A Chipotle Brand Survey Update (via CivicScience) | $CMG

Editor's Note: Below is a complimentary institutional research note written by Hedgeye Restaurants analysts Howard Penney and Shayne Laidlaw. In it, they discuss the findings of a recent CivicScience brand survey regarding Chipotle Mexican Grill (CMG) and what it tells investors about the damage to the brand following the E. coli outbreak earlier this year. To read our Restaurant team's research ping


A Chipotle Brand Survey Update (via CivicScience) | $CMG - chipotle 2


Prior to the start of the earnings season we highlighted proprietary CivicScience brand survey data on two of our favorite names, LONG Panera and SHORT Chipotle


Looking at the previous notes on PNRA and CMG, the CivicScience brand survey data pointed to improving trends at Panera, supporting our LONG position and called for continued troubles at Chipotle, supporting our SHORT case.  As both companies reported earnings, the PNRA trends remain positive and Chipotle remained negative.  At this point, we intend to publish on more company’s making further use of the CivicScience data set.  We felt, at this point it is important for everyone to understand who or what CivicScience is.


Quite simply, CivicScience is a survey company.  Their technology, which traces its roots to Carnegie Mellon University, allows them to ask anything they want, to anyone they want, in huge numbers, extremely fast.  This context is important because we can use the platform for quick-turn-around questions (to test an investment hypothesis we may have) and will typically see results in a few hours – with history and context.


Here’s how CivicScience’s process works: Through partnerships with hundreds of media companies, they embed questions inside the kinds of fun polls and quizzes you see on websites and social networks everywhere you look. CivicScience has cataloged nearly a billion responses since 2011 on thousands of topics. They’ve tracked the popularity of hundreds of brands, media consumption, technology usage, shopping behavior, and most of the key consumer trends affecting the markets. They mine all of that data, constantly, for patterns and correlations.  Importantly, due to the scale and diversity of their data sources and the fact that they are reaching real consumers, their results are scientifically-valid and appear very reliable.


At Hedgeye, we are now taking that data and correlating it with management commentary and brand performance to see where we can isolate discrepancies in market perception and stock prices.  While we don’t take advantage of it, the company even provides data feeds, via API, for some quant funds.    


To that end we are publishing the latest Chipotle brand survey, which asks consumers: How much do you like to eat at Chipotle?  The results are showing minor improvements in the trends, but not enough for us to change our short thesis. Our previous survey included the early days of 2Q16 (1,197 responses), now, as we are moving further into 2Q16 we have received 3,051 responses and are getting a better picture of the true sentiment for the brand.

  1. The “I don’t like it” crowd is up 700bps from 18% in 4Q15 to 25% in 2Q16, declining slightly sequentially from 1Q16.
  2. The “I like it” is still down roughly 100bps from 4Q15 to 17% of responses, seeing a sequentially recovery from 1Q16. Importantly this answer has significantly decreased from our initial note which showed people that said “I like it” rose aggressively to 21%.
  3. “I love it” responses were sequentially flat from 1Q16 to 2Q16, which was better than our early read which indicated a deceleration in people saying “I love it”.
  4. The “I don’t have a strong opinion” is down 700bps from 4Q15 to current levels as consumers have become more opinionated on the brand.


A Chipotle Brand Survey Update (via CivicScience) | $CMG - chipotle survey


Although the survey is showing sequential improvement in consumer opinions towards the brand, the steep rise in people saying “I don’t like it” cannot be over looked. As we continue to work through 2Q16, we will update you monthly on how the trends are evolving.

Trump's Victory Lap ... Sour Grapes From Cruz ... & Hillary's Heat-Bern

Below is a brief excerpt from Hedgeye Potomac Chief Political Strategist JT Taylor's Morning Bullets sent to institutional clients each morning. For more information on how you can access our institutional research please email



Trump's Victory Lap ... Sour Grapes From Cruz ... & Hillary's Heat-Bern - trump deal with it


The easy part may be over for the presumptive Republican nominee, and there is no looking back. Donald Trump's double-digit victory in IN has him waving the checkered flags, and now he is faced with uniting the warring factions of the Republican Party heading into the convention and throughout the long slog to November.


