Capital Brief: Trump's Donor Deficiency... & What's On Bernie's Wish List

Takeaway: Sanders and Clinton Set to Sit Down; Contrasts in Circumspection; Donald's Donor Deficiency

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


Capital Brief: Trump's Donor Deficiency... & What's On Bernie's Wish List - capital brief


Hillary Clinton and Bernie Sanders are set to sit down and discuss Sander’s policy wish list, his campaign, and the upcoming convention in July. Sanders has yet to suspend his campaign and up to this point felt that the longer he holds out, the more leverage he has to push Clinton and the Democrats in his direction, but he’s getting perilously closer to overstaying his welcome.


Look for Sanders to push his mainstay ideas like wage inequality, free healthcare and free college tuition, and Wall Street reform, while Clinton looks to press for issues she hopes will end up unifying the party - like climate change, immigration, and foreign policy. With Donald Trump threatening to ban ethnic groups and cancel the Paris climate deal, look for Sanders and Clinton to rally and unite the party with their eye on the November prize being more than just the White House.


In times of turmoil, true leaders emerge and have stood to both console and rally our nation. The tragic massacre in Orlando comes as the first big test of the 2016 general election. Trump is using the situation to double down on his sentiment towards Muslims, immigration and went on to tweet an I-told-you-so statement, calling for President Obama to resign.


In contrast, Clinton canceled her first dual campaign appearance with Obama, delivering more somber remarks and outlining her goals to combat terrorism. Candidates will ultimately differentiate and further distance themselves from their opponent in their response to situations of this magnitude - expect this to prevail throughout the election.


The Trump camp may have lost more sorely-needed donors after high profile patrons made no bones about shutting their wallets at Mitt Romney’s annual conference. Donors were vocal in their concern with Trump’s lack of discipline and his demagoguery.


The summit, which brings together Romney’s extensive network of wealthy contributors, further serves as a reminder of the hurdles Trump faces in corralling the monied crowd. If he’s unable to mend the wounds, look for these dollars to go elsewhere – we hear Gary Johnson is looking for help.

Less Than Zero: German 10-Year Yields Go Negative (#GrowthSlowing Anyone?)

Takeaway: The German 10yr Bund yield went negative and hit new all-time lows at -0.0047% on global #GrowthSlowing fears.

Less Than Zero: German 10-Year Yields Go Negative (#GrowthSlowing Anyone?) - bond yields


Big news in bond markets today.


The 10yr German Bund yield went negative, hitting an all-time low, as investors flocked to sovereign bonds on global #GrowthSlowing fears. Take a look at the long-term chart of the yield on the German 10yr over the last 26 years.


A truly amazing rally.


Less Than Zero: German 10-Year Yields Go Negative (#GrowthSlowing Anyone?) - german bund long term


The graphs below show the yield curves for select sovereign bonds today (green line) versus where they were at the beginning of the year (yellow line). As you can see, there's been a massive rally in long bonds around the world. 



12/31/15: 0.627%

Today: -0.0047%


Click images to enlarge.

Less Than Zero: German 10-Year Yields Go Negative (#GrowthSlowing Anyone?) - bund 6 14



12/31/15: 0.260%

Today: -0.169%


Less Than Zero: German 10-Year Yields Go Negative (#GrowthSlowing Anyone?) - jpy 6 14



12/31/15: -0.091%

Today: -0.519%


Less Than Zero: German 10-Year Yields Go Negative (#GrowthSlowing Anyone?) - swiss 6 14


U.S. 10YR:

12/31/15: 2.270%

Today: 1.6053%


Less Than Zero: German 10-Year Yields Go Negative (#GrowthSlowing Anyone?) - ust 6 14

Stock Report: Dunkin Brands (DNKN)

Takeaway: We added DNKN to Investing Ideas on the short side on 6/06.

Stock Report: Dunkin Brands (DNKN) - dunkin table 



Slowing Top Line: 


Since peaking in 4Q12, Dunkin Brands' 2-year same-store sales trends have slowed by over 350 basis points to 1.7% in 1Q16. Adjusting for the weather benefit in 1Q16, 2-year sales trends are likely flat. The self-inflicted issues (more on that below) coupled with the increasingly competitive environment, suggest that it’s unlikely that DNKN can regain momentum anytime soon. We believe that major internal changes are needed to fix the brand beyond the ones already announced.


Slowing top line is also indicated by our proprietary Donut Tracker modelIt continues to trend downward, making DNKN’s positive performance in 1Q16 look like a one quarter phenomenon supported by price, and is not indicative of stability or strength.


Click to enlarge

Stock Report: Dunkin Brands (DNKN) - donut tracker




Overcomplicating The Menu Is Bad For Operations: 


DNKN currently faces an issue many operators have faced => menu overload. Over the last four years, the company has shifted away from its core competency and significantly increased the number of menu items. In addition, Dunkin’s barbell menu strategy (value versus premium products) is adding complexity to the menu, slowing down service times and increasing costs in the supply chain. The number of Dunkin’ menu items is up over 43% since 2010 and up 19% YoY in 2015.




