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The Most Disruptive Change In the Restaurant Industry In This Generation

The Most Disruptive Change In the Restaurant Industry In This Generation - food delivery cartoon 01.05.2017

 

Veteran restaurant industry analyst Howard Penney is calling it "the most disruptive change in the restaurant industry in this generation." He's referring to restaurant DELIVERY and his analyst team is hosting a special call featuring in-depth analysis of this development Thursday at 1pm ET.

 

Penney will discuss how the consumer's need for convenience is paramount. Access to food is no exception. With the likes of Domino's and other pizza players having had a lock on meal delivery for some time, it is now time for others to join the party.

 

Here's a brief look at some key discussion points.

 

DOORDASH | POSTMATES

The Most Disruptive Change In the Restaurant Industry In This Generation - Z POST

 

There has been a spread of third party delivery services such as DoorDash and Postmates which have received considerable venture funding, and partnered with many independents and large national chains.

 

GRUBHUB (GRUB)

The Most Disruptive Change In the Restaurant Industry In This Generation - z grub

 

Historically, GrubHub has merely been an aggregator of orders. But now it has begun to delve into the delivery space. Both organically and through acquisitions.

 

GRUB's business model is under severe pressure. We see considerable downside to management's lofty top line and margin goals given competitive actions and company initiatives around delivery. The commission model is also going to be under pressure and is unsustainable at the current rates.

 

PANERA BREAD (PNRA)

The Most Disruptive Change In the Restaurant Industry In This Generation - z panera

 

The chain of bakery-café fast casual restaurants has been investing immense amounts of capital to push out their Panera 2.0 initiative, which is nearly completed in company-owned stores. Panera Bread's next frontier is delivery, which they anticipate will be in 15% of units by the end of 2016, and ramping to 35% - 40% of the system by the end of 2017.

 

We are looking at 2017 as being another investment year for PNRA and 2018 will be a much cleaner year from a profitability standpoint. We believe PNRA's ownership of delivery will allow them to maximize the profitability while having complete control of the process, yielding top of class results.

 

DOMINO'S PIZZA (DPZ)

The Most Disruptive Change In the Restaurant Industry In This Generation - z dominos

 

Founded back in 1960, when Dwight D. Eisenhower was President, Domino's Pizza remains the darling of the restaurant industry from a technology and convenience standpoint. It trades at a premium valuation accordingly. We have not talked about DPZ much, but we now believe there is line of sight to their domination in the delivery business ending.

 

 

CALL DETAILS

If you are an institutional investor interested in accessing this call email sales@hedgeye.com.


Cartoon of the Day: Belly Up?

Cartoon of the Day: Belly Up? - GOLDfish cartoon 01.04.2016

 

Gold prices are down -16% since peaking in early July. We say sell it.

 

 

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ICYMI: How to Trade Gold Right Now

Takeaway: The U.S. economy is growing. Interest rates and the U.S. Dollar are rising. That’s an explicit signal to do what? Sell gold.

 

“If you want to get Gold right, you have to get rates and the U.S. Dollar right.”

—Hedgeye CEO Keith McCullough

 

As you can see in the video above, the U.S. Dollar has a negative correlation of -0.97 to Gold over the past 90 days, meaning their prices move in direct opposition to each other. Pay attention to the 10-year Treasury yield and direction of the U.S. dollar — both are expressions of future growth expectations.

 

Recently reported economic data including U.S. GDPISM Manufacturing and Durable Goods orders all suggest that U.S. economic growth is accelerating.

 

We agree.

 

And at the right level, you sell gold.

WHEN TO SELL

Our proprietary model signals gold is overbought. It suggests Gold has almost 4% downside at current prices to $1121 per ounce. However, an even better spot to sell, McCullough says, is when the 10-year Treasury yield hits 2.41%. That would imply Treasuries (and hence other asset classes that benefit from slower U.S. economic growth) are also overbought.

 


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Guest Contributor: The End Of Currency Wars?

by Daniel Lacalle

Guest Contributor: The End Of Currency Wars? - currency wars

 

“From its creation in 1913, the most important Fed mandate has been to maintain the purchasing power of the dollar; however, since 1913 the dollar has lost over 95 percent of its value” -James Rickards

 

One of the least talked about proposals of the future Trump administration is the one that aims to penalize with economic sanctions those countries that manipulate their currency … even the US.

 

The proposal is not entirely new, and has been defended by Republicans since 2014, but the novelty is to penalize monetary manipulation.

 

On the one hand, Republicans have two proposals, one in the House of Representatives Financial Services Committee -of 2014- and another, of 2015, in the Senate Banking Committee by which the Federal Reserve would be prevented from making decisions on interest rates and balance sheet expansion if they deviate by more than two percentage points from a predetermined Taylor Rule. Let’s explain.

 

If the Federal Reserve targets a level of inflation and employment for a level of rates and monetary policies, it would have to explain to Congress or the Senate why it changes or deflects the normalization when these targets are met.

 

Why? Very few representatives of the Republican party deny that the dramatic cut in interest rates led to a huge bubble that generated the 2008 crisis, and that prolonging the so-called expansive policies in recent years has generated another bubble in bonds and an excess of euphoria in financial assets with no discernible impact on the real economy ( read the results here )

Guest Contributor: The End Of Currency Wars? - d lac 2

The indiscriminate creation of money not supported by savings is always behind the greatest crises, and there is always someone willing to justify it as both a problem and its solution.

