Call Today @11 | Detecting Deception Through Statement Analysis

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“Statement Analysis is the most accurate way of determining if a person is lying in a verbal or written statement. A person cannot give a lengthy deceptive statement without revealing that it is a lie. This is because people's words will betray them.”

-Mark McClish, creator of the Statement Analysis method



Reading conference call/analyst meeting transcripts is a key part of the analyst’s job.    We all use words to define our reality, and our choice of words can be revealing.  The premise of Statement Analysis is that a person’s choice of specific words can reveal when there might be an attempt at deception.  This Statement Analysis exercise looks exclusively at a company’s written and verbal statements.  Using these hidden clues, we can dig deeper into a company’s public pronouncements for signals of potential concerns in a company’s reporting.



In 1990, Mark was promoted to the position of Inspector/Instructor at the U.S. Marshals Service Training Academy located at the Federal Law Enforcement Training Center in Glynco, GA. He taught at the Training Academy for nine years serving as the lead instructor on interviewing techniques. He used this time to study deceptive statements and conduct research on deception. Based on his findings, he created the Statement Analysis techniques for detecting deception in a verbal and written statement. While assigned to the Training Academy Mark was also the lead defensive tactics instructor for the Marshals Service.


Mark retired from the Marshals Service in 2009 and started Advanced Interviewing Concepts. His company provides interviewing skills training and assists investigators in analyzing statements.



On the call we will focus on:

  • Why Statement Analysis is important.
  • Mark’s process and findings.
  • Provide analysis on select companies. 
  • Identify areas within specific corporate releases that bear closer scrutiny, and
  • Compare company comments with their financial statements.


The call will last about an hour including time for Q&A.

Keith's Macro Notebook 12/23: Yield Curve | Commodities | Volume


Hedgeye CEO Keith McCullough shares the top three things in his macro notebook this morning.

Commodities: Crash! Boom! Bang!

Editor's note: This is a brief excerpt from Hedgeye morning research. For more information on how you can become a subscriber click here.


*  *  *  *  *  *  *

Collapse, crash – use whatever word you want to describe a CRB Index (19 commodities) that dropped another -1.4% to fresh year-to-date lows yesterday.


For those of you keeping score, it’s down -25% since June.


While it’s fascinating to hear a wide range of narratives on why, the reality is that being positioned for #deflation risk (net short Commodities, Junk Bonds, etc.) is paying off big time now. 

Commodities: Crash! Boom! Bang! - 55

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Industry-Wide Comp Outlook (2015)

Takeaway: In this note, we take a closer look at the industry-wide trends implied by consensus same-store sales estimates for 2015.

Industry-Wide Comp Outlook (2015) - 88


Key Points

  • Casual Dining, Family Dining, Fine Dining, and Sandwich two-year comps are expected to accelerate throughout 2015.
  • Coffee, Fast Casual, and Pizza two-year comps are expected to decelerate throughout 2015.
  • Comp estimates, in aggregate, appear aggressive perhaps driven by recent encouraging reports from Black Box and Knapp as well as declining gasoline prices.
  • For this reason, we believe we are well-positioned to identity several opportunistic shorts next year.


Casual Dining Consensus SSS Expectations (3Q14-4Q15)

  • Casual Dining two-year accelerating 100 bps to 1.7%
  • BJRI two-year accelerating 200  bps to 1.1%
  • BLMN two-year accelerating 30 bps to 1.8%
  • BBRG two-year accelerating 240 bps to -2.8%
  • BWLD two-year decelerating 60 bps to 4.5%
  • CAKE two-year accelerating 35 bps to 1.7%
  • CHUY two-year decelerating 50 bps to 2.6%
  • DIN (Applebee’s) two-year accelerating 60 bps to 1.3%
  • DIN (IHOP) two-year decelerating 95 bps to 2.1%
  • DRI two-year accelerating 230 bps to 1.6%
  • EAT two-year accelerating 160 bps to 2.0%
  • IRG accelerating 225 bps to -0.1%
  • KONA two-year decelerating 5 bps to 2.6%
  • RRGB two-year decelerating 65 bps to 2.7%
  • RT two-year accelerating 660 bps to 1.5%
  • TXRH two-year accelerating 55 bps to 4.9%