Slowing Unit Growth And Uses of Cash:


The slowing sales trends poses a longer-term risk to the company => slowing unit growth. In addition, the further the brand gets from the core markets in New England, the more expensive it is to build stores. The combination of slowing sales trends and lower new unit volume increases the likelihood that the company slows unit expansion. Finally, the company’s ability to pay out significant amounts of cash to shareholders is also at risk.


Stock Report: Dunkin Brands (DNKN) - dunkin chart

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Chipotle Shares Have 35% Downside

Takeaway: Our Restaurants analyst Howard Penney remains bearish on Chipotle. He sees an additional 35% downside.

Chipotle Shares Have 35% Downside - nypost chipotle


In case you missed it, Hedgeye's Howard Penney captured the essence of the bearish case on Chipotle (CMG) in a recent New York Post article.


Since the E. coli outbreak was announced, Chipotle shareholders have taken a significant hit. The stock is down -34% since Penney added it as a Best Idea Short on 11/16/15 ... and over -18% year-to-date.


Here's Penney's update from the NY Post story (with data provided via our survey partner CivicScience):


"By another measure, the number of diners who say they 'don’t like' Chipotle increased to 24 percent in the second quarter of 2016 — from 18 percent in the fourth quarter of 2015, according to a Civicscience brand survey released on Monday.


'There’s going to be a permanent group of people who won’t go back,' said Hedgeye’s Howard Penney. 'And even after three years, when Chipotle may see some improvement, their competition will have improved by then, too. They may have had their run.'"


To be clear, Penney has been the bear on CMG for a while now. (For more, click here and here.)


Bottom line? Be careful if you're betting on a bottom.



Takeaway: We are hosting a conference call on Thursday, June 16th at 1:00 PM ET to introduce our Demography Sector and review some key topics.

Join us on Thursday, June 16th at 1:00PM ET when Neil Howe will be launching his new Demography Sector and explaining both his method and the range of issues he will cover. Here we will focus (near term) on the jobs slowdown and the surprising 2015 vital statistics release. We will also focus (long term) on population growth, the housing market, productivity growth, and possible outcomes for long-term rates. Questions about Neil's views on how generational changes are shaping the 2016 election year mood are invited. Please contact  for additional information.




Call Details


Demography is a big word with fuzzy boundaries. Yes, it certainly includes long-term population trends. But it can also include breaking data on anything "people" are doing or feeling. Our Demography Sector will overlap with every other sector. But it will focus less on individual firms than on industries, product themes, sentiment trends, measurable shifts in the popular mood, and inflection changes in the macro numbers.


 Key points to be discussed:

  • Neil's background and overall method; range of issues the Sector will cover. 
  • What do the breaking jobs numbers say about the economy: Healthy growth? Impending recession? Hitting the NAIRU wall?  Thoughts on jobs, Brexit, and another Fed hike.
  • Unhealthy trends: Deaths up, births down. A look at the disturbing CDC early report on U.S. vital statistics in 2015.
  • A long-term housing forecast--overall bearish, but with some bullish hot spots. We start with realistic demographic projections... and then add a generational overlay.
  • Reflections on stubborn downward trend in long-term rates: What Mr. Market may be supposing about future growth in prices, population, and productivity. 

We look forward to seeing you.

An Update On The Great Debate: Deflation Vs. Reflation

Takeaway: Next catalyst in the #Reflation vs. #Deflation debate? Fed head Janet Yellen will give an update on the FOMC's latest thinking on Wednesday.

An Update On The Great Debate: Deflation Vs. Reflation - Deflation cartoon 11.10.2015


Got #Deflation?


That's the latest macro market read through, explaining why equity markets in Australia and Russia puked and the 10yr Treasury yield headed lower. In other words, it was a classic Dollar Up, Rates Down day.


Where do we go from here?


Is the evolving trend #Deflation or #Reflation? That's the question of the month...


On an immediate-term trade basis, yesterday's selloff triggered oversold in a number of shorts in Real-Time Alerts. Here's additional insight via Hedgeye CEO Keith McCullough in a note sent to subscribers earlier today:


"U.S. Treasury 10yr yield at 1.57%. Yep. Closing in on 2015 lows but rates are oversold ahead of Yellen’s 4th pivot (hawkish to dovish to hawkish to dovish) in 6 months as #EmploymentSlowing becomes obvious."


Take a look at a chart of the tumbling 10yr Treasury yield. (Note: At the start of 2016, the 10yr Treasury yield was 2.25%.)


Click to enlarge. 

An Update On The Great Debate: Deflation Vs. Reflation - 10yr yield 6 14


Meanwhile in equity markets... 


"Dollar Up, Rates Down – that is the #Deflation Risk On – and that’s a big reason for the oversold signal in Global Equities this morning – Reflation sensitive countries (Russia -3%, Australia -2%) and Reflation Risk sector exposures have corrected, hard, from our USD oversold (Energy Overbought) signal last week."



Next catalyst in the #Reflation vs. #Deflation debate? Fed head Janet Yellen will give an update on the FOMC's latest thinking on Wednesday...


It's perverse, but it's reality. The Fed's pivots from hawkish to dovish throughout the year have perpetuated either reflation or deflation. 


More to be revealed.

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