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October 6, 2015

October 6, 2015 - Slide1

 

BULLISH TRENDS

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BEARISH TRENDS

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Call Invite | Q4 2015 Macro Themes Conference Call (10/8/15 at 1:00PM ET)

 

We will be hosting our highly-anticipated Quarterly Macro Themes conference call on Thursday, October 8th at 1:00PM ET. 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.

 

Q4 2015 MACRO THEMES OVERVIEW:

  • #SuperLateCycle (USA): Slowing growth typifies the twilight of an economic expansion and negative 2nd derivative trends are creeping in across much of the domestic fundamental data. From labor and manufacturing markets to consumer and business confidence, leading indicators are beginning to roll as the late-cycle moves past peak. We'll detail why Slower-And-Lower-For-Longer remains the call. 
  • #GlobalSlowing: With the Street, IMF, World Bank and OECD all still forecasting global growth of around 3% for 2015, we find it appropriate to reiterate our call for global growth to come in at or below half that rate. Moreover, while China's August CNY devaluation effectively made our #EmergingOutflows theme a consensus bearish cog in the global economic outlook, we do not think investors are appropriately positioned for a likely trend of negative revisions to the respective growth outlooks in the U.S., Eurozone and Japan throughout the balance of the year.
  • #Crashing: Definitive crashes have occurred across many global macro markets in recent months. Those market participants on the wrong side of growth slowing and deflation are feeling the most pain. Crashing inflation expectations are perpetuating the pain across all asset classes and sectors levered to unrealistic growth expectations (energy, industrials, materials), as well as across the high-yield bond market, commodity markets, commodity currencies. Is the U.S. equity market next in line?

 

WATCH LIVE

Watch Keith McCullough walk through this presentation live Thursday at 1:00PM ET.

 

CALL DETAILS

  • Toll Free:
  • Toll:
  • Confirmation Number: 13621323
  • Materials: CLICK HERE

 

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

 


Cartoon of the Day: Help!

Cartoon of the Day: Help! - jobs cartoon 10.05.2015

Excerpt from today's Early Look by Hedgeye CEO Keith McCullough:

 

"...While I’m sure the Old Wall storytelling will be epic this morning on “why the jobs number wasn’t that bad” … and “stocks closed up on the day… the bottom is in…”, blah blah blah… allow me to re-interrupt with economic cycle-realityThe jobs number sucked… and labor data will continue to suck into year-end."

 


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It's Been a Tough Year In Bentonville | $WMT

Editor's Note: This an abridged excerpt from a research note written recently by our Retail team led by Sector Head Brian McGough. If you're an institutional investor and are interested in accessing our Retail research (or any of our other sector coverage areas) please email sales@hedgeye.com.

*  *  *  *  *

2015 has been less than a banner year for Walmart.

 

For starters, the stock is down 24% YTD as the company took one on the chin as it invested in both its people and e-comm capabilities. The new minimum wage standard at $9.00 alone will cost the company $0.24 (up from the original guidance of $0.20) add on top of investments in e-comm and Fx pressure and we get to an earnings growth rate for the year of -10% at the mid-point of the guide.

 

It's Been a Tough Year In Bentonville | $WMT - z wamo

 

 

We've seen Walmart try to offset these costs over the past year by renegotiating terms with its vendors (not once, but twice), cutting some 24-hour locations, and reducing employee hours.

 

Now it's going after its headcount at HQ.

 

This 2.5% headcount reduction is just a drop in the bucket compared to the 13% cut Target (TGT) announced earlier this year. But, its pretty obvious that Walmart is scratching and clawing for every bps of margin.

 

That's bad news for the rest of retail.


Do You Suffer From H.P.A.D.? (Hedgie Performance Anxiety Disorder)

In this brief excerpt from The Macro Show earlier this morning, Hedgeye CEO Keith McCullough offers a lighthearted take on a curious mental affliction investors are currently battling. 

 

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.


Monday Mashup

Monday Mashup - CHART 1

 

RECENT NOTES

9/30/15 CMG | LONG IN THE TOOTH?

