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The Macro Show Replay | November 17, 2015

 

 


CMG FLASH CALL INVITE | NEW BEST IDEA SHORT

new best SHORT idea: Chipotle (CMG)

watch THE REPLAY below

 

 

When we added CMG to the short list on 9/30/15, one of our primary concerns was focused on potential issues surrounding the supply chain and increased growth pressures coming from more expensive real estate and associated costs. The walls seem to be caving in on CMG, and on the call we will take you through what we see as the biggest issues.

 

We will be discussing three main points:

  1. Chipotle’s Whole Foods moment
  2. Growing pains / supply chain issues
  3. Valuation

CALL DETAILS

Toll Free:

Toll:

Confirmation Number: 13625259

Materials: To be released before the call

 

Please call or e-mail with any questions.

 

Howard Penney

Managing Director

 

Shayne Laidlaw

Analyst

 

 

 


Cartoon of the Day: Paris

Cartoon of the Day: Paris - paris

 

"I’m on the Acela train to Boston this morning and, admittedly, having a hard time thinking about macro markets as the sun rises on the East Coast of Liberty’s Colossus.

 

The New Colossus is commonly known as the Statue of Liberty poem. It’s a sonnet that was written by Emma Lazarus in 1883.  Interestingly, the poem wasn’t placed on the pedestal of the statue until 1903. History often takes time to find her truths.

 

En francais, on appelle le statue La Liberte Eclairant Le Monde. And whether your mother’s tongue is French like mine’s is this morning or not… no matter what your politics, we should all stand together to defend all that is truth, liberty, and justice in this world this morning..." -Hedgeye CEO Keith McCullough in today's Early Look


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 80.33%
  • SHORT SIGNALS 78.51%

SPECIAL EXCERPT: Digging Into The Gold Mining Disconnect | $GLD

 

 In this brief excerpt from last week's Materials sector launch call, Hedgeye analyst Jay Van Sciver responds to a subscriber's question about the disconnect between gold miner company production guidance and industry forecasts.  Email sales@hedgeye.com for more information on how you can subscribe to our new research sector.  


Déjà Vu In Japan: Has The Sun Set on Abenomics?

Takeaway: Japan just slipped into its fourth recession in five years. Abenomics is failing.

Déjà Vu In Japan: Has The Sun Set on Abenomics? - japan rising setting

 

The Bank of Japan has been purchasing 90 trillion yen worth of government bonds annually, which began in early 2013, in an effort stimulate economic growth. It's part of Abenomics, the concerted effort put forth by Prime Minister Shinzo Abe to pull Japan out of it's decades long slump.

 

It is failing. 

 

This is something we've been concerned about for a while now. Take a look below at a brief excerpt from our 73-page Q3 Macro Themes presentation released in early October:

 

"... 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." 

 

We could pull up any number of recent headlines that suggest as much about global growth, but the latest news out of Japan is more than just an intimation. It's a direct confirmation of our #GameOfSlowing macro theme. 

 

Déjà Vu In Japan: Has The Sun Set on Abenomics? - Japan game of slowing

 

Here's Reuters:

 

"Japan slipped into its fourth technical recession in five years between July and September - spotlighting how the government's "Abenomics" policies have struggled to drag the economy out of chronic stagnation.

 

Official data on Monday showed the world's third-largest economy shrank an annual 0.8 percent in July-September after a 0.7 percent contraction in the prior quarter, putting it firmly into recession - two consecutive quarters of declines."

 

Interestingly, Japan's Economics Minister Akira Amari blamed the recent contraction on an overhang in inventories and (wouldn't you know it) sounded a positive tone on the country's recent jobs and income data.

 

This should sound familiar. 

 

New York Fed president Bill Dudley talked up the same playbook last Thursday:

  • "... the fundamentals supporting domestic demand look quite sturdy.  For example, consumer spending has been well-supported by real income gains and rising household net worth."
  • "It is also important that the forward momentum in the jobs market persists."
  • "A large decline in the pace of inventory accumulation was the main reason why real GDP growth faltered in the third quarter."

