CHART OF THE DAY | Consumer Confidence: Elevator Up, Then ... Crash

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye CEO Keith McCullough. Click here to learn more.


"... While most Americans don’t own stock market funds and Fed fueled “reflation” indexes anymore (yeah, the 2000 and 2008 cycle peaks did leave some crazy people cautious), a lot of Americans own single stocks like AAPL, NFLX, and GOOGL.


That’s why I think it’s going to be a lot harder to stop Consumer Confidence from doing what it always does after the economic, profit, and stock/credit market cycle peaks. See Chart of The Day – it takes the elevator up during the cycle, then it crashes."


CHART OF THE DAY | Consumer Confidence: Elevator Up, Then ... Crash - CoD Confidence

Cartoon of the Day: The Elephant In The Room

Cartoon of the Day: The Elephant In The Room - GDP cartoon 04.26.2016


We think U.S. GDP will come in significantly worse than even downwardly-revised macro consensus or the Fed is currently forecasting.

Washington On Wall Street: Handicapping the ‘Acela Primary’


Potomac Research Group Chief Political Strategist JT Taylor joins Hedgeye Director of Research Daryl Jones to discuss today’s so-called "Acela primary" bringing voters to the polls in Pennsylvania, Connecticut, Rhode Island, Maryland and Delaware.

the macro show

what smart investors watch to win

Hosted by Hedgeye CEO Keith McCullough at 9:00am ET, this special online broadcast offers smart investors and traders of all stripes the sharpest insights and clearest market analysis available on Wall Street.

Can Fed Stop Recessionary Selloff?


In this animated excerpt from The Macro Show, Hedgeye’s Keith McCullough, Darius Dale and Neil Howe respond to a subscriber’s question about whether the Fed can continue propping up the stock market as economic conditions deteriorate and a recession knocks on the door.

Penney: The Better Burger Won't Save Chipotle's Investors

Takeaway: The bad news for Chipotle investors isn't going away anytime soon writes veteran analyst Howard Penney on Fortune.

Editor's Note: Beleaguered Chipotle reports earnings tonight after the market close. Bulls (and bears) will undoubtedly be focused on the pace of Chipotle's losses following last year's E. coli outbreak. But, as veteran Hedgeye Restaurants analyst Howard Penney writes in Fortune, Chipotle has committed a "fatal mistake" and "massive shareholder value will be destroyed over the next few years."


Penney: The Better Burger Won't Save Chipotle's Investors - fortune chipotle


On Tuesday, the Mexican fast-food chain is expected to report earnings for the first quarter of 2016.


Fast-food chain Chipotle Mexican Grill on Tuesday is expected to report its first quarterly loss as a public company following last year’s E. coli outbreaks that exposed the chain’s health safety issues. Wall Street analysts are estimating a GAAP earnings loss of $1.04 versus $3.88 last year. I suspect the media will focus on Chipotle’s loss and its decline in same-store sales of roughly 30% during the first three months this year. Meanwhile, anyone who is still bullish on Chipotle’s stock will likely focus on the pace of its recovery in same-store sales and the improving profitability over the next two years.


I’m bearish and think massive shareholder value will be destroyed over the next few years. Up until the E. coli outbreak, Chipotle’s management team has never managed a company crisis. They continue to believe consumer attitudes toward the brand have not changed and that customer traffic will return to pre-crisis levels within the next 12 to 24 months.


That outlook is flawed. The fatal mistake the company is making is all about capital deployment. Chipotle ended 2014 with 1,783 stores and $445 million in net income. By the end of 2018, the company’s estimates suggests that they will spend $1.3 billion to add 1,117 new stores, a 62% increase in its store base. The problem is that during the same period between 2014 to 2018, even the most bullish investors of Chipotle estimate that the chain could earn net income of $506 million or incremental net income of $61 million. So if Chipotle invests $1.3 billion in new stores and generate $61 million in incremental new income, that’s a 4.7% return on investment. That is what I call the definition of destruction of shareholder value.



Vomitous U.S. Economic Data

Takeaway: If you're buying stocks on the effervescent hope that U.S. economic data is improving ... think again.

Vomitous U.S. Economic Data - queasy

1. Durable goods down -2.5% y-o-y Today.

2. Consumer Confidence Still Off Feb. 2015 peak.


Nothing to see here. Go buy stocks...


Back to the data.


As Hedgeye Senior Macro analyst Darius Dale wrote today: "BREAKING: U.S. Durable and Capital Goods violently puke in March... What recovery?" Here's the Durable Goods table (notice all the nasty-looking red):


Click the image below to enlarge. 

Vomitous U.S. Economic Data - durable4 26 


A more simplistic (sic "obvious") #GrowthSlowing breakdown looks like this. 



Another bitter pill for bulls to swallow...


Consumer confidence continues to decline from its February 2015 peak, dropping to 94.2 in April versus 96.1 in March.



Basically, it boils down to this:


If you're buying stocks on the effervescent hope that U.S. economic data is improving, think again.

Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.