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#LateCycle

Client Talking Points

EURO

As the central planning panic moves into its scary stage, we expect ECB President Mario Draghi to try to devalue again tomorrow at the ECB meeting; if he does, don’t forget that Down Euro (Up Dollar) = Down Oil – lots of beta in that trade.

OIL

WTI was down -10% yesterday and down another -2% this morning – that shouldn’t surprise anyone who thinks Draghi has cowbell coming. There is no support for WTI in our risk range model to $35.84.

UST 10YR

Tons of questions on why the UST 10YR wasn’t “down more” yesterday, and not one focused on the move higher in Global Yields! Plenty of conspiracy theories out there from Bond Bears, but Spanish 10YR is as close to UST as its been – is this a sovereign credit trade developing as our #EuropeSlowing Macro Theme plays out? Eurozone #deflation of -2.1% PPI this morning.

 

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

Asset Allocation

CASH 65% US EQUITIES 0%
INTL EQUITIES 0% COMMODITIES 3%
FIXED INCOME 32% INTL CURRENCIES 0%

Top Long Ideas

Company Ticker Sector Duration
MCD

We recently tried out the "Create Your Taste" experience at the newly remodeled McDonald’s location in Midtown East on the corner of 58th street and 3rd Ave. Walking into the newly remodeled MCD, we were greeted by the brand new self-order kiosks with attentive staff there to assist you. Customers were very interested in using the kiosks, and everyone using them seemed to be having an easy time with it.

 

For it being only two weeks into the process we were very impressed by the efficiency and mastery the staff is already displaying. We plan to head back to the same McDonalds location and check on their progress.

 

PENN

Our Gaming, Lodging & Leisure team is going to furnish a new update following their recent meeting with Penn National Gaming's management. They note that the stock has held up quite well despite increased market volatility. The bullish thesis on shares of PENN remains intact. Regional revenues remain strong in addition to the 2-year growth story, etc. Stay tuned.

 

TLT

As we outlined through various channels, we expect that high levels of volatility are here to stay for the foreseeable future. The biggest shift last week that we’ll call out is a bullish to more neutral intermediate-term view on the U.S. dollar which is why we added GLD to investing ideas in replace of UUP. To be clear, if growth continues to slow we want to be long of bonds (that view hasn’t changed in a year and a half).

 

From an asset allocation perspective here is the set-up:

  • Growth slowing: Long bonds and low-beta yield chasing sectors (TLT, EDV, XLU)
  • Shift to more dovish policy: long of GOLD as the shift weakens the value of the USD

We re-iterate the same view we’ve had since the beginning of 2014: Growth is slowing, and deflation remains a real risk (central bankers can’t solve this by talking down the currency). The fed will continue to push out the dots on “policy normalization.”

Three for the Road

TWEET OF THE DAY

VIDEO (3mins): I Am Unnerved https://www.youtube.com/watch?v=fhezt8uqpjw&feature=youtu.be  via @YouTube

@KeithMcCullough

QUOTE OF THE DAY

The best way to have a good idea is to have a lot of ideas.

Dr. Linus Pauling

STAT OF THE DAY

Total retail sales are 15% higher than they were in mid 2008, yet furniture store sales are 10% below their mid 2006 peak.


The Macro Show Replay | September 2, 2015

 


September 2, 2015

September 2, 2015 - Slide1

 

BULLISH TRENDS

September 2, 2015 - Slide2

September 2, 2015 - Slide3

 

 

BEARISH TRENDS

September 2, 2015 - Slide4

September 2, 2015 - Slide5

September 2, 2015 - Slide6

September 2, 2015 - Slide7

September 2, 2015 - Slide8

September 2, 2015 - Slide9

September 2, 2015 - Slide10


Early Look

daily macro intelligence

Relied upon by big institutional and individual investors across the world, this granular morning newsletter distills the latest and most vital market developments and insures that you are always in the know.

