• run with the bulls

    get your first month


    of hedgeye free

prev

10,000 Workers Suing Chipotle (The Latest Sign This Company Can't Get Out of Its Own Way)

Takeaway: This short is far from played out.

10,000 Workers Suing Chipotle (The Latest Sign This Company Can't Get Out of Its Own Way) - chipotle image

From E. Coli To Wage Theft, Bad news keeps on coming for chipotle

 

CNN just reported nearly 10,000 workers are suing Chipotle for allegedly cheating them on their pay in a class action lawsuit. 

 

"Current and former Chipotle (CMG) employees claim that the company made them work extra hours "off the clock" without paying them. It's a practice known as wage theft, and Chipotle is allegedly doing it all over the United States.

 

'Chipotle routinely requires hourly-paid restaurant employees to punch out, and then continue working until they are given permission to leave,' according to the class action lawsuit known as Turner v. Chipotle. It's named after a former Chipotle manager in Colorado, Leah Turner, who claims she had to work without pay and was told to make workers under her do the same in order to meet budget goals."

 

Hedgeye Restaurant analyst Howard Penney has been the bear on the Chipotle for some time, criticizing management for their hubris surrounding the E. coli scandal and then actually denying that any problem even exists at the company. 

 

Given this awful news today, it's clear management's issues run much deeper than we initially thought.

 

We're comfortable saying the Chipotle short call has yet to fully play out.


PREMIUM INSIGHT

What Happens To Stocks If Friday’s Jobs Report Bombs?

What Happens To Stocks If Friday’s Jobs Report Bombs? - HETV macroshow thumb Jobs Report

In this excerpt from The Macro Show earlier today, Hedgeye CEO Keith McCullough explores what could happen to the S&P 500 following Friday’s Jobs Report.


Hedgeye Book Recommendations

Just in time for Labor Day weekend, we have put together a recommended reading list based on suggestions from the team at Hedgeye.  Some books you’ve probably heard of or already read, while other books on the list are much more esoteric. 

 

Also, please share any reading ideas you have for us.  We might not be the smartest guys and gals on Wall Street, but we do like to read!

 

As Dr. Seuss famously wrote:

 

“The more you read, the more you will know. The more that you learn, the more places you’ll go.”

 

Cheers,

 

Daryl G. Jones

Director of Research

 

---------- 

 

1.Cracking the Aging Code: The New Science of Growing Old- And What It Means For Staying Young” by Josh Mitteldorf

 

In Cracking the Aging Code, theoretical biologist Josh Mitteldorf and award-winning writer and ecological philosopher Dorion Sagan reveal that evolution and aging are even more complex and breathtaking than we originally thought. Using meticulous multidisciplinary science, as well as reviewing the history of our understanding about evolution, this book makes the case that aging is not something that “just happens,” nor is it the result of wear and tear or a genetic inevitability. Rather, aging has a fascinating evolutionary purpose: to stabilize populations and ecosystems, which are ever-threatened by cyclic swings that can lead to extinction.

 

2.“Superforecasting: The Art and Science of Prediction ” by Phillip Tetlock and Dan Gardner

 

Tetlock and coauthor Dan Gardner offer a masterwork on prediction, drawing on decades of research and the results of a massive, government-funded forecasting tournament. The Good Judgment Project involves tens of thousands of ordinary people—including a Brooklyn filmmaker, a retired pipe installer, and a former ballroom dancer—who set out to forecast global events. Some of the volunteers have turned out to be astonishingly good. They’ve beaten other benchmarks, competitors, and prediction markets. They’ve even beaten the collective judgment of intelligence analysts with access to classified information. They are "superforecasters."

