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Keith's Macro Notebook 3/2: Japan | Euro | Oil

 

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


Retail Callouts (3/2): Mobile Commerce, COST, GME, LL

Takeaway: A look at Global Mobile Commerce over the holiday season.

EVENTS TO WATCH

Retail Callouts (3/2): Mobile Commerce, COST, GME, LL - 3 2 chart2

 

 

HIGHLIGHTS

 

Mobile/Tablet Commerce Stat Pack

 

Takeaway: For the amount of noise we hear about mobile - it's still just a drop in the bucket for most retailers. For the retail space in aggregate over the holiday season, mobile/tablet sales increased in penetration by 500bps and accounted for 22.6% of digital sales. There is one limiting factor however, and that is conversion rate where desktop rates sit at levels 4x smartphones and 1.5x tablets.

Perhaps the more interesting dynamic on mobile is the heavy weighting towards Apple powered iOS devices. Android operating devices account for about 52% of the devices in the US (compared to iOS at 42%), but only account for 22% of mobile sales. The median income of an iOS user is 40% higher than that of Android, but we don't think that explains the big discrepancy between units and sales volume. It has to be centered on functionality, an edge Apple will continue to enjoy especially after it integrates its Apple Pay feature into retail apps.

Retail Callouts (3/2): Mobile Commerce, COST, GME, LL - 3215 chart1

Retail Callouts (3/2): Mobile Commerce, COST, GME, LL - 3215 chart2

Retail Callouts (3/2): Mobile Commerce, COST, GME, LL - 3215 chart3

 

 

OTHER NEWS

 

COST- COSTCO ENTERS INTO A LONG TERM CO-BRAND CREDIT CARD AGREEMENT WITH CITI AND AN ACCEPTANCE AND CO-BRAND AGREEMENT WITH VISA

(http://phx.corporate-ir.net/phoenix.zhtml?c=83830&p=irol-newsArticle&ID=2021495)

 

GME, RSH - Report: GameStop bids $2.4 million on 163 RadioShack leases

(http://www.chainstoreage.com/article/report-gamestop-bids-24-million-163-radioshack-leases)

 

LL - Lumber Liquidators linked to health and safety violations

(http://www.cbsnews.com/news/lumber-liquidators-linked-to-health-and-safety-violations/)

 

JWN - Nordstrom Launching Collaboration With Piece & Co.

(http://www.wwd.com/retail-news/department-stores/nordstrom-launching-collaboration-with-piece-co-8237666?module=Retail-latest)

 

JCP, M - Court Rekindles J.C. Penney's Battle With Macy's

(http://www.wwd.com/business-news/legal/court-rekindles-jc-penneys-battle-with-macys-8233964?module=Retail-latest)

 

GPS - Gap names Victoria’s Secret ‘Pink’ creator as new design chief

(http://www.chainstoreage.com/article/gap-names-victoria%E2%80%99s-secret-%E2%80%98pink%E2%80%99-creator-new-design-chief)


LULU - Kit & Ace, the new retail venture from the son of Lululemon Athletica Inc founder, has been resounding success

(http://business.financialpost.com/2015/02/27/kit-ace-the-new-retail-venture-from-lululemon-athletica-inc-founders-son-has-been-resounding-success/)

 

Ron Johnson leads $16M investment in Nasty Gal

(http://www.fierceretail.com/story/ron-johnson-leads-16m-investment-nasty-gal/2015-02-27)

 

LVMH - Louis Vuitton is now a 'brand for secretaries' in China

(http://uk.businessinsider.com/louis-vuitton-losing-sales-in-china-2015-2?r=US#ixzz3TCfLnreh)


MONDAY MASHUP: CHUY, BOBE & MORE

MONDAY MASHUP: CHUY, BOBE & MORE - 1

 

Recent Notes

02/23/15 Monday Mashup: DRI, DFRG & More

02/24/15 DRI: The Transition Is Nearly Complete

02/25/15 DFRG: Going In Short, Redux

02/25/15 DFRG: A Broken Growth Algorithm

02/27/15 DFRG: Thesis Confirmed, Despite the Pop


Events This Week

Monday, March 2nd

  • CHUY earnings call 4:30pm EST

Wednesday, March 4th

  • CCSC earnings call 7:30am EST
  • BOBE earnings call 10am EST

 

Commodities

MONDAY MASHUP: CHUY, BOBE & MORE - 2

 

Recent News Flow

This Morning

  • CBRL downgraded to hold at Miller Tabak with a $150 PT.