Trump needs about 40%  of the remaining delegates facing opposition only from John Kasich in the next four weeks, but his true task will be how he can repair his image and appeal to the focal point of every election - undecided and independent voters - not to mention skeptical Republicans. Despite a setback last night, Hillary Clinton is already vying to get out ahead of him campaigning yesterday in the battleground state of OH - even though the primary was back in March.



Trump's Victory Lap ... Sour Grapes From Cruz ... & Hillary's Heat-Bern - cruz trump


Ted Cruz brought everything and the kitchen sink to IN as final acts of desperation needed to derail Trump (his alliance with John Kasich, Carly Fiorina, and Gov. Pence's backing), but they were no match for Trump's all-star squad of endorsements and momentum coming from his Northeastern firewall.


Cruz's campaign had been in panic mode for weeks trying to convince supporters and donors that he was the only person who could stop Trump; the writing was on the wall once IN polls showed Cruz's 20-point lead vanishing in weeks - not to mention polls showing Trump ahead by 30+ points in the Golden State.  Cruz is headed back to the cartel Capitol and will resume his position as a Tea Party agitator setting his sights on other conservative battles with a future eye on 1600 Pennsylvania Avenue.



Trump's Victory Lap ... Sour Grapes From Cruz ... & Hillary's Heat-Bern - sanders 22


Bernie Sanders' victory in IN does not change the delegate math, but it definitely changes the narrative - which is sure to cause Clinton, well, heartburn until the last primary in June. As newfound momentum and the media continue to pump Sanders with fuel, we're waiting to see how Sanders deals with Clinton (and vice versa) as a prolonged and ugly fight for the next month proposes a sizeable risk of hurting her chances this fall now that Trump will devote all of his attention and resources to the general election.  


While Clinton's focus has squarely been on Trump for the past few weeks, she is keenly aware that the primary map ahead now favors Sanders  - WVA, NE, OR and KY - and has to find a way to counteract his growing leverage and keep him in the fold.  Her path the nomination is all but assured and her team has been prepping for a general election run for years (but not against Donald Trump) as one of her biggest assets is her fundraising operation which becomes even more formidable if Sanders cedes his people to her for the general.  

McCullough: Why Our GDP Forecasts Are So Accurate


In this special excerpt from The Macro Show this morning, Hedgeye CEO Keith McCullough takes subscribers “behind the curtain” on our quantitative forecasting model and how we interpret and debate evolving economic data.

Early Look

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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.

5 CHARTS: Fed Forecasters Flat-Out Wrong

5 CHARTS: Fed Forecasters Flat-Out Wrong - fed forecast crystal ball


What do you call an economic forecasting outfit which continually calculates future economic growth and misses time and time again?






...Certainly not "credible."


Whichever derivative of "inaccurate" you choose to use, they all apply to the Federal Reserve's economic modeling. Incidentally, it's funny that Fed prognosticators came out so strongly in favor of future rate hikes yesterday when they seemingly have no clue whatsoever about the direction of the U.S. economy.


5 CHARTS: Fed Forecasters Flat-Out Wrong - Fed grasping cartoon 01.14.2015


Here are a few of the more shocking recent Fed governor comments that we simply couldn't ignore:


  1. “A rate hike could be appropriate, if the data is as expected.” –John Williams (San Francisco Fed Head, yesterday)
  2. The economy is offering mixed signals, but favors unemployment data.” –Dennis Lockhart (Atlanta Fed, yesterday) 


As Hedgeye CEO Keith McCullough pointed out in today's Early Look:


"Recently reported GDP of 0.5% isn’t in the area code of 'as expected.' I don’t think Williams has a lot of credibility as a Wall St. forecaster."


Meanwhile, Lockhart's Atlanta Fed updates its much-watched GDPNow estimate throughout the week. The measure seeks to project what recent data points mean for economic growth.


However, in the chart below, we show just how wrong that model has been over its lifespan (a.k.a. it has an intra-quarter standard error of 200-250 basis points!). Note: Our own GDP predictive tracking algorhythm has actually been, on average, within 20-30 basis points of getting the US GDP number right for the last 5 quarters (the historical standard error in our model is 35 basis points).