 

3.“Founding Brothers: The Revolutionary Generation” by Joseph J. Ellis

 

Pulitzer-winning history (not the lightest reading but only 248 pages!) shows that the roots of the divisiveness in our country today go all the way back. You can’t read any of the six vignettes without seeing the parallels. (Spoiler: Jefferson was not that cool)

 

4. “The Hour Between Dog and Wolf: How Risk Taking Transforms Us, Body and Mind” by John Coates

 

Before he became a world-class scientist, John Coates ran a derivatives trading desk in New York City. He used the expression “the hour between dog and wolf” to refer to the moment of Jekyll-and-Hyde transformation traders passed through when under pressure. They became cocky and irrationally risk-seeking when on a winning streak, tentative and risk-averse when cowering from losses. In a series of groundbreaking experiments, Coates identified a feedback loop between testosterone and success—one that can cloud men’s judgment in high-pressure decision-making.  For any stock market operator, this book is well worth the read.

 

5. “American Spartan” by Ann Scott Tyson

 

Lawrence of Arabia meets Sebastian Junger's War in this unique, incendiary, and dramatic true story of heroism and heartbreak in Afghanistan written by a Pulitzer Prize–nominated war correspondent. Army Special Forces Major Jim Gant changed the face of America’s war effort in Afghanistan. A decorated Green Beret who spent years in Afghanistan and Iraq training indigenous fighters, Gant argued for embedding autonomous units with tribes across Afghanistan to earn the Afghans’ trust and transform them into a reliable ally with whom we could defeat the Taliban and counter al-Qaeda networks. Illustrated with dozens of photographs, American Spartan is their remarkable story—one of the most riveting, emotional narratives of wartime ever published.

 

6. “Sapiens: A Brief History of Humankind” by Yuval Harari

 

A truly unique anthropological study of how and why homo sapiens evolved from one of many homo species around the world that was somewhere in the middle of the food chain, to the sole remaining species of our genus and the apex predator. This book presents a number of compelling theories on how, and why, we developed and thrived as we did, what we lost by evolving from a hunter/gather species to an agrarian one, and what these changes and choices mean for the future. You’ll be hard pressed to look at the world and man the same way after you read this story.

 

7. “America’s War for the Greater Middle East: A Military History” by Andrew Bacevich

 

This ret. Army Colonel and West Point grad describes, synthesizes and links 40 years of US policy and action – both military, covert and diplomatic – toward the Middle East to detail how we’ve ended up where we are today. The conclusions he reaches are that we have misunderstood the motivations behind the people of this region, and we’ve compounded mistake after mistake, to get to where we are today.

 

8. “Red Sparrow and Palace of Treason” by Jason Matthews

 

This is a spy craft thriller series. The author is a recently retired CIA operative, and in novel form, presents the most realistic detail of what is entailed with spy craft in the on-going cat and mouse game between the US and today’s Russia. The stories are very entertaining as they follow a US agent/handler and the Russian “Sparrow” spy who’s agreed to turn once she’s disillusioned with Putin and his aims.

 

9. “John Quincy Adams‎: Militant Spirit" by James Traub

 

A fascinating and very rich account of JQA life ties his lifelong intellectual and inner spiritual growth to his tremendous accomplishments and his impact on so many aspects of this new nation. John Quincy Adams was the last of his kind—a Puritan from the age of the Founders who despised party and compromise, yet dedicated himself to politics and government. The son of John Adams, he was a brilliant ambassador and secretary of state, a frustrated president at a historic turning point in American politics, and a dedicated congressman who literally died in office—at the age of 80, in the House of Representatives, in the midst of an impassioned political debate.

 

10. "The Politicians and Egalitarians: The Hidden History of American Politics” by Sean Wilentz

 

One of the rare documents that makes a full intellectual and practical argument for the interplay of practical politics and moral principles, Wilentz' book is a real breath of fresh air in our current climate. Where our politicians seem to be trying to outdo one another in ignorance, venom and venality, Wilentz looks deeply into key figures from America's past and reveals layers of complexity and subtlety we rarely get to see. Finally, a book that should make us all re-think the very purpose of politics in this day and age. 

 

11. “The Arm: Inside the Billion-Dollar Mystery of the Most Valuable Commodity in Sports” by Jeff Passan

 

Every year, Major League Baseball spends more than $1.5 billion on pitchers—five times the salary of all NFL quarterbacks combined. Pitchers are the lifeblood of the sport, the ones who win championships, but today they face an epidemic unlike any baseball has ever seen.  One tiny ligament in the elbow keeps snapping and sending teenagers and major leaguers alike to undergo surgery, an issue the baseball establishment ignored for decades. For three years, Jeff Passan, the lead baseball columnist for Yahoo Sports, has traveled the world to better understand the mechanics of the arm and its place in the sport’s past, present, and future.

