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Monday Mashup

Monday Mashup - CHART 1

 

RECENT NOTES

8/17/15 MCD | Create Your Taste Experience

8/11/15 SHAK | PLANTING FLAGS

8/10/15 July Restaurant Sales and Employment Trends

8/7/15 BOJA | BO’S DILEMMA

 

RECENT NEWS FLOW

Friday, August 21

MCD | Signed agreement to franchise 20 restaurants in remote Russian locations (click here for article)

Burgers | Casual dining restaurants boosting lunch sales with burgers (click here for article)

 

Thursday, August 20

MCD | Another survey supports the expansion of All Day Breakfast (click here for article)

 

Wednesday, August 19

QSR | Burger King is expanding delivery service in India, marking the fifth country that BK offers the service (click here for article)

 

Tuesday, August 18

YUM | Micky Pant named new Yum China CEO (click here for article)

NYC Restaurant Wage Hikes | Quick service restaurant owners in New York have filed objections to the proposal to raise minimum wage to $15 per hour (click here for article)

 

Monday, August 17

DFRG | Opened new Double Eagle steak house in Orlando, FL (click here for article)

SBUX | Expanded evening program with beer and wine (click here for article)

DRI | Named Bill Lenehan as CEO of proposed REIT, currently a member of the Darden board (click here for article)

 

SECTOR PERFORMANCE

Casual dining and quick service stocks, in aggregate, outperformed the XLY last week. The XLY was down -5.1%, top performers from casual dining were BBRG and RUTH posting an increase of 2.7% and 2.3%, respectively, while ARCO and GMCR led the quick service pack up 12.0% and 4.2%, respectively.

Monday Mashup - CHART 2

Monday Mashup - CHART 3

 

QUANTITATIVE SETUP

From a quantitative perspective, the XLY looks bearish from a TRADE and TREND perspective, TRADE support is 72.91.

Monday Mashup - CHART 4

 

CASUAL DINING RESTAURANTS

Monday Mashup - CHART 5

Monday Mashup - CHART 6

 

QUICK SERVICE RESTAURANTS

Monday Mashup - CHART 7

Monday Mashup - CHART 8

 

Keith’s Three Morning Bullets

  1. CRASH – not an inappropriate word to use given that on the 3-month duration alone, Oil (-37%), China (-31%) Emerging Markets (-26%), and Long-term Sov Bond Yields have crashed. This is a literal crashing of both US and Global growth expectations – we’re still at ½ of consensus forecasts
  2. HIKE? – oh definitely – they should hike. “It’s just 25 basis points, Keith” – yep. Have at it. Let’s see what happens. This risk of being too tight during both the cyclical and secular slowdown was only obvious to those who had the bearish growth and inflation views. Jackson Hole = Thursday
  3. VIX – the main challenge with modeling accurate risk management levels right now is that volatility is undergoing a major Phase Transition across durations – hard to explain in 140 characters or less but very easy to see the series of higher-highs going back 2yrs

 


The Macro Show Replay | August 24, 2015

 


August 24, 2015

August 24, 2015 - Slide1

 

BULLISH TRENDS

August 24, 2015 - Slide2

 

 

BEARISH TRENDS

August 24, 2015 - Slide3

August 24, 2015 - Slide4

August 24, 2015 - Slide5

August 24, 2015 - Slide6

August 24, 2015 - Slide7

August 24, 2015 - Slide8

August 24, 2015 - Slide9

August 24, 2015 - Slide10


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 80.28%
  • SHORT SIGNALS 78.51%

CHART OF THE DAY: The Mother of all Demographic Secular Slowings

Editor's Note: The following chart and excerpt are from today's Early Look written by Hedgeye CEO Keith McCullough. Click here to subscribe. 

*  *  *  *  *  *  *

...And the last two cycle tops didn’t have this mother of all demographic secular slowings (which actually makes it different, for the worse – see Chart of The Day for the demographic tail wagging this global demand dog).

 

CHART OF THE DAY: The Mother of all Demographic Secular Slowings - z ben 08.24.15 chart


Fireball!

“Mr. Worldwide to infinity, you know the roof on fire”

-Pitbull

 

Since this morning isn’t going to be fun for anyone but Long Bond bulls (TLT), I thought I’d start my morning with a McCullough Clan household favorite and try to change the mood up a little:

 

“We gon’ boogie oogie oogie, jiggle, wiggle and dance”

 

My 19 month-old girl can cut a rug to #Fireball like you wouldn’t believe (she calls it “Ball, ball”). And if you didn’t know that the roof of global growth expectations is on fire, you haven’t been reading my rants for the past 3 months. Markets are crashing.

Fireball! - Bubble bear cartoon 09.26.2014

**Keith is LIVE on The Macro Show at 9am ET this morning. Click here for access.

 

Back to the Global Macro Grind

 

Crash? Yep. In big macro stuff, this slow-moving train wreck of willfully blind US and global growth expectations has been very obvious. You should not be surprised, whatsoever, by the following this morning:

 

  1. Oil crashing (down another -3% this morning, -38% in the last 3 months)
  2. China crashing (down another -8.5% overnight, -31% in the last 3 months)
  3. Emerging Markets crashing (-21.3% on MSCI and -23.4% LATAM in the last 3 months)

 

Oh, and Bond Yields (on the long-end of the curve) have crashed (again) in the last 3 months too. From 2.54% on the 10yr UST Yield to 2.01% this morning as inflation expectations crash (5yr UST Break-Even collapses to 1.14%, -52bps in 3 months).