Industry-Wide Comp Outlook (2015) - 11



Coffee Consensus SSS Expectations (3Q14-4Q15)

  • Coffee two-year decelerating 156 bps to 3.4%
  • DNKN two-year decelerating 130 bps to 1.9%
  • KKD two-year decelerating 60 bps to 2.9%
  • SBUX two-year decelerating 95 bps to 5.1%


Industry-Wide Comp Outlook (2015) - 22



Family Dining Consensus Expectations (3Q14-4Q15)

  • Family Dining two-year accelerating 78 bps to 2.1%
  • BOBE two-year accelerating 225 bps to 1.3%
  • CBRL two-year decelerating 20 bps to 2.9%
  • DENN two-year accelerating 30 bps to 2.1%


Industry-Wide Comp Outlook (2015) - 33



Fast Casual Consensus Expectations (3Q14-4Q15)

  • Fast Casual two-year decelerating 52 bps to 4.3%
  • CMG two-year decelerating 230 bps to 10.7%
  • FRGI (Pollo Tropical) two-year decelerating 160 bps to 4.6%
  • FRGI (Taco Cabana) two-year accelerating 55 bps to 3.2%
  • NDLS two-year accelerating 20 bps to 2.1%
  • PBPB two-year accelerating 30 bps to 1.8%
  • PNRA two-year accelerating 130 bps to 2.7%
  • ZOES two-year decelerating 210 bps to 4.7%


Industry-Wide Comp Outlook (2015) - 44



Fine Dining Consensus Expectations (3Q14-4Q15)

  • Fine Dining two-year accelerating 52 bps to 1.9%
  • DFRG two-year accelerating 75 bps to 2.5%
  • RUTH two-year decelerating 105 bps to 3.5%


Industry-Wide Comp Outlook (2015) - 55



Pizza Consensus Expectations (3Q14-4Q15)

  • Pizza two-year decelerating 173 bps to 3.9%
  • DPZ two-year decelerating 160 bps to 5.0%
  • PZZA two-year decelerating 185 bps to 2.8%


Industry-Wide Comp Outlook (2015) - 66



Sandwich Consensus Expectations (3Q14-4Q15)

  • Sandwich two-year accelerating 44 bps to 2.6%
  • BKW two-year accelerating 55 bps to 2.2%
  • JACK (JIB) two-year accelerating 120 bps to 2.1%
  • JACK (Qdoba) two-year accelerating 155 bps to 6.4%
  • MCD two-year accelerating 145 bps to 0.3%
  • PLKI two-year decelerating 230 bps to 3.9%
  • SONC two-year decelerating 220 bps to 3.1%
  • WEN two-year decelerating 15 bps to 1.8%
  • YUM two-year accelerating 340 bps to 1.4%


Industry-Wide Comp Outlook (2015) - 77



Howard Penney

Managing Director


Fred Masotta


Retail Callouts (12/23): Sales Trends, Idea List – KATE, RH, FL, HIBB, DKS

Takeaway: Idea List. With ICSC & ChannelAdvisor, tough to argue that sales are not decelerating into final wk of Holiday. Demand down, discounts up.


Retail Callouts (12/23): Sales Trends, Idea List – KATE, RH, FL, HIBB, DKS - 12 23 chart1


Several changes to the Idea List this week.

  1. We put all athletic retailers in our Core Short list. This follows our Athletic Black Book last week where we outlined the changes happening with distribution in that space, and how FL, HIBB and DKS are uniquely positioned to fail.
  2. We removed DDS from our Short Bench. With HBC making noise about acquiring the company, it hardly makes sense for us to continue to hold our breath waiting for an entry point.
  3. We contemplated moving KATE ahead of RH on our idea list into the #1 slot -- not because of lack of confidence in RH, but because we think that there's more controversy around KATE over the near-term. We're going to keep our positioning as is. But if KATE weakens or RH plows forward, we might make the switch.




Takeaway:  A big rebound in sales for the week, but it follows two big weekly declines in the context of an intermediate downtrend. The point there is that with sales trending down so much heading into the biggest Holiday week, it makes sense that retailers would really turn the discounting machine into overdrive to have any shot at hitting numbers and prevent a glut of inventory in January. 

Retail Callouts (12/23): Sales Trends, Idea List – KATE, RH, FL, HIBB, DKS - 12 23 chart2


We're seeing the same here out of the ChannelAdvisor numbers -- which show e-commerce trends. The consistency in spending decline is clear as day.