 

12. “Prospecting for Trout: Fly Fishing Secrets from a Streamside Observer” by Tom Rosenbauer and Nancy Aitken

 

Even if you are not a fisherman, this natural history of this elusive and improbable creature, may help new patterns emerge from the data where you didn’t see them before.  In seeking the greatest efficiency, the trout is a model organism for understanding how complex systems, including markets, work.   The successful trout balances safety from predators, energy efficiency, and prey capture rate in finding a spot in the thin strip of water passing his stationary position.  The successful prospector has to read that water, guess where the energy efficient spots that attract trout are located, experiment with flys and casts, and enjoy the failure along the way. 

 

13. “The Art of the Sale: Learning From the Masters About the Business of Life” by Philip Delves Broughton

 

The first book of its kind, The Art of the Sale is the result of a pilgrimage to learn the secrets of the world's foremost sales gurus. Bestselling author Philip Delves Broughton tracked down anyone who could help him understand what it took to achieve greatness in sales, from technology billionaires to the most successful saleswoman in Japan to a cannily observant rug merchant in Morocco. The wisdom and experience Broughton acquired, revealed in this outstanding book, demonstrates as never before the complex alchemy of effective selling and the power it has to overcome challenges we face every day

 

14. “The Industries of the Future” by Alec Ross


In The Industries of the Future, Ross shows us what changes are coming in the next ten years, highlighting the best opportunities for progress and explaining why countries thrive or sputter. He examines the specific fields that will most shape our economic future, including robotics, cybersecurity, the commercialization of genomics, the next step for big data, and the coming impact of digital technology on money and markets.

 

15. “Witness to the Revolution: Radicals, Resisters, Vets, Hippies, and the Year America Lost Its Mind and Found Its Soul” by Clara Y Bingham

 

As the 1960s drew to a close, the United States was coming apart at the seams. From August 1969 to August 1970, the nation witnessed nine thousand protests and eighty-four acts of arson or bombings at schools across the country. It was the year of the My Lai massacre investigation, the Cambodia invasion, Woodstock, and the Moratorium to End the War. The American death toll in Vietnam was approaching fifty thousand, and the ascendant counterculture was challenging nearly every aspect of American society. Witness to the Revolution, Clara Bingham’s unique oral history of that tumultuous time, unveils anew that moment when America careened to the brink of a civil war at home, as it fought a long, futile war abroad.

 

16. “Blockchain Revolution: How the Technology Behind Bitcoin is Changing Money” by Don Tapscott

 

Blockchain is the ingeniously simple, revolution­ary protocol that allows transactions to be simul­taneously anonymous and secure by maintaining a tamperproof public ledger of value. Though it’s the technology that drives bitcoin and other digital cur­rencies, the underlying framework has the potential to go far beyond these and record virtually everything of value to humankind, from birth and death certifi­cates to insurance claims and even votes.

 

17. “The Biology of Belief: Unleashing the Power of Consciousness, Matter, & Miracles” by Bruce A. Lipton 

 

With more than 100,000 copies sold of his self-published book, The Biology of Belief, Bruce Lipton teams up with Hay House to bring his message to an even wider audience. This book is a groundbreaking work in the field of new biology, and it will forever change how you think about thinking. Through the research of Dr. Lipton and other leading-edge scientists, stunning new discoveries have been made about the interaction between your mind and body and the processes by which cells receive information. It shows that genes and DNA do not control our biology, that instead DNA is controlled by signals from outside the cell, including the energetic messages emanating from our thoughts.