 

But the Fed should definitely raise rates, eh? “It’s just 25 basis points, Keith.” Yep. I know. Have at it … and let me know how that goes for everything that’s rate sensitive now that … you know, everything else is like “the roof on fire”!

 

#Fireball!

 

I sincerely don’t mean to make fun of the situation market’s are in. But I do. I haven’t heard this many “it’s different this time” narratives since the 2000 and 2007 cycle tops.

 

And the last two cycle tops didn’t have this mother of all demographic secular slowings (which actually makes it different, for the worse – see Chart of The Day for the demographic tail wagging this global demand dog).

 

Oil, Chiner, EM – yep. You get that. But who gets #EuropeSlowing? Last week alone, here was the European Equity score:

 

  1. Euro Stoxx 600 Index -6.5% and -11.4% in the last 3 months (plus what it’s down this morning)
  2. Germany’s DAX down another -7.8% last week and -14.7% in the last 3 months
  3. Russian Stocks (RTSI) down another -8.7% last wk and -27.2% in the last 3 months

 

Germany and Russia slowing, at the same time? Probably just another glitch in a chart or something. “Don’t pay so much attention to the data” in Europe, ok? The secular (demographic) headwinds there are even stronger than USA’s.

 

Back to the US story, ex-long-Energy (XLE -8.4% wk-over-wk and -21.1% in the last 3 months) here’s what Style Factors in the SP500 got crushed the most last week:

 

  1. High Beta Stocks -7.8% on the week and -15.6% in the last 3 months
  2. Top 25% Sales Growth Stocks -6.4% on the week and -8.2% in the last 3 months
  3. Top 25% EPS Growth Stocks -6.4% on the week and -8.7% in the last 3 months

 

In other words, with the SP500 -5.8% last week and -7.6% in the last 3 months, the aforementioned “Growth” Style Factors underperformed the market’s beta… and the question remains whether or not being long “growth” starts to look like being long “value” (i.e. #Deflation Risk) has for the next 3 months?

 

As a reminder, the base effect (comparative period, year-over-year) for US GDP growth gets tougher in the 2nd half of 2015 vs. the 1st half. That means, if you held all other risks equal, the probability is higher that growth slows in Q3 and Q4 than Q2. That’s one of the biggest reasons why our US GDP forecast is ½ that of our top macro research competitor for Q3.

 

Not that “the data” or being right matters, but what happens if we continue to be right on growth and inflation AND the Fed decides to “tighten because it’s time”? While I’m praying they don’t make that policy mistake, anything can happen – and if they do, “we gon’ drink drinks and take shots until we fall out, like the roof on fire.” #Fireball

 

Our immediate-term Global Macro Risk Ranges are now:

 

UST 10yr Yield 2.01-2.14%

SPX 1
VIX 20.80-31.51
EUR/USD 1.11-1.15
Oil (WTI) 39.01-41.93

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Fireball! - z ben 08.24.15 chart


The Multi-Standard Deviation Zone

Client Talking Points

CRASH

Not an inappropriate word to use given that on the 3-month duration alone, Oil (-37%), China (-31%) Emerging Markets (-26%), and Long-term Sovereign Bond Yields have crashed. This is a literal crashing of both U.S. and Global growth expectations – we’re still at ½ of consensus forecasts.

HIKE?

Oh definitely – they should hike. “It’s just 25 basis points, Keith” – yep. Have at it. Let’s see what happens. This risk of being too tight during both the cyclical and secular slowdown was only obvious to those who had the bearish growth and inflation views. Jackson Hole = Thursday.

VIX

The main challenge with modeling accurate risk management levels right now is that volatility is undergoing a major Phase Transition across durations – hard to explain in 140 characters or less but very easy to see the series of higher-highs going back 2 years.

 

 

**Tune into The Macro Show with Hedgeye CEO Keith McCullough at 9:00AM ET - CLICK HERE

Asset Allocation

CASH 70% US EQUITIES 2%
INTL EQUITIES 0% COMMODITIES 0%
FIXED INCOME 28% INTL CURRENCIES 0%

Top Long Ideas

Company Ticker Sector Duration
MCD

One of the ways that McDonald's is going to take market share back is through one of the most popular items on its menu—the Egg McMuffin. "I honestly believe that if there is a silver bullet, it’s all day breakfast for McDonald’s," says Restaurants Sector Head Howard Penney. "And I do believe they’re going down that road and they will do it."

 

Penney adds that we’ll probably know more about that at the November analyst meeting and what the breakfast potential will be. There’s obviously a lot of things that go around MCD doing breakfast (e.g. shrinking other parts of the menu, etc).

PENN

"We continue to like Penn National Gaming here due to stable regional gaming trends, better than expected quarterly and annual earnings, and the Plainridge and Jamul contribution to PENN’s two-year growth story," writes Hedgeye Gaming, Lodging & Leisure Sector Head Todd Jordan. 

TLT

It was a very good week for those sitting behind the long-bond coming out of the FOMC minutes release on Wednesday. During a tumultuous 5-day stretch in which the S&P 500 fell over -5%, subscribers who followed our recommendation on TLT were sheltered from the market storm and gained almost +2%. Moreover, during the past month, TLT has gained +5.7% versus a -6.8% loss for the S&P 500 (a 1,200 basis point difference). In other words, it has paid handsomely to buck the consensus tide.

Three for the Road

TWEET OF THE DAY

RUSSIA: down another -4.7% this morning - clearly a sign of Global Growth ramping

@KeithMcCullough

QUOTE OF THE DAY

Destiny is not a matter of chance, but of choice. Not something to wish for, but to attain.

 William Jennings Bryan

STAT OF THE DAY

The Russian ruble plunged 2.3% Monday hitting a seven-month low.


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