Retail Callouts (12/23): Sales Trends, Idea List – KATE, RH, FL, HIBB, DKS - 12 23 chart3


NKE, FL, DKS, FINL - e-Commerce Trends

Retail Callouts (12/23): Sales Trends, Idea List – KATE, RH, FL, HIBB, DKS - 12 23 chart4

Takeaway: Following up on a major theme of our Athletic Black Book here is a look at e-Commerce sales growth for the relevant companies.  If you are wondering when Nike's commitment to DTC starts to have an effect... it's now.

Dick's and Foot Locker occasionally report their main banner performance, which outpaces their consolidated company e-commerce growth.  We have used that data here and included our estimates where necessary.

As a reminder HIBB does not have an e-commerce business. That's a problem.


The key takeaway is that there have only been two quarters in history where Nike outgrew its wholesale partners with online sales. Those two quarters just happened. And we're going to see a third, and a fourth...etc...





BABA, COST - Alibaba’s Tmall Global Site Stumbles



M, VFC - Ranking the Top 20 Finance Chiefs


Retail Callouts (12/23): Sales Trends, Idea List – KATE, RH, FL, HIBB, DKS - 12 23 chart5


DDS - Hudson's Bay could wrap up Dillard's in 2015



WMT, TGT - Walmart stores busy, Target stores, not so much




Client Talking Points


Once upon a time, yield curve compression (flattening) was a clean cut #GrowthSlowing signal (it still is, as both U.S. and global growth slow in Q4 vs. Q3 – you’ll get that data in JAN); UST 10YR 2.16% (-29% year-to-date) minus 2yr 0.70% = +146 basis points spread registering fresh tear-to-date lows as commodities continue to collapse.


Collapse, crash – use whatever word you want for a CRB Index (19 commodities) that dropped another -1.4% to fresh year-to-date lows yesterday (-25% since June); while it’s fascinating to watch the narrative on why, reality is that being positioned for #deflation risk (net short Commodities, Junk Bonds, etc.) is paying off big time now.


At the all-time (which is a long time) closing highs for the SPX (2078), Total U.S. Equity Market Volume was -12% and -30% vs. its 1 month and year-to-date averages yesterday.  We would say #NoWorries on the liquidity trap if it wasn’t for the 100-150 handle draw-downs we saw from the no volume SEP and NOV highs – enjoy the markups.

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

The Vanguard Extended Duration Treasury (EDV) is an extended duration ETF (20-30yr). U.S. real GDP growth is unlikely to come in anywhere in the area code of consensus projections of 3-plus percent. And it is becoming clear to us that market participants are interpreting the Fed’s dovish shift as signaling cause for concern with respect to the growth outlook. We remain on other side of Consensus Macro positions (bearish on Oil, bullish on Treasuries, bearish on SPX) and still have high conviction in our biggest macro call of 2014 - that U.S. growth would slow and bond yields fall in kind.


We continue to think long-term interest rates are headed in the direction of both reported growth and growth expectations – i.e. lower. In light of that, we encourage you to remain long of the long bond. The performance divergence between Treasuries, stocks and commodities should continue to widen over the next two to three months. As it’s done for multiple generations, the 10Y Treasury Yield continues to track the slope of domestic economic growth like a glove. We certainly hope you had the Long Bond (TLT) on versus the Russell 2000 (short side) as the performance divergence in being long #GrowthSlowing hit its widest for 2014 YTD (ex-reinvesting interest).


The U.S. is in Quad #4 on our GIP (Growth/Inflation/Policy) model, which suggests that both economic growth and reported inflation are slowing domestically. As far as the eye can see in a falling interest rate environment, we think you should increase your exposure to slow-growth, yield-chasing trade and remain long of defensive assets like long-term treasuries and Consumer Staples (XLP) – which work decidedly better than Utilities in Quad #4. Consumer Staples is as good as any place to hide as the world clamors for low-beta-big-cap-liquidity.

Three for the Road


VIDEO (2mins) Why I’m Using the Word “Recession” for the First Time This Year via @hedgeye



Excellence is the gradual result of always striving to do better.

-Pat Riley


Greece is leading losers his morning down -2.5% to -26.8% year-to-date.