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VIDEO: Can JCP Go Bankrupt?


Hedgeye Retail Sector Head Brian McGough appeared on CNBC this afternoon to discuss JCPenney's (JCP) current financial woes and whether or not the company should fire current CEO Ron Johnson. McGough argues that firing Johnson will put the company on the fast track to Chapter 11 bankruptcy.


Go to 6:48 into the video to watch Brian’s interview.

All Quiet On The European Front?

We don’t expect today’s press conference with the European Central Bank (ECB) to have a material impact on the EUR/USD currency pair. While the meeting does suggest bearishness due to a lower 2013 GDP target and downside on CPI outlook, ECB Chair Mario Draghi still has plenty of tricks up his sleeve that can support the Euro. Though the EUR/USD recently broke its TAIL line of support at $1.30, it quickly climbed back to its TREND line of resistance at $1.31. If anything is going to affect the Euro in the coming weeks, it will be the uncertainty over Italy’s next government. We play the Euro through the CurrencyShares Euro Trust ETF (FXE).


All Quiet On The European Front? - EUROUSD

Casual Dining Black Box Update

Black Box Intelligence released same-restaurant sales data for February.  As expected, the data is implying a significant deceleration in comparable sales and traffic trends.



  • SRS fell 5% in February
  • 1Q-to-date trends averaging -2.3%
  • Winter weather comparisons were a negative factor in first two weeks of February
  • The western region (weather not a factor) performed the best: SRS up 2.1%
  • New England performed the worst: SRS -8.9%
  • Traffic declined -6.2% on top of January’s decline of -3.1%.  The rolling 3mo decline in traffic is now -4.2%
  • Average check is running +3.3% in 1Q13, up from 1.6% in September 2012

Casual Dining Black Box Update - black box same restaurant sales


Casual Dining Black Box Update - blackbox average check



Some upcoming catalysts:


JPM, BofA, UBS conferences this week and next


Our favorite names:







Howard Penney

Managing Director


Rory Green

Senior Analyst


March ECB Presser: 2013 GDP Revised Down

The Q&A from today’s ECB press conference revealed that there was “discussion on whether to cut rates but the prevailing consensus was to keep rates unchanged”, leaving the interest rate on the main refinancing operations unchanged at 0.75% along with the interest rates on the marginal lending facility and the deposit facility at 1.50% and 0.00%, respectively.


The real call-out of the meeting is the ECB staff’s projections downward target range revision for Eurozone 2013 GDP to between -0.9% to -0.1% versus December’s estimate of-0.9% to  0.3%. Draghi blamed the revision on the worse-than-expected Q4 print of -0.6% Q/Q due to weak domestic demand and falling exports.   The staff’s 2014 GDP estimate is a very “healthy” range of 0.0% to 2.0%.


The 2013 CPI range was revised to 1.2 – 2% hinting at a more deflationary outlook versus a December estimate of 1.3% – 2.5%.


In his prepared statements, Draghi highlighted recent data that suggests stabilization in 1H 2013 and improvement in 2H 2013. In the Q&A he suggested some positive signs leading to less “fragmentation”:

  • Stronger world demand from exports
  • The ECB’s monetary policy stance will remain accommodative as long as needed
  • Counterparties have so far repaid  €224.8 billion of the net LTROs issued (€500B)
  • Target 2 balances are improving
  • Funding for sovereigns has improved
  • Increased capital flows from the core to the non-core
  • Financial market improvement since July 2012

However when questioned on the difficulty of credit reaching the real economy, especially for small and medium sized enterprises, Draghi had little to say and no specific program in mind to spur lending. Below we show a chart of the weaken credit lines to households and corporations, one piece of evidence of a very clogged environment that should hamper real growth.


March ECB Presser: 2013 GDP Revised Down - z. ecb loans



--Today’s Q&A was packed with questions on the Italian election and how those receiving the most support rejected the fiscal discipline that Draghi advocates. Draghi had this to say:  “markets, despite excitement after the election, have reverted back to where they were before. There’s recognition that these are democratic elections. Much of fiscal adjustment that Italy already went through will now go on auto pilot, and the country has less debt versus 2012 to roll over. You’ve also seen that contagion to other countries is muted, versus the past. This is positive.”


--The question of staggeringly high youth unemployment came up again which Draghi dodged, saying it’s up to the individual countries to provide labor market reforms.


--On the need for a bailout of Cyprus Draghi said that the Eurogroup is discussing this and a statement could perhaps come in the second part of March. He said Cyprus is a small country but transfer risks could be bigger and it’s important for the Cyprus government to take this opportunity to adhere to anti- money laundering legislation.


