over Epic Move in Treasuries - TLT Chart

Restaurant Sector Valuation

Restaurant Sector Valuation - 1


  1. Mixed results for restaurant stocks in August as valuations fluctuated by segment.  Coffee and sandwich stocks had multiple expansion during the month, while casual dining and fast casual had multiple contraction.  Valuations for family dining, fine dining and pizza stocks largely remained flat month over month.
  2. Fast casual continues to be the most richly valued segment of the restaurant industry, although a significant decline in previously high-flying NDLS has recently hampered the overall category.
  3. Multiple expansion in the coffee category was led by strength at KKD and the recent surge in THI’s stock following the announcement of its merger with BKW.

 Restaurant Sector Valuation - 2


Restaurant Sector Valuation - 3

restaurant industry

Restaurant Sector Valuation - 4


Restaurant Sector Valuation - 5

Casual dining category

Restaurant Sector Valuation - 6


Restaurant Sector Valuation - 7

Coffee category

Restaurant Sector Valuation - 8


Restaurant Sector Valuation - 9

family dining category

Restaurant Sector Valuation - 10


Restaurant Sector Valuation - 11

fast casual category

Restaurant Sector Valuation - 12


Restaurant Sector Valuation - 13

fine dining category

Restaurant Sector Valuation - 14


Restaurant Sector Valuation - 155

Pizza category

 Restaurant Sector Valuation - 16


Restaurant Sector Valuation - 17

sandwich category

Restaurant Sector Valuation - 18


Restaurant Sector Valuation - 19


Have a wonderful Labor Day Weekend.


Howard Penney

Managing Director


Fred Masotta


Playing The ECB’s QE Games

Investment Recommendations:  short France (EWQ),  EUR/USD (FXE) and Eurozone equities (EZU);   Long GBP/USD (FXB)


ECB head Mario Draghi has opened the gates for QE, but we think market expectations are over the skis on timing going into the September 4th meeting.


Quantitatively, major European equities remain broken TREND and we’re sticking to our playbook (we shorted France this week in Real-Time Alerts) as we see growth decelerating and inflation weak in the 2H. As Keith noted this morning, “we believe European Equity bulls traverse the thesis drift plains (begging for more QE), remember that Japan’s didn’t work.” And we reiterate, inflation is not growth, even if Draghi showers us with QE!


So the river cards market participants were talking about this week are now out:

  • Eurozone CPI fell to 0.3% Y/Y (4-yr low), a 10bps move lower – in line with our view and that of consensus (released today)
  • European Confidence figures (Economic, Consumer, Industrial, Services, Business) turned lower in AUG versus the previous month and have weakened since ~ MAY 2014 – in line with our view and missing consensus (released yesterday)

Playing The ECB’s QE Games - zzz. Mario CPI


As we made clear in notes this week (see Shorting France (EWQ); Draghi Trumps Yellen’s Dovishness – Sticking with the Playbook) we expected the decline in both CPI and confidence - it's clear and present in the recent data!


What’s our outlook?  Conditions are not desperate enough to warrant QE in September, but expectations will rise. 


Come September 4th we expect updated ECB staff projections to show downward revisions to growth and inflation outlooks, in line with the spate of weak Eurozone data over recent weeks and months. We expect that Draghi will “push” the growth and inflation prospects from TLTROs and QE-lite (ABS buying) programs in his public commentary (although we are not buying it to move the needle), and that the downward move in inflation for the August period is not enough (it’s not negative, yet) to accelerate a QE announcement to September.

Consider further, the TLTROs won’t be issued until September and December and he hasn’t experimented with QE-lite beyond a soft announcement. As the ECB has shown time and time again, it can flirt with “aid” packages for EXTENDED periods, to test expectations and further assess economic conditions (think of all the programs with 3 and 4 letter acronyms since the “crisis” got under way with Greece). 