The parallels would be comical were it not so troubling. As Hedgeye CEO Keith McCullough continues to write, "The Fed’s ‘forecast’ is wrong 70% of the time. They are the new market risk.” 

 

So too is Abenomics.

 

Déjà Vu In Japan: Has The Sun Set on Abenomics? - japan abe

 

But we digress...

 

The Nikkei index was down over 1% on the news that the economy had slid into recession. We'll have to wait and see how this changes the monetary calculus of the Bank of Japan at their rate review next week. 

 

The recent news is a confirmation of our initial take on Abenomics. So we'll reiterate:

 

Déjà Vu In Japan: Has The Sun Set on Abenomics? - abenomics


Evidence of #ConsumerSlowing Grows... Will the Fed Ignore and Hike Anyway?

Takeaway: The outlook for retailers and the manufacturing sector isn’t getting any brighter.

The consumer spending slowdown strikes again.

 

Evidence of #ConsumerSlowing Grows... Will the Fed Ignore and Hike Anyway? - consumer spent

 

Department store chain Dillard’s (DDS) opened down almost 8% after reporting declining profits and lower than expected sales. Peers like Macy’s (M), Nordstrom (JWN), and Kohl’s (KSS) have all seen their stocks clobbered of late, as shoppers were loath to open their purse strings. The stocks have lost between 6% and 24% in the past week after Friday’s retail sales data came in significantly lower than expectations.

 

Evidence of #ConsumerSlowing Grows... Will the Fed Ignore and Hike Anyway? - retailers

 

The outlook isn’t getting any brighter either. Retail inventories continue to build, which may force companies to take heavy-handed discounts into the holiday season. The latest data from the Census Bureau puts the inventory to sales ratio at U.S. retailers at 1.38, the highest reading for that month since 2001.

 

(Editor's Note: In July, our Macro team called the #ConsumerSlowing theme, while Retail analyst Brian McGough recently reiterated short calls on both Kohl's and Tiffany's (TIF). For more information, ping sales@hedgeye.com.)   

 

Here’s an excerpt from today’s Early Look written by Hedgeye CEO Keith McCullough: 

 

Since US Retailers like Macy’s (M), Nordstrom’s (JWN), and Kohl’s (KSS) had been crashing coming into this #LateCycle consumption data slowing, it was quite bearish to see both those stocks and the US Retail (XRT) sector hit new lows on the “news.”

 

Evidence of #ConsumerSlowing Grows... Will the Fed Ignore and Hike Anyway? - dillards down

 

Yet more evidence of the slowdown? Take a look at the U.S. shipping industry. During September and October, imports to key U.S. seaports in New York, L.A. and Long Beach, California — which cumulatively handle 54% of container volumes — fell for the first time in a decade.

 

For the record, the fall months are usually peak season for the shipping industry. But surprise! The Wall Street Journal reports that retail inventories were a chief concern for the recent shipping weakness.

 

Evidence of #ConsumerSlowing Grows... Will the Fed Ignore and Hike Anyway? - seaports

 

To be sure, U.S. manufacturers aren’t exactly signaling strength either. Today’s Empire State Manufacturing index, which the New York Federal Reserve uses to track the state’s business activity, contracted yet again and missed already dour expectations.

 

The reading came in at -10.74 with business conditions worsening for the fourth straight month, while the six month outlook was flat and zero sign of any labor market improvement.

 

Question: Does any of this change consensus' certainty of a December rate hike?

 

It should. 

 

Look no further than New York Fed head Bill Dudley. He has been sounding increasingly cautious of late. This, after sounding much more optimistic and calling December a “live possibility” at the beginning of the month.

 

Evidence of #ConsumerSlowing Grows... Will the Fed Ignore and Hike Anyway? - dudley 22


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