Monday, February 23rd

  • DRI appointed interim CEO Gene Lee as permanent CEO, effective immediately.  The search for the next CFO to succeed Bradford Richmond is now underway.
  • BOBE declared a quarterly cash dividend of $0.31 per share, payable on March 23 to stockholders of record on March 9.

Tuesday, February 24th

  • DIN Applebee’s launched a new platform of appetizers – Bar Snacks (double-crunch bone-in wings, pot stickers, churro s’mores, green bean crispers, chips & salsa, soups), Shareables (pot stickers, sriracha shrimp, sweet potato fries, spinach & artichoke dip, brew pub pretzels & beer cheese dip, mozzarella sticks) and Pub Plates (kobe-style meatballs, sweet chile brisket sliders, salsa verde shredded brisket nachos, double-crunch bone-in wings, chicken quesadilla, grilled chicken wonton tacos, boneless wings, crosscut ribs).
  • WEN announced the addition of Michelle Mathews-Spradlin to its Board of Directors.  Prior to her retirement in 2011, Ms. Mathews-Spradlin worked at Microsoft for over 18 years, serving most recently as Chief Marketing Officer and Senior Vice President.

Thursday, February 26th

  • DNKN expanded its partnership with SJM and GMCR by signing agreements for the manufacturing, marketing, distribution and sales of Dunkin’ K-Cup packs at national retailers across North America, as well as online.  Dunkin’ K-Cup packs were previously only available in Dunkin’ Donuts restaurants in the U.S.
  • PZZA downgraded to hold at Feltl and Company.
  • PBPB announced the resignation of Chief Financial Officer, Charles Talbot.  Mr. Talbot accepted a senior leadership position with a firm outside of the restaurant industry.  He will continue to serve as Potbelly’s CFO until his date of departure on March 27, 2015.  An external search for his replacement is underway.

 

Sector Performance

The XLY (+0.7%) outperformed the SPX (-0.3%) last week.  Both casual dining and quick service stocks, in aggregate, underperformed the XLY.

MONDAY MASHUP: CHUY, BOBE & MORE - 3

MONDAY MASHUP: CHUY, BOBE & MORE - 4

 

Quantitative Setup

From a quantitative perspective, the XLY remains bullish on an intermediate-term TREND duration.

MONDAY MASHUP: CHUY, BOBE & MORE - 5

 

Casual Dining Restaurants

MONDAY MASHUP: CHUY, BOBE & MORE - 6

MONDAY MASHUP: CHUY, BOBE & MORE - 7

 

Quick Service Restaurants

MONDAY MASHUP: CHUY, BOBE & MORE - 8

MONDAY MASHUP: CHUY, BOBE & MORE - 9


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 80.32%
  • SHORT SIGNALS 78.49%

European Banking Monitor: Swaps Tighten, Greece Kicks the Can

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 mostly tightened among European banks last week.  The median change was -8 bps. Greek banks led the move with tightening between -240 bps and -991 bps as further progress was made with the country's recovery plan; Germany's lower house of parliament on Friday approved the bailout extension that Eurozone finance ministers had agreed on the week before.

 

European Banking Monitor: Swaps Tighten, Greece Kicks the Can - chart1 financials CDS

 

Sovereign CDS – Sovereign swaps mostly tightened over last week. Portuguese sovereign swaps tightened by -19.8% (-33 bps to 135 ) and Italian sovereign swaps widened by 15 bps to 110. Investors' sentiment was boosted by positive progress in Greece with Germany approving the four-month bailout extension.