While we expect Draghi to leave QE in his back pocket through the September meeting, what we’re managing against is recent news that some sell-side economists, including JPMorgan, Deutsche Bank, Nomura, and Credit Suisse are now pricing in policy easing next week, according to the WSJ. 


As the saying goes, expectations will always be the root of all heartache, and we’re sticking to our guns. For now our investment recommendations remain short France (EWQ), EUR/USD (FXE) and Eurozone equities (EZU); Long GBP/USD (FXB). 


Enjoy the long holiday weekend!


Playing The ECB’s QE Games - w. econ and consum senti

Playing The ECB’s QE Games - w. manu and ser conf

Playing The ECB’s QE Games - w. business conf


Matthew Hedrick


Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.45%
  • SHORT SIGNALS 78.38%


Takeaway: Still soft - projecting down mid single digit August (YoY). Margin pressure may be escalating.

Last week's numbers finally in



We just obtained last week’s numbers (Augusts 18-24) and still nothing to be positive about. Daily table revenues averaged HK$819 million, down 8% from the same week in August of 2013.  Month to date, ADTR is tracking down 5%.  Indeed, full month gross gaming revenues (includes slots) should come in down mid-single digits or maybe worse.




Softness in VIP volumes, compounded by a lower hold % particularly at the larger Cotai casinos, weighed on last week's results. Volumes could end the month lower than that seen in July.  


Mass growth appears to be decelerating through the month and our low 20s% growth projection could prove aggressive.  Remember that Mass grew only 17% in July.  We're hearing entry requirements for high commission rebates may have been relaxed which could further pressure margins. We know labor has been running meaningfully higher but it now appears that Mass reinvestment rates are escalating as well.


LVS continues to outperform here in August and although its market share moderated somewhat this past week, it remains well above trend.  LVS’s gain was SJM’s loss as all other concessionaires are tracking close to recent trend.



Keith's Macro Notebook 8/29: Japan | Russell 2000 | UST 10YR

Retail Callouts (8/29): SIGMAs - WSM, GES, ANF, DG, TIF, BBY, DSW, +

Takeaway: SIGMA review for companies reporting this week. Definitely worse on the margin, with very few exceptions.




Here's a SIGMA review of every retailer that reported earnings this week. As a reminder, the analysis triangulates sales, inventories and margins. The vertical axis is the spread between sales and inventories -- the higher on the scale, the better.  The horizontal axis is the y/y change in EBIT margin. In effect, you want to be either in the upper right hand quadrant, or headed there. The opposite holds true for the lower left.


We've done this summary over the past few weeks, and the trends have been overwhelmingly positive -- with most companies improving inventories relative to sales and/or margins significantly. But this week, we're definitely looking at a different picture. The only companies that showed any material improvement were WSM and ANF -- and both of those names clearly had issues of their own that took the stocks down.  Interesting to see that the companies reporting so late in the season (i.e. taking longer to close their books) are the ones that are putting up the worst directional trends.


WSM - 2Q14 Earnings


Retail Callouts (8/29): SIGMAs - WSM, GES, ANF, DG, TIF, BBY, DSW, + - 8 29 chart1



GES  - 2Q15 Earnings


Retail Callouts (8/29): SIGMAs - WSM, GES, ANF, DG, TIF, BBY, DSW, + - 8 29 chart2



ANF - 2Q14 Earnings


Retail Callouts (8/29): SIGMAs - WSM, GES, ANF, DG, TIF, BBY, DSW, + - 8 29 chart3



DG - 2Q14 Earnings


Retail Callouts (8/29): SIGMAs - WSM, GES, ANF, DG, TIF, BBY, DSW, + - 8 29 chart4



CHS - 2Q14 Earnings


Retail Callouts (8/29): SIGMAs - WSM, GES, ANF, DG, TIF, BBY, DSW, + - chart5 8 29



PSUN - 2Q14 Earnings


Retail Callouts (8/29): SIGMAs - WSM, GES, ANF, DG, TIF, BBY, DSW, + - chart6 8 29



