Yikes: Yellen’s Favorite Market Indicator Hits 7-Year Low


Hedgeye U.S. macro analyst Christian Drake takes a look at the “Labor Market Conditions Index” which just posted its 5th consecutive month of negative reading (worse since 2009) and what it portends for Fed policy.

Embarrassing... Fed's Lockhart Completely Changes His Tune In Just 34 Days

Takeaway: A month ago, Atlanta Fed head Dennis Lockhart said a June rate was "a real option." Now, he wants the Fed to "be patient."

Embarrassing... Fed's Lockhart Completely Changes His Tune In Just 34 Days - Fed grasping cartoon 01.14.2015


“I don’t personally see a lot of cost to being patient to the July meeting at least,” Atlanta Fed head Dennis Lockhart said today. “I think we can be watchful and see how things develop over the next few weeks.”


What a difference a month can make. 


Way, way back on May 3, 2016 (a.k.a. a month ago), Lockhart called a June rate hike "a real option."


Embarrassing... Fed's Lockhart Completely Changes His Tune In Just 34 Days - lock

Bottom Line?


These Fed head guys and gals are getting really silly.



Call Invite: ECPG & PRAA | Quicksand

Takeaway: Join us this Thursday, June 9, 2016, at 1 PM ET for a run-through of our latest analysis on ECPG and PRAA.

Over the last 18 months, we have released a number of detailed research notes on two of our best short ideas: Encore Capital Group (ECPG) and PRA Group (PRAA). We will be hosting a conference call this Thursday, June 9, 2016 at 1 PM ET to explain our latest in-depth analysis on both companies. 




Encore Capital Group

  • Recent & Significant Deterioration: The amount of collections relative to purchase price on recent vintages has fallen to all-time lows. 
  • Deteriorating Vintage-Level Operating Income: We use company data to approximate operating income at the vintage level. The results of which show the earnings power of the company is in real trouble.
  • Would the Real Earnings Power Please Stand Up: The company’s results are not nearly as good as the company is suggesting. 
  • Into the Abyss: Our analysis finds persistently declining revenue and earnings going forward, while the Street has revenue and earnings per share growing every year through 2018.

PRA Group

  • Deteriorating Recoveries: Similar to Encore, PRA's newer vintages’ cumulative collections as percentages of purchase prices are falling fast relative to older vintages.
  • Negative Top-Line Growth: PRA is already exhibiting declining top line and earnings due to deteriorating collections performance. 
  • Allowance Albatross: Contrary to managment's assertion that Allowance charges are incidental, we've found that they're material and a hallmark of the late stage collapse in earnings power for this company. 



Toll Free Number:

Conference Code: 13638888#

Watch Live: CLICK HERE

Materials: CLICK HERE (Materials will be available approximately one hour prior to the start of the call)


Joshua Steiner, CFA


Jonathan Casteleyn, CFA, CMT

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.

DNKN: Adding Dunkin' Brands to Investing Ideas (Short Side)

Takeaway: We are adding Dunkin' Brands to Investing Ideas today.

Editor's Note: Please note that our Restaurants team will send out a full report outlining our high-conviction short thesis next week. In the meantime, below is a brief summary of our thesis sent today by Hedgeye CEO Keith McCullough in Real-Time Alerts.


DNKN: Adding Dunkin' Brands to Investing Ideas (Short Side) - dunkin donuts


I'm looking for fresh ideas that are signaling immediate-term TRADE overbought within bearish intermediate-term TRENDs. Dunkin' Brands fits that profile.


Howard Penney put out a Best Ideas Black Book (Institutional Research Product) on DNKN last week (i.e. a best idea on the short side) and had the following to say about the brewing situation that must have insiders selling at Dunkin':


"Many may think that the DNKN slowing sales story has been told and it is all priced into the stock, but given the levitation in the stock price from mid-January we believe people may have forgotten too quickly. Management continues to seem disconnected from the business as they stretch the system into both value and premium offerings. All while believing that their franchisees “don’t necessarily look at it on a cash-on-cash return [basis].” It is preposterous to believe that these astute businessmen and women don’t look at their cash-on-cash return, why else would they be raising prices because of traffic deceleration? Simply put, the slowing of unit growth is still a threat because management hasn’t yet grasped the realities that their concept is facing."


Yeah, Howard - tell us what you really think!



McCullough: The Most Asymmetric US Corporate Profit Risk (Ever)


In this brief excerpt from The Macro Show this morning, Hedgeye CEO Keith McCullough reviews the “Fantasy Island” earnings risk blinding many investors and why second and third quarter earnings for most sectors will be “awful.”


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.

Call Invite: Don Kohn Previews the FOMC Meeting

Don Kohn Previews the FOMC Meeting

Thursday, June 9 at 11:00 a.m. ET


Please join us this Thursday for a call with former Fed Vice Chairman Don Kohn on the June 14-15 FOMC meeting. Don will offer his outlook on the jobs report, consumer spending, personal consumption, GDP growth, and other factors expected to influence the Fed's rate hike calculus. 


Participating Dialing Instructions

Toll Free:


UK: 0

Confirmation Number: 13638657