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Cartoon of the Day: Boom! (Or Is That Bust?)

Cartoon of the Day: Boom! (Or Is That Bust?) - Greece cartoon 07.06.2015

"After introducing single-shot Hedgeye Cartoons in the last year," Hedgeye CEO Keith McCullough wrote in today's morning market note, "we may have to resort to full-form illustrative children’s books in order to explain this Greek debt drama."

 


Referendums Have (Deflationary) Consequences

The Euro is down on the “NO” news out of Greece and the risk range here is widening again to $1.09-1.13. That should be respected as it’s:

 

A) A leading indicator for rising volatility in Foreign currencies and Commodities and

B) An explicit #deflation risk on signal (think inflation expectations of things like Oil and low-quality peripheral debt).

 

Referendums Have (Deflationary) Consequences  - z GREECE 07.06.15 chart

 

On a related note, WTI Oil is getting smashed for a -4.8% loss this morning. (That’s after a -6.7% drop last week.) It’s down -44% year-over-year.

 

The #StrongDollarDeflation risk remains for most things levered to inflation expectations (including junk debt) – this is why big beta to “reflation” is in drawdown mode again.

 

***Finally, if you haven’t read it already… Make sure to check out this special contributor insight on the Gong Show in Greece from our good friend Daniel Lacalle. He knows this story inside out.


Retail Callouts (7/6): Gnarly SIGMAs, Employment Callout

Takeaway: Bad 2H inventory setup for retailers comes just in time for higher wage and shipping costs.

SIGMA Update - Bad 2H inventory setup just in time for higher wage and shipping costs

We sent out our updated SIGMA book for about 100 companies on Thursday. We picked out a few of the gnarlier looking charts. Most them are department stores -- or companies with no square footage growth. We're not playing favorites. They simply looked the worst.  Regardless, there's one thing that is undeniable...these retailers are heavier on inventory heading into 2H than they'd probably like. With wage pressure building beginning in August (courtesy of Wal-Mart, McDonalds, etc...) and higher dot.com costs (freight) headed into holiday, we still think we're going to see a sharp deceleration in EPS growth for US Retail.

 

Retail Callouts (7/6): Gnarly SIGMAs, Employment Callout - 7 6 chart1B

 

Retail Callouts (7/6): Gnarly SIGMAs, Employment Callout - 7 6 chart2B

 

Retail Callouts (7/6): Gnarly SIGMAs, Employment Callout - 7 6 chart3B

 

Retail Callouts (7/6): Gnarly SIGMAs, Employment Callout - 7 6 chart4B

 

Retail Callouts (7/6): Gnarly SIGMAs, Employment Callout - 7 6 chart5B

 

Retail Callouts (7/6): Gnarly SIGMAs, Employment Callout - 7 6 chart6B

 

Retail Callouts (7/6): Gnarly SIGMAs, Employment Callout - 7 6 chart7B

 

Retail Callouts (7/6): Gnarly SIGMAs, Employment Callout - 7 6 chart8B

 

Retail Callouts (7/6): Gnarly SIGMAs, Employment Callout - 7 6 chart9B

 

 

Notable Employment Callout

This is from one of Keith McCullough's notes to clients last night.

 

With Greece, it’ll be convenient for the Bullish Growth (rates up) camp to forget Friday’s jobs report. But this cycle data doesn’t cease to exist. Instead of writing more words, you can follow the cycle (in rate of change terms) using Crayola. I still say the US labor cycle peaked in FEB 2015.

 

Don’t forget that NFP peaks, on average, 3 months AFTER the economic cycle (GDP) has peaked. The US employment cycle peaked, right on time.

Retail Callouts (7/6): Gnarly SIGMAs, Employment Callout - 7 6 chart10

 

 

 

OTHER NEWS

 

NKE - World Cup: Nike adds a third star to United States uniform

(http://fansided.com/2015/07/05/united-states-world-cup-third-star-uniform/)

 

Ashley Furniture HomeStore to Open Multiple Canadian Locations

(http://www.retail-insider.com/retail-insider/2015/7/ashley-furniture-homestore)

 

PYPL - PayPal on hunt for takeovers after eBay split

(http://www.ft.com/intl/cms/s/0/0f17aa34-2134-11e5-aa5a-398b2169cf79.html#axzz3f6fKPL6U)

 

BRIEF-Puma and Kering Eyewear sign partnership agreement for optical frames and sunglasses

(http://in.reuters.com/article/2015/07/06/idINFWN0ZM00920150706)

 

SHLD - Sears Holding Corporation Announces Expiration And Over-Subscription Of Seritage Growth Properties Rights Offering

(http://searsholdings.mediaroom.com/index.php?s=16310&item=137374)

 

Tory Burch Sets Paris Flagship

(http://wwd.com/retail-news/designer-luxury/tory-burch-paris-flagship-10174738/)

 

BLKIA - Bain, Sycamore Circle Belk Inc.