BWS - 2Q14 Earnings


Retail Callouts (8/29): SIGMAs - WSM, GES, ANF, DG, TIF, BBY, DSW, + - chart7 8 29



WTSL - 2Q14 Earnings


Retail Callouts (8/29): SIGMAs - WSM, GES, ANF, DG, TIF, BBY, DSW, + - chart8 8 28



TLYS - 2Q14 Earnings


Retail Callouts (8/29): SIGMAs - WSM, GES, ANF, DG, TIF, BBY, DSW, + - chart9 8 29



BBY - 2Q15 Earnings


Retail Callouts (8/29): SIGMAs - WSM, GES, ANF, DG, TIF, BBY, DSW, + - 8 29 chart10



TIF - 2Q14 Earnings


Retail Callouts (8/29): SIGMAs - WSM, GES, ANF, DG, TIF, BBY, DSW, + - 8 29 chart11



DSW - 2Q14 Earnings


Retail Callouts (8/29): SIGMAs - WSM, GES, ANF, DG, TIF, BBY, DSW, + - 8 29 chart12





WMT - Wal-Mart Looks Online for Chinese Growth



  • "As Alibaba Group Holding Ltd. courts investors for a highly anticipated public offering next month in the U.S., Wal-Mart Stores Inc. is busy trying to win over online shoppers in the Chinese e-commerce company's backyard."
  • "Wal-Mart's online arm in China—called Yihaodian, meaning No. 1 Store—has recently increased the number of products sold on its site, built up its supply chain and streamlined its mobile site in a push to boost sales. Wal-Mart owns a 54% stake in Yihaodian."


TGT - How Target Aims To Turn Instagram Into Shopping Spree



  • "Target on Wednesday adopted Curalate's software Like2Buy for its Target and Target Style Instagram feeds, in the hopes that users will turn a casual scroll into a shopping spree."
  • "Target has 319,000 Instagram followers and Target Style has 375,000, which means nearly 700,000 potential online customers."


APP - Robert Mintz appointed to American Apparel B.O.D.



  • "On August 26, 2014, Lion/Hollywood designated Robert Mintz to be a director of the Issuer pursuant to its rights under the Investment Agreement, as amended to date."


GPS - Gap Files Report on Myanmar Factories



  • "Through the U.S. Responsible Investment Reporting Requirements, U.S. companies making significant investments in Myanmar must be fully transparent about payments made to the government and about how they respect human rights in their business operations. Gap Inc., the first U.S. retailer to reenter Myanmar since sanctions were eased, submitted a report to the U.S. State Department this week on conditions it found at the first two factories it engaged to produce clothing for its Old Navy and Banana Republic factory stores."


GPS - Gap returning to television with ‘Dress Normal’ campaign



  • "Gap is returning to television. The brand debuted four commercials that will air on TV, in cinema, in stores and online. Created by Academy Award-nominated director David Fincher, the films were created with Wieden+Kennedy New York as part of Gap's new marketing campaign, Dress Normal. The TV campaign launches in the United States and United Kingdom in the week of Sept. 1."


JWN - SNEAK PEEK: Inside Canada’s first Nordstrom store



  • "It’s just three weeks until American retailer Nordstrom opens their first store in Canada, but there’s still lots of work to be done."
  • "Shelves in the 140,000 square foot retail space at Chinook Centre remain bare, as hundreds of newly hired employees work to assemble racks and get familiar with the high-end merchandise they’ll soon be selling."


Analysis: Holt Renfrew to Close its Smaller Stores Amid Increased Competition



  • "Holt Renfrew has announced that it will close its small Ottawa and Quebec City locations early next year, and we think that more Holt Renfrew store closures could follow. The company will instead concentrate on operating larger locations in just five Canadian cities. This strategy could be in response to expected competition from Saks Fifth Avenue and Nordstrom, both opening Canadian locations over the next several years. "

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.