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Penney: Why We're Short These 4 Restaurant Stocks

 

Veteran restaurants analyst Howard Penney highlights two major headwinds making him bearish on four stocks.


Poll of the Day Recap: Do You Hear That, Social Media? Pop, Pop, Pop!

Hedgeye CEO Keith McCullough wrote in today’s Morning Newsletter: “Risk happens fast. With the social media stock bubble crashing (single stock moves have been down -20% to -45% from their all-time peak), the Nasdaq is already -5.3% off its YTD high.”
 

Yikes. We went from “Bubble Overbought” (another note from Keith last week) to bubble popping, fast.

 

So, we asked you in today’s poll: Is the Social Media Bubble bursting the beginning of a broader market decline?


At the time of this post, 57% responded YES; 43% said NO.


Of those that voted YES, they said that the economy is slowing; people are running out of money.

 

One specifically noted that, “Inflation will reduce purchasing power for citizens and reduce top line revenue for consumer staple names. People on [government] assistance and fixed incomes won't be able to keep up with food prices and energy. GDP will fall precipitously.”

 

A few humorously explained, “This time, everyone will be able to tweet their dismay and Instagram their monthly statement.”

 

And: “The decline in the S&P will start in the next couple months, then Yellen will pump it back up, singing: ‘That's why I’m eaaaasing, I’m easing like Sunday morning.’”

 

Conversely, one NO voter felt that the Fed wouldn't “let the market fall too far.”

 

Hedgeye Managing Director Moshe Silver also argued NO, summing up that “In the short term, the social media froth will probably lead lots of frothy sectors lower; for the longer term, the next 12 months-plus, we are not on the brink of a broad bear market. There’s too much fear and uncertainty in the air to get outright bearish, plus the presidential campaigns will start this year, [which is] good for stocks.”

 

But, as Keith says, “I have no love for the bubbles - social or otherwise…Not buying this pullback was a risk managed choice.”

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European Banking Monitor: CDS Tightens Broadly Across Europe

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 .

 

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European Financial CDS - Swaps tightened sharply across the European Financials complex last week. The biggest movers were in Greece, Italy, Germany and Spain. The Greek banks have posted impressive M/M moves, dropping by an average of 238 bps in just the last four weeks. Outside of Greece, the only EU bank that is still trading above our so-called "Lehman line" (+300 bps) is Sberbank of Russia.

 

European Banking Monitor: CDS Tightens Broadly Across Europe  - bank cds.1

 

Sovereign CDS – Sovereign swaps were tighter around the world last week. Italy, Spain and Portugal lead the charge lower, dropping by 24, 19 and 26 bps, respectively.

 

European Banking Monitor: CDS Tightens Broadly Across Europe  - sovereign cds. 2

 

European Banking Monitor: CDS Tightens Broadly Across Europe  - sovereign cds.3

 

European Banking Monitor: CDS Tightens Broadly Across Europe  - sovereign cds.4

 

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 tightened by 2 bps to 13 bps. 

 

European Banking Monitor: CDS Tightens Broadly Across Europe  - euribor OIS spread.5

 

Matthew Hedrick

Associate


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.


Bubble, Overbought: SP500 Levels, Refreshed

Takeaway: You just saw 40 handles of upside from our 1842 oversold signal and now you have 30 handles of downside from our overbought signal.

Editor's Note: Hedgeye CEO Keith McCullough released the following note on April 01, 2014. The Nasdaq has fallen approximately -5% since 4/2. Follow Keith on Twitter @KeithMcCullough.

 

POSITION: 8 LONGS, 8 SHORTS

 

In my last SP500 Levels note, “Bubble Up” (March 26th) I signaled that we’d like re-test the all-time-bubble-highs. Now that bubble is signaling immediate-term TRADE overbought.

 

Bubble, Overbought: SP500 Levels, Refreshed - bubble pic 

While buying-the-damn-bubble #BTDB felt pretty darn good at the beginning of last March, Biotech and Social Media stocks were only down -15-45% from that prior capitulation high. I trust no one forgets that. Risk happens fast.

 

Across our core risk management durations, here are the lines that matter to me most:

  1. Immediate-term TRADE overbought = 1885
  2. Immediate-term TRADE support = 1854
  3. Intermediate-term TREND support = 1823

In other words, you just saw 40 handles of straight upside from our 1842 oversold signal – and now you have 30 handles of downside from the overbought signal.

 

Don’t chase beta. Fade it.

KM

 

Keith R. McCullough
Chief Executive Officer

 

Bubble, Overbought: SP500 Levels, Refreshed - SPX

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McCullough: What's Working Right Now (And What's Not)

 

Hedgeye CEO Keith McCullough discusses the outside-consensus macro themes we've been running with YTD as well as what's working in the markets right now and what's getting whacked.


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