5 CHARTS: Fed Forecasters Flat-Out Wrong - atlanta fed post


That's why we're deeply skeptical of the most recent GDPNow reading of 1.8% for Q2 2016. (Note: Applying the aforementioned standard error means Q2 GDP could be between -0.7% and 4.3%!)


Outside the Atlanta Fed's challenged algorhythm, Hedgeye Senior Macro analyst Darius Dale has peeled back the onion on the Fed's official GDP projections. Unsurprisingly, these unelected bureaucrats are both incorrect and serial over-optimists:


5 CHARTS: Fed Forecasters Flat-Out Wrong - fed overoptimism


Similarly, back in October, we highlighted the absurdity of the Fed's forecasting in our 73-page Q4 Macro themes deck. Back then, the Fed was predicting the "longest economic expansion ever."


5 CHARTS: Fed Forecasters Flat-Out Wrong - CoD Fed Optimism


Now, You might be wondering...


Can't the Fed simply turn dovish like last week's "no April rate hike" soothsaying?


No. Investors betting on the direction of rates had pushed the next hike into December of 2017.


5 CHARTS: Fed Forecasters Flat-Out Wrong - Chart of the Day 4 20 normal


So what happens when the Fed admits they are wrong about growth (and Hedgeye's economic predictions prove correct)?


Frankly, it will be too late for the Fed to save the day.


Here's the selloff that occured during the last two downturns.


5 CHARTS: Fed Forecasters Flat-Out Wrong - fed post drawdown


As we continually reiterate, the biggest risk to macro markets is believing in the Fed's serially overoptimistic economic projections.

The Daily Macro Market Data Dump: Wednesday

Takeaway: A closer look at global macro market developments.

Editor's Note: Below are complimentary charts highlighting global equity market developments, S&P 500 sector performance, volume on U.S. stock exchanges as well as rates and bond spreads. It's on the house. For more information on how Hedgeye can help you better understand the markets and economy (and stay ahead of consensus) check out our array of investing products


Click to enlarge


The Daily Macro Market Data Dump: Wednesday - world equity markets 5 4


The Daily Macro Market Data Dump: Wednesday - s p sector 5 4


The Daily Macro Market Data Dump: Wednesday - volume 5 4


The Daily Macro Market Data Dump: Wednesday - hedgeye rates   spreads

A Precarious Global Growth Setup

Takeaway: U.S. GDP sliding toward zero, Europe struggling with deflation, Japan still flailing as China releases phony (but declining) growth numbers.

 A Precarious Global Growth Setup - stop sign


in case you missed it, We'll say it again ... Global growth IS slowing


The evidence is obvious to even casual observers by now. U.S. GDP continues its slow slide toward zero, Europe is struggling to beat back deflation, Japan is desperately flailing just to stay afloat, while the Chinese politburo releases phony, albeit still declining, growth numbers.


As a result... surprise > global equity markets are getting hammered.


Below is equity market analysis via Hedgeye CEO Keith McCullough in a note sent to subscribers this morning:


"Buckle in Europe and Japan, that is… most European stock markets signaling immediate-term oversold but Euro not obeying overlord Draghi up at $1.149 this am; European Equities remain in crash mode from last year’s Global Equity Bubble highs; Spain now -26.3%  since this time last year w/ an election (for socialism) pending June 26."



Heading over to China... 


A spate of new reports shines light on the complicated situation evolving in everyone's favorite Communist country.



In related news, the China Securities Journal noted this morning, "Bad loan ratios rising at majority of Chinese banks in Q1." Meanwhile, Reuters noted the obvious, "Investors to remain wary of China for now."


Here's how all of this manifested in Chinese equities today. Spoiler Alert: It's not good.



it raises serious alarm bells For growth.


It also partly explains why Dr. Copper is down yet again this morning despite the recent reflation rally. (Incidentally, we've been warnings subscribers about global #GrowthSlowing for about a year and a half now.)



The slowdown in China is also handicapping the Australian economy, hence the Reserve Bank of Australia’s decision to cut interest rates to a record low 1.75%.




(Yes, we're highly skeptical the Aussie central bank's efforts will yield fruit.)



A final rhetorical question... 


When global growth slows, what do you own?


That's simple... Long Bonds (TLT)


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