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Cartoon of the Day: Yellen & Screamin'

Cartoon of the Day: Yellen & Screamin' - Hawk dove cartoon 06.06.2016

 

The mercurial Fed has pivoted from Hawkish (in December) to Dovish (March/April) to Hawkish (May). With today's speech, market consensus now perceives Yellen & Co. as flipping back to Dovish here in June. Clearly, the Fed is perpetuating a massive amount of volatility in macro markets.


Capital Brief: Clinton's Conundrum ... & Will The GOP Trust Trump?

Takeaway: Clinton's Conundrum, Trusting Trump?, Procrastination Nation

Capital Brief: Clinton's Conundrum ... & Will The GOP Trust Trump? - capital brief

 

Editor's Note: Below is a brief excerpt from Hedgeye Potomac Chief Political Strategist JT Taylor's Capital Brief sent to institutional clients each morning. For more information on how you can access our institutional research please email sales@hedgeye.com.

CLINTON'S CONUNDRUM

Capital Brief: Clinton's Conundrum ... & Will The GOP Trust Trump? - hillary another

 

Hillary Clinton needs less than 30 delegates to secure the nomination – a sure bet after looking to amass a large chunk of delegates in tomorrow’s primaries in NJ, CA, MT, NJ, NM, ND, and SD. All in, CA remains the biggest prize as Clinton and Bernie Sanders remain neck and neck.

 

If she’s able to edge it out, she’ll hand Sanders a lethal blow – but then what’s in it for Sanders? Sure – he’s corralled and electrified the masses, but his future steps are immensely important. Clinton’s lead in the general election polls over Donald Trump remains slim and when Sanders decides to hang it up – expect Clinton’s numbers to climb – but she’ll need his help getting there.

TRUSTING TRUMP?

Capital Brief: Clinton's Conundrum ... & Will The GOP Trust Trump? - trump pic

 

The Donald Trump trust factor may be the biggest issue facing the Republican party this year and though many Republican leaders have taken their seats aboard the Trump train they know there will be many opportunities for a derailment or two.

 

Senior Republicans are calling Trump’s recent criticism of a Hispanic judge the last straw after promising to make an effort to “lighten” his choice of words when speaking of minorities as Goldwater flashbacks keep them up at nights. If Republicans believe they have a fighting chance this November,  they’ll need to mitigate their trust in Trump to do the right thing – and fast.

PROCRASTINATION NATION

With summer recess nearing and an unfinished budget still looming, Congress returns this week to a full plate. Zika funding has been sitting before Congress for more than three months – House and Senate bills are yet to combine due to political reasons. Puerto Rico is still sinking but sees a glimmer of hope as legislation will hit the Rules Committee later this week, followed by a vote in the House later in the week. With this hanging over Congress’ head, remember – it’s also Appropriations season and we’ve only got five weeks until Congress skips town for a loonnnngg summer recess.


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.


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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. 

Watch THE REPLAY BELOW

 

KEY POINTS

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. 

 

CALL DETAILS

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


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!

 

KM


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