You’d think that if #EOW ("End of the World") Republicans and Democrats were credible that Gold would be ripping higher right? Nope. It's still crashing. Gold was down -3.2% last week. It's up 0.69% today.
Don’t make the mistake of confusing the real risk of US #GrowthSlowing with “default risk.” They are two very different things.
Takeaway: September marked the end of an ugly 3Q13. Same-restaurant sales showed marginal (if any) improvement and traffic remains a huge concern.
We have been bearish on the casual dining sector since early July and, on Friday, Black Box gave us a look at September sales trends, which show a marginal improvement from an ugly July and August. Traffic trends, however, remain anemic. But, before we delve further into the details of the release, we thought it would be useful to point out which casual dining companies saw consensus metrix same-restaurant sales estimates adjusted in September.
The following companies saw 3Q13 same-restaurant sales estimates revised upward over the past month: EAT
The following companies saw 3Q13 same-restaurant sales estimates remain unchanged over the past month: BOBE, CBRL, CEC, KONA, RRGB, TXRH
The following companies saw 3Q13 same-restaurant sales estimates revised down over the past month: BBRG, BJRI, BLMN, BWLD, CAKE, CHUY, DIN, RUTH
Moving back to the release, Black Box reported that September 2013 same-restaurant sales increased +0.1%, while comparable traffic trends decreased -1.9% – same-restaurant sales improved +30 bps sequentially, while comparable traffic trends held flat. These estimates come against September 2012 comps of -0.8% and -2.4%, respectively. For the third quarter, same-restaurant sales and traffic are estimated to have declined -0.3% and -2.0%, respectively. Both metrics declined -70 bps and -10 bps, respectively, over the prior quarter.
Malcolm Knapp also released his September estimates last week. Knapp-Track casual dining comparable restaurant sales declined -1.9%, while comparable guest counts declined -3.6% – comparable restaurant sales decreased -10 bps and guest counts decreased -40 bps, sequentially. These results come against September 2012 comps of -0.5% and -2.3%, respectively.
For the third quarter, comparable restaurant sales and comparable guest counts are estimated to have declined -2.5% and -4.0%, respectively. This would indicate that both metrics declined -220 bps and -250 bps, respectively, over the prior quarter. Knapp also noted that comparable restaurant sales and comparable guest counts were negative for all four weeks in September.
Currently, consensus metrix estimates for the 24 casual dining chains we track in the space are for 3Q13 same-restaurant sales growth of +0.7% (excluding DRI brands) versus +1.5% in 2Q13. This would imply a -40 bps sequential deceleration in same-restaurant sales on a trailing twelve month basis over the prior quarter.
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Takeaway: Bond funds were unable to follow through on last week's inflow which was the first weekly in 9 weeks with more outflows this week
This note was originally published October 10, 2013 at 08:14 in Financials
Investment Company Institute Mutual Fund Data and ETF Money Flow:
Fixed income mutual funds flow showed no follow through with an outflow of $400 million this week, a reversal from the $1.2 billion inflow last week which was the first inflow in 9 weeks
Equity mutual funds booked an another outflow of $3.3 billion for the 5 day period ending October 2nd, a continuation from the $3.7 billion redemption from last week
Within ETFs, passive equity products experienced inflow of $1.3 billion for the 5 day period ending October 2nd with Bond ETFs losing $2.0 billion of investor funds during the week
For the week ending October 2nd, the Investment Company Institute reported another weekly outflow in combined stock funds to the tune of $3.3 billion, essentially in line with the $3.7 billion outflow last week. The $3.3 billion outflow for the week broke out to a $739 million inflow into international equity products and a $4.1 billion outflow within domestic stock funds. The equity category has been a tale of two tapes recently with domestic equity funds having had outflows in 7 of the past 12 weeks compared to international equity funds which have had inflows every week in the past 12. Despite this weak run in domestic stock fund flows, the year-to-date weekly average for 2013 for all equity mutual funds now sits at a $2.7 billion, a complete reversal from the $3.0 billion outflow averaged per week in 2012.
On the fixed income side, bond funds were not able to maintain the momentum from last week and for the 5 days ending October 2nd, the aggregate of taxable and tax-free bond funds booked a $400 million outflow. The taxable bond category had slight inflows of $468 million which was washed over by the $868 million outflow in tax-free or municipal bonds. While the sharp outflows that marked most of the summer and the start of the third quarter have moderated, the appetite for bonds has hardly rebounded. The 2013 weekly average for fixed income fund flows is now a $525 million weekly outflow, a far cry from the $5.8 billion weekly inflow averaged last year.
We highlighted the year-to-date tallies of this rotation from bonds and into equities last week with the first inflow into total equity funds in 6 years with stock funds running at a $106 billion inflow thus far in 2013. Conversely bond mutual funds are working on their first annual outflow since 2004 with a $23 billion outflow thus far in '13. This is a substantial reversal from the $303 billion inflow into fixed income funds as laid out in our research last week.
Within our asset management sector launch in the middle of the summer, we released our regression models that forecasted an prospective inflow for stock funds of $80 billion and conversely a forward 12 month outflow of $100 billion for bond funds. Thus far into our coverage of the asset managers, the equity rotation has occurred at a faster than expected rate and bond fund flows have been fairly stubborn, although our forecasts have been directionally relevant. As such, we continue to recommend investors are long leading equity manager T Rowe Price (TROW) to capture this shift and conversely avoid or be short a manager more dependent on bonds like Franklin Resources (BEN).
Hybrid funds, or products that combine both fixed income and equity allocation had a surprisingly light week with the first outflow in 14 weeks. The year-to-date weekly average inflow for hybrid products however is still $1.6 billion for '13, almost a 100% increase from 2012's $911 million weekly average.
Exchange traded funds experienced mixed trends during last week with equity products booking an inflow and bond ETFs experiencing redemptions. Equity ETFs gathered $1.3 billion in funds, a deceleration from the $7.3 billion in the prior week and also down from the impressive $25.8 billion two week's ago. Including this week's production however, 2013 weekly average equity ETF trends are averaging a $3.3 billion weekly inflow, a strong improvement from last year's $2.2 billion weekly inflow average.
Bond ETFs experienced the first redemption in 5 weeks of $2.0 billion which was a reversal from the $1.3 billion in new funds garnered last week. Including this most recent outflow within passive bond products, the 2013 weekly bond ETF average is flagging at just a $369 million inflow, much lower than the $1.0 billion average weekly inflow from 2012.
In last week's ICI report we outlined the brewing ETF record for equities with 2013 thus far having produced $129 billion in stock ETF flow, well above the $117 billion produced in 2012 with still a quarter left in the year. Fixed income ETFs are struggling with just a $15 billion annual inflow year-to-date thus far in '13. This is well below 2012's trends of a $56 billion inflow.
Jonathan Casteleyn, CFA, CMT
Joshua Steiner, CFA
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 - Europe's banking system continues its winning ways. Swaps across European financials tightened another 14 bps, on average, last week, bringing the median EU bank to 140 bps, as compared with 101 bps for the US Financials.
Sovereign CDS – Sovereign swaps tightened around the world last week on rising expectations that the US will find a solution and avert default. US swaps tightened 7 bps, falling to 34 bps. Portugal, Italy and Spain saw their swaps tighten by 48, 20 and 8 bps, respectively.
Euribor-OIS Spread – The Euribor-OIS spread tightened by 2 bps to 12 bps. 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.
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