9/28/15 SBUX | THE APP IS WORKING | HOW BIG IS BIG?

9/21/15 DFRG | WORKING THRU THE STAGES OF GRIEF | GOING LONG

9/16/15 SHORT SMALL-CAP BURGER CHAINS | QUICK SERVICE CAN’T AFFORD $15 MINIMUM WAGE

 

RECENT NEWS FLOW

Friday, October 2

DIN | Increased quarterly dividend by 5% to $0.92 per share of common stock. Additionally, they raised the share repurchase authorization to $150mm from the currently remaining authorization of $63mm (ARTICLE HERE)

 

Thursday, October 1

TAST | Announced the acquisition of five Burger King restaurants in Ohio and West Virginia (ARTICLE HERE)

JMBA | CEO and Chairman James White announced his retirement (ARTICLE HERE)

 

Wednesday, September 30

DFRG | Announced the opening of the Hoboken Grille, this is the 21st Grille location for DFRG across the country (ARTICLE HERE)

 

Tuesday, September 29

PLAY | Announced proposed secondary offering of common stock, selling stockholders will receive all proceeds from the sale of these shares (ARTICLE HERE)

 

Monday, September 28

ZOES | Named Sunil M. Doshi their new CFO, he previously served as CFO of Fossil Americas, a $1.8bn division of Fossil Group (ARTICLE HERE)

CMG | Carnitas has returned to 90% of Chipotle restaurants, the company expects to have carnitas back in all restaurants by the end of November (ARTICLE HERE)

QSR | Announced the proposed acquisition of Quick Group, a fast food burger chain in France (ARTICLE HERE)

 

SECTOR PERFORMANCE

Casual Dining and Quick Service stocks that we follow widely underperformed the XLY last week. The XLY was up +1.6%, top performers on a relative basis from casual dining were CHUY and CBRL posting an increase of +5.6% and +0.4%, respectively, while ZOES and YUM led the quick service group this week up +6.2% and +2.2%, respectively.

Monday Mashup - CHART 2

Monday Mashup - CHART 3

 

XLY VERSUS THE MARKET

The XLY has fared better than most other sectors in the YTD time period and as of late especially. In the last five trading days the SPX was up +1.0% and the XLY was up +1.6%, outperformed by XLV (Healthcare), XLE (Energy), and XLB (Materials).

Monday Mashup - CHART 4

 

QUANTITATIVE SETUP

From a quantitative perspective, the XLY looks bearish from a TRADE and TREND perspective, TRADE support is 72.14.

Monday Mashup - CHART 5

 

CASUAL DINING RESTAURANTS

Monday Mashup - CHART 6

Monday Mashup - CHART 7

Monday Mashup - CHART 8

 

QUICK SERVICE RESTAURANTS

Monday Mashup - CHART 9

Monday Mashup - CHART 10

Monday Mashup - CHART 11

 

Keith’s Three Morning Bullets


Bad Jobs à Dollar Down, Rates Down à Energy/Basic Materials Crash/Squeeze (so much for the rate hike):

 

  1. US DOLLAR – down USD on Friday as rate of change in NFP hit another YTD #slowing low = EUR/USD up another +0.6% this am testing $1.13 and the headline chase for everything “reflation” (from Glencore to Crude and Russian stocks) is on!
  2. UST 2YR – after 7 consecutive failed “breakouts” > 0.75% in the 2yr, it got hammered -11bps last week and is down at 0.57% this morning (10yr = 1.99%) as Bond Bear hopes of a rate hike get blasted into 2016; rates were oversold Friday on the lows
  3. STOCKS – but, but – “stocks are up” – sure, off those early Friday morning lows where both the Russell and SPX tested YTD lows, and led largely by Basic Materials (XLB) reflation of +2.9% while Financials (XLF) were down w/ rates -0.5% on the wk

 

SPX immediate-term risk range = 1; UST 10yr Yield 1.94-2.09% (both Bond Yields and SPX signaling lower-highs)

 

Please call or e-mail with any questions.

 

Howard Penney

Managing Director

 

Shayne Laidlaw

Analyst

 


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