--On the rumor of the ECB leaving Troika, Draghi called the report “Angst of the week”, and said it was unfounded.


As it relates to the EUR/USD, we don’t think the outcome of today’s meeting will have a huge impact on the currency cross. The meeting does suggest bearishness due to a lower 2013 GDP target and more downside to the CPI outlook. However, Draghi still appears armed to issue policy and leverage the bank where necessary, which should continue to support the cross. We think the real inflections over the next days and weeks will come from the uncertainty over Italy’s next government.


March ECB Presser: 2013 GDP Revised Down - zz. eur usd


Matthew Hedrick

Senior Analyst


Takeaway: Economic Activity, Housing, & Labor Market Trends are Accelerating. Is #GrowthAccelerating taking the hand-off from #GrowthStabilizing?

With the equity market making new highs and our domestic-centric 1Q13 Macro Investment themes of #GrowthStabilizing and #HousingsHammer continuing to play out, the relevant risk management question at hand is whether the data is credibly signaling a hand-off from #Growthstabilizing to #GrowthAccelerating.


Across some of the more recent higher frequency economic data, the new orders component within the ISM Mfg, ISM Services, and PMI mfg survey’s all accelerated sequentially in February while yesterday’s Corelogic Home Price data saw January home prices rise +9.7% y/y (up from the prelim estimate of 7.9%) with the preliminary February estimate coming in at +9.7% as well – the second strongest February print in the last 20 years. 


If the current slope in the rate of price appreciation in the non-distressed market continues, pricing growth could see an incremental 500bps of upside over the NTM.  With demand rising (Pending, New, & Existing Home sales data) and supply falling (months-inventory making new lows) we think the dynamics are in place to support further pricing strength.


In addition the positive housing & economic activity data, Yesterday’s higher than expected ADP number and this morning’s jobless claims data offer confirmation of accelerating improvement in labor market trends.  Today's SA Initial claims print of 340K was a headline positive, while the improvement in the NSA initial claims data accelerated to +9.5% y/y vs. +8.0% in the prior week.   


Below is the weekly detailed analysis of the claims data from our head of Financials, Josh Steiner.  If you would like to setup a call with Josh or trial his research, please contact 



Labor Market Strengthens Further

This past week's NSA (Non-seasonally adjusted) initial jobless claims were better YoY by 9.5%, which is from the 8.0% YoY improvement in the previous week. This print reflects data through March 2, so next week should be the first week that sheds light on whether the sequester is actually having an impact. On a rolling basis (4-wk moving average), NSA claims were better YoY by 4.3%, which was improved from 2.6% in the previous week. These two measures, the YoY change in NSA and rolling NSA claims, are the better indicators of what's really happening in the labor market, and they both indicate the labor market is strengthening.


On the SA (seasonally-adjusted) front, the numbers look great. This is what the market is paying attention to. As a reminder, last week was the final week of tailwind for the series and we'll now be gradually shifting from tailwind to headwind over the coming six months. The first chart in the note tells the story well. 


The Data

Prior to revision, initial jobless claims fell 4k to 340k from 344k WoW, as the prior week's number was revised up by 3k to 347k. The headline (unrevised) number shows claims were lower by 7k WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims fell -7k WoW to 348.75k.


The 4-week rolling average of NSA claims, which we consider a more accurate representation of the underlying labor market trend, was -4.3% lower YoY, which is a sequential improvement versus the previous week's YoY change of -2.6%














Joshua Steiner, CFA


Christian B. Drake



This note was originally published March 07, 2013 at 08:55 in Gaming

Anything less than double digit growth would be a disappointment



Based on the last 3 months of actual growth and factoring in seasonality, we’re projecting 10-15% YoY growth for March.  Excluding the impact of low hold, investors should be disappointed with growth less than double digits.


Why should we be disappointed with even high single digit growth?  For one, the hold comp is very easy.  March 2012 VIP hold was the lowest of 2012.  Moreover, March VIP volumes and Mass revenues have historically averaged 6% and 5% sequential growth over February in years when Chinese New Year occurred in February.  A simple calculation using these sequential growth rates yields 15% YoY growth for March, at the high end of our projection.


Even with flat MoM revenues, March would still exceed last year by 8%.  Our projection methodology is more comprehensive than these simple sequential analyses but we find them useful as a reasonableness check.  Any way we look at it, March YoY growth should be strong and an acceleration from January and February.  A non-hold related miss from our projection could be indicative of a slowdown in the underlying fundamental trends or the impact from the China corruption crackdown.



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20 Proprietary Risk Ranges

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