(http://wwd.com/retail-news/department-stores/bain-sycamore-circle-belk-inc-10175037/)

 

Joe’s Receives Forbearance From Creditors

(http://wwd.com/business-news/financial/joes-forbearance-creditors-loan-10174919/)


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YELP: Can't Find a Buyer

Takeaway: YELP can't find a buyer, but is still shopping. We doubt it will find one, especially after its 2Q15 earnings release.

KEY POINTS

  1. CAN'T FIND A BUYER: Last Friday, news broke that YELP's CEO/co-founder isn't looking to sell anymore, but YELP may have interest if an acquirer could help leverage its reviewers toward e-commerce.  Translation: YELP couldn't find a buyer, so it's pitching ways to promote its user base in order to drum up interest among potential acquirers.  YELP is still very much for sale, but we still don't believe it will find a buyer.  Broken Business Model + High Price = Tough Sell; especially if YELP disappoints again on its next print as we expect.
  2. 2Q15 PRINT WILL BE A DISASTER: We all thought that it was odd that management chose to maintain full-year revenue guidance after missing 1Q results and guiding light for 2Q15.  We suspect the reason why was because YELP was shopping itself, and it's much easier to do so when chalking up its recent weakness as temporary.  That is going to come back to bite them on this print.  YELP will need a massive acceleration in new account growth to hit consensus Local Advertising estimates, particularly in 2H15.  We're expecting YELP to miss 2Q Local Advertising estimates, guide light for 3Q15, and cut 2015 guidance. 
  3. THIS ISN'T TEMPORARY: YELP's model is predicated on hiring enough new sales reps in order to drive new account growth in excess of its rampant attrition, which is the overwhelming majority of its customers annually.  The issue is that its TAM isn't large enough to support its model.  That has manifested into a persistent decline in salesforce productivity, which is now devolving into a mounting exodus of its sales reps (see note below).  That last point means that its model is unraveling, and this story is going to get much uglier than we initially expected.  

 

See our most recent note below for supporting detail.  Let us know if you have any questions, or would like to discuss further.

 

Hesham Shaaban, CFA

@HedgeyeInternet

 

 

YELP: The New Major Red Flag (1Q15)

04/30/15 08:53 AM EDT

[click here]


INVITE | Q3 2015 MACRO THEMES CONFERENCE CALL

TOMORROW (July 7th) at 1pm ET we will be hosting our highly-anticipated Quarterly Macro Themes conference call.  Led by CEO Keith McCullough, the presentation will detail the THREE MOST IMPORTANT MACRO TRENDS we have identified for the quarter and the associated investment implications. 

 

Q3 2015 MACRO THEMES OVERVIEW:

 

#SecularStagnation: Amid consensus expectations for a return to “normal” economic conditions, our analysis shows ample evidence of secular stagnation. In light of that, we reiterate our “lower-for-longer” thesis on growth, inflation and interest rates and continue to find the FOMC’s hawkish guidance wholly misplaced.

 

#EuropeSlowing: With our proprietary GIP (growth, inflation, policy) model we’ll outline the top 6 European economies that will be most impacted by real GDP growth slowing as inflation accelerates in the back half of 2015. The timing of ECB head Mario Draghi’s eventual response will be critical in terms of risk managing the EUR/USD exchange rate, as well as any associated spillover risks.

 

#ConsumerCycle: Consumption peaks late cycle and with domestic and global growth set to slow alongside easing inflation comps in 2H15, it looks increasingly likely 1H15 marked the current cycle peak in household spending growth.  We'll contextualize the current cycle, discuss the implications and detail how best to be counter-cyclically positioned as the consumer cycle enters its twilight. 

 

CALL DETAILS:

  • U.S. Toll-Free Number:
  • U.S. Toll Number:
  • Confirmation Number: 13612090
  • Materials:  CLICK HERE (the slides will be available approximately one hour prior to the start of the call)

 

As always, our prepared remarks will be followed by a live, anonymous Q&A session. Please submit your questions to .

 

Also, for those of you who cannot join us live, we will be distributing a replay video of the call shortly after it concludes.

 

Kind regards,

 

The Hedgeye Macro Team


RTA Live: July 6, 2015

Here is the replay of today's edition of RTA Live.

 


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