 

European Banking Monitor: Swaps Tighten, Greece Kicks the Can - chart2 sovereign CDS

 

European Banking Monitor: Swaps Tighten, Greece Kicks the Can - chart3 sovereign CDS

 

European Banking Monitor: Swaps Tighten, Greece Kicks the Can - chart4 sovereign CDSS

 

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 widened by 1 bps to 11 bps.

 

European Banking Monitor: Swaps Tighten, Greece Kicks the Can - chart5 euribor OIS spread

 

Matthew Hedrick

Associate

 

Ben Ryan

Analyst

 

 

 

 

 


Commodities Weekly Sentiment Tracker

Note: Using the z-score in the tables below as a coefficient of variation for standard error helps us flag the relative market positioning of the commodities in the CRB Index. It is not intended as a predictive signal for the reversion to trailing twelve month historical averages. For week-end price data, please refer to “Commodities: Weekly Quant” published at the end of the previous week. Feel free to ping us for additional color.    

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1.       CFTC Net Futures and Options Positioning CRB Index: The Commodities Futures Trading Commission (CFTC) releases “Commitments of Traders Reports” at 3:30 p.m. Eastern Time on Friday. The release usually includes data from the previous Tuesday (Net Positions as of Tuesday Close), and includes the net positions of “non-commercial” futures and options participants. A “Non-Commercial” market participant is defined as a “speculator.” We observe the weekly marginal changes in the overall positioning of “non-commercial” futures and options positions to assess the directionally-biased capitulation risk among those with large, speculative positions.

  • The SOYBEANS, COTTON, and COPPER markets experienced the most BULLISH relative positioning changes week-over-week
  • The SUGAR, ORANGE JUICE, and, COFFEE markets experienced the most BEARISH relative positioning changes week-over-week

Commodities Weekly Sentiment Tracker - chart1 sentiment

 

Commodities Weekly Sentiment Tracker - Chart1B

 

2.       Spot – Second Month Spread: Measures the market expectation for forward looking prices in the near-term.

  • The LEAN HOGS, WTI CRUDE OIL, and CORN markets are positioned for HIGHER PRICES near-term
  • The LIVE CATTLE, COCOA, and HEATING OIL markets are positioned for LOWER PRICES near-term

Commodities Weekly Sentiment Tracker - chart2 spot 2nd month spread

 

3.       Spot – 1 Year Spread: Measures the market expectation for forward-looking prices between spot and the respective contract expiring 1-year later.

  • The WTI CRUDE OIL, SUGAR, and NATURAL GAS  markets are positioned for HIGHER PRICES in 1-year  
  • The LIVE CATTLE, COCOA, and SOYBEANS markets are positioned for LOWER PRICES in 1-year  

Commodities Weekly Sentiment Tracker - chart3 spot 1yr spread

 

4.       Open Interest: Aggregate open interest measures the amount of opened positions in all actively traded futures contract months. Open interest can be thought of as “naked” or “directionally-biased” contracts as opposed to hedgers scalping and providing liquidity. Most of the open interest is created from large speculators or participants who are either: 1) Producers/sellers of the physical commodity hedging their cash market exposure or 2) Large speculators who are directionally-biased on price.

 

Commodities Weekly Sentiment Tracker - chart4 open interest

 

Ben Ryan

Analyst


FLASH CALL: CRUISE PRICING SURVEY-FEB

The Hedgeye Gaming, Lodging, and Leisure team will host a conference call on Tuesday, March 3rd at 11AM to discuss the latest findings from our proprietary cruise pricing database.

 

Points of discussion include:

  • One market experienced a surge in close-in pricing in February while another discounted summer pricing
  • New ship premiums - 1st look at Norwegian Escape premiums
  • Did the Norwegian brand continue to outperform its contemporary peers in the Caribbean and Europe?
  • Are Costa and Anthem holding their ground in Europe?
  • (NEW*) RCL pricing vs load in Asia
  • (NEW*) Same-ship pricing across different markets (e.g. Europe vs Caribbean)

Please contact for dial-in information.


the macro show

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