MCD | ALL DAY BREAKFAST IS OFFICIALLY LAUNCHING ON 10/6

McDonald’s (MCD) is on the Hedgeye Restaurants Best Ideas list as a LONG.

 

The franchisees voted YES on the proposal last week to launch All Day Breakfast nationwide at all 14,318 U.S. locations. The vote confirmed on Tuesday, September 1st by the franchisee leadership council. This is a very important and monumental move by CEO Steve Easterbrook, and will define his legacy as the CEO that changed McDonald's and the rest of the industry for many years to come.

 

With this move we are also moving JACK and WEN from the bench to the Best Idea SHORT list.  In 2016, if MCD (with all day breakfast and an improved value message) can drive same-store sales up by 5%, the system will generate $1.9bn in incremental system-wide sales.  Needless to say, a healthy McDonald’s will make life difficult for a number of others in the QSR space.

 

As noted in our survey we released on July 27th it is evident that All Day Breakfast (ADB) will be a game changer for MCD. Breakfast is the single most requested item by McDonald’s customers, and listening to the customer is a tried and true way to succeed.

 

MCD | ALL DAY BREAKFAST IS OFFICIALLY LAUNCHING ON 10/6 - CHART ADB

 

MENU

Menu changes are coming as part of this initiative. MCD will have to remove some items from the previous menu to make way for ADB. They have already announced the removal of certain sandwiches and snack wraps and the simplification of the drive thru menu, but expect more to come on a region by region basis.  The company has said that they will be offering at minimum the Egg McMuffin, Bacon, Egg & Cheese Biscuit, Sausage Burrito, Hotcakes, Hash Browns and Fruit ‘N Yogurt Parfait.

 

KITCHEN CHANGES

As part of this move, operators will need to purchase separate grills and toasters. The grills will sit on rolling carts which will carry utensils used just for eggs to ensure the raw eggs do not contact any other food. The required investment will range from $500 to $5,000 per restaurant, depending on what equipment franchisees already have.  We would not be surprised to hear that corporate is helping to support the franchisees making this investment. 

 

TURNAROUND OUTLOOK

All Day Breakfast has the potential to be the “silver bullet” MCD will need to drive same-stores sales higher in 2016 and beyond.  This will undoubtedly drive incremental traffic, probably even from people that don’t normally go to McDonald’s. The momentum that they gain from this must be harnessed to turnaround customer perception. This is their time to shine and we are confident the system is ready to show off its bountiful improvements to bring back their lost customers and continue to serve their loyal ones.  ADB is coming sooner than we had thought, and we look forward to the November 10th analyst day in which we will assuredly be getting an early read on All Day Breakfast performance.

 

MCD | ALL DAY BREAKFAST IS OFFICIALLY LAUNCHING ON 10/6 - BEst IDeas list

 

Please call or e-mail with any questions.

 

Howard Penney

Managing Director

 

Shayne Laidlaw

Analyst

 


Cartoon of the Day: Bull Bomb

Cartoon of the Day: Bull Bomb - Bull bomb cartoon 09.01.2015

"[This] appears to be the most ominous setup in my macro model since 2008…As I look at what I call the downside of the “probable range” in Global Equity markets this morning, for the first time in my career I don’t think I want to be right. That’s a tough thing for me to write because the goal of the game is to be right. We’ve spent the last 7-8 years trying to evolve the Global Macro risk management process to the point where many aren’t unprepared for this. Unfortunately, many are.”  

- Hedgeye CEO Keith McCullough in the Early Look on 8/28/15


Is the U.S. Knocking On Recession's Door?

 

In this special excerpt from The Macro Show this morning, Hedgeye CEO Keith McCullough and Senior Macro Analyst Darius Dale respond to a subscriber's question on whether the U.S. is inching closer to recession.

 

Subscribe to The Macro Show today for access to this and all other episodes. 

 

Subscribe to Hedgeye on YouTube for all of our free video content.

 


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