 

18. “The Rise and Fall of American Growth: U.S. Standards of Living Since the Civil War” by Robert J. Gordon

 

For all those who believe we are currently living through an era of unprecedented technological transformation—and there are many who do, especially in Silicon Valley—this book will serve as an eloquent corrective. It also helps explain why today’s productivity growth seems so feeble when “comped” against the 1 century. This is a really big book, designed for two weeks at the beach. There are all kinds of fascinating details about how nasty, brutish, and short life was for most Americans 150 years ago and how dramatically that changed. Housing, electrification, pneumatic power, radio, autos, refrigeration, public health—you name it, this is a book with panoramic scope.


Poll of the Day: Which Is The WORST Place To Put Your Money Right Now?

Takeaway: What do you think? Cast your vote. Let us know.


Dear Janet – Stop Ignoring Economic Reality

Dear Janet – Stop Ignoring Economic Reality - Jackson Hole cartoon 08.26.2016

 

The bond market is sending Fed officials a clear signal: Hike now at your own peril.

 

It's the same message Fed officials have selectively chosen to ignore all year. If you’re still keeping score, the Fed pivoted hawkish in December, dovish in March, hawkish in May, dovish in June, and hawkish in August. That’s right, 5 policy pivots in 7 months.

 

Here's the much discussed passage from Fed head Janet Yellen's prepared remarks in Jackson Hole:

 

"Based on this economic outlook, the FOMC continues to anticipate that gradual increases in the federal funds rate will be appropriate over time to achieve and sustain employment and inflation near our statutory objectives. Indeed, in light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months. Of course, our decisions always depend on the degree to which incoming data continues to confirm the Committee's outlook."

 

Investors clearly believe Yellen's hawkish rhetoric. Fed Funds futures on September and December hike probabilities just popped back up to 42% and 64%, respectively. Note: Before hawkish comments from Fischer and Yellen, those probabilities were 32% and 57%, respectively on Thursday.

 

Dear Janet – Stop Ignoring Economic Reality - rate hike expectations 8 29

What's next?

 

All eyes are on Friday's Jobs report. As Yellen's speech clearly indicates, the Fed is closely watching for strength in non-farm payrolls to justify future rate rises ("in light of the continued solid performance of the labor market... the case for an increase in the federal funds rate has strengthened in recent months.").

 

And though largely ignored by the media last week, remember, second quarter GDP was revised down to 1.1% from 1.2%, on Friday, Consumer Confidence hit a four-month low and 90% of the Housing market (see Existing Home Sales) slowed to -1.6% year-over-year. So clearly, one of the few things the Fed has left to trumpet is relative strength in the labor market.

 

Even that premise is faulty. As we've shown many times before (see chart below), non-farm payrolls put in their year-over-year rate of change peak in February 2015 and have been declining ever since. As Hedgeye CEO Keith McCullough points out in today's Early Look, "it’s now mathematically impossible for labor to accelerate in Q3." 

 

Dear Janet – Stop Ignoring Economic Reality - nfp 8 5

Why does this matter?

 

 

Oh right.

 

The 10s/2s yield spread continues its crash to year-to-date lows this morning as the market fears Fed tightening into an economic slowdown.

 

Dear Janet – Stop Ignoring Economic Reality - yield spread 8 29

 

In other words, U.S. #GrowthSlowing. This is the call that's driven asset prices all year. So, whether or not the Fed hikes rates into a slowdown or turns dovish on a Jobs Report bomb and the stock market pops doesn't really matter (outside of risk managing any short-term investor hyperventilation). Our favorite macro positions continue to crush the performance of the S&P 500 year-to-date (see below) as investors continue to price in economic reality.

 

Dear Janet – Stop Ignoring Economic Reality - yeartodate macro

What it all means...

 

Investors have become disillusioned by supposed Fed omnipotence. That's being price into markets daily.


PREMIUM INSIGHT

[UNLOCKED] Keith's Daily Trading Ranges

[UNLOCKED] Keith's Daily Trading Ranges - Bull and bear extra cartoon

We've made some new enhancements to Daily Trading Ranges - our proprietary buy and sell levels on major markets, commodities and currencies sent to subscribers weekday mornings by CEO Keith McCullough. Click here to view a brief video of McCullough explaining how to use it most effectively.


Early Look

daily macro intelligence

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.

next