 

Add to this that the economists of the Federal Reserve and its chairpersons were all unable to alert or even recognize the risk of such bubbles (from Greenspan to Bernanke or Yellen) and you will understand why there is a growing body of politicians concerned about monetary policies that are always launched as if they had no risk and then justified with the lame argument of “it would have been worse.”

 

Of course, the Federal Reserve rejects such limitations. When the central bank becomes the largest hedge fund in the world under the premise that there is “no inflation” despite a massive bubble in financial assets, it is difficult to change the methodology of the entity. But after consistently erring on estimates, impact and consequences, it is normal that the Republican Party and many Democrats put the mandate of the central bank in question .

 

Carl Icahn, one of the world’s top investors and Trump’s newly appointed regulation adviser, still holds the napkin where he took note of the Federal Reserve chairman’s response to his question on whether they had gauged the negative consequences of the Fed´s monetary policy. ” We don’t know “, was the answer.

 

But I am especially interested in the idea of penalizing countries that implement devaluation policies of ” beggar thy neighbor ” after the currency war seen in recent years. Read here.

 

Several years ago, in 2009, I had the opportunity to chat at a meeting with the incoming US Secretary of State, Rex Tillerson, and he was already saying that the greatest threat to the world was the spread of currency wars.

 

Now, only a few days away from getting a clear picture of the entire US government team and advisors, Rex Tillerson, Mick Mulvaney and Carl Icahn are clearly against the policies of financial repression. Even Steve Mnuchin himself has often commented on the risk of inflationary policies.

 

But the US cannot prevent central banks from other countries from continuing to impoverish their citizens through devaluations and brutal increases in money supply … Unless they are fined for doing so. And that penalty can have dissuasive effects and, in addition, prevent the generation of larger bubbles that lead us to another financial crisis. It is no coincidence that Mick Mulvaney applauds initiatives like Bitcoin  and the depoliticization of currencies.

 

It is not about returning to the gold standard or anything like that. In fact, what this group of representatives of the Republican party demands – and in that they are absolutely right – is the end of uncontrolled monetary excess without any responsibility on its consequences. Rejecting a system that encourages bubbles and over-indebtedness under the excuse that “it could be worse.”

Guest Contributor: The End Of Currency Wars? - dla z 

We do not know if these measures will be implemented, but I think it is important and healthy that the debate over the excesses of central banks is raised at government level in the world’s leading economy. Trump himself, who once said that “America can print all the money it needs,” has abandoned that ridiculous comment.

 

In any case, just as the crisis of 2008 ended the open bar excesses of some financial operators, it is time to alert that central banks´balance sheet cannot be used indiscriminately as if they were high risk funds to perpetuate the bubble , when the result has been more than disappointing. Recovering a little sanity, even modestly, will not hurt anyone.

 

We shall see.

EDITOR'S NOTE

This is a Hedgeye Guest Contributor research note written by economist Dr. Daniel Lacalle. He is the author of Life In The Financial Markets and The Energy World Is Flat. This piece does not necessarily reflect the opinion of Hedgeye.

 

 


The U.S. Economy Is Growing: Sell Long-Term Bonds & Gold

The U.S. Economy Is Growing: Sell Long-Term Bonds & Gold - growth info

Sell Gold and Long-Term Bonds

 

Simply put, the U.S. economy is accelerating and that's not good for either Long Bonds or Gold. Case in point, yesterday's ISM Manufacturing release hit a 2-year high. This follows recently reported economic data from GDP to Retail Sales to Durable Goods orders that's been better than expected.

 

If you've been following Hedgeye for a while you might be shocked to see the aforementioned investment conclusions. We had been bullish on Long-Term Treasury Bonds (TLT) since late 2014 and liked Gold (GLD) for much of 2016. But we also told subscribers to sell it all shortly after Donald Trump's Election Day victory. Why this seemingly radical change? It's actually not radical at all but consistent with a fundamental aspect of our research process. 

 

Let's back up a bit. It was our contention in 2014 that the U.S. economy was slowing. It did. U.S. growth peaked in March of 2015 at 3.3% (on a year-over-year basis) and declined to 1.3% in June 2016. Over that period, Gold, Long-Term Treasury bonds, and the Utilities sector (XLU) posted double-digit gains. These typically outperform in a slow growth environment.

 

Shortly thereafter, the market began betting that the U.S. economy bottomed. The traditional U.S. growth slowing leaders turned into laggards and sectors tethered to an accelerating U.S. economy, like Industrials (XLI) and Financials (XLF), came roaring back. (See our detailed explanation in "Why Trump Didn't Kick-Start the U.S. Economy.")

U.S. Economic Data Hadn't Confirmed Recovery (Yet)

#Economy #GDP #Recession

 

The market was front-running the U.S. economic data. As the numbers rolled in (just before Trump's victory in early November), however, the data started to rubber-stamp investor's bets:

 

  • Durable goods and Retail Sales data for the month of October began improving.
  • Then previously recessionary Industrial Production data started to look up.
  • U.S. GDP for the third quarter stopped slowing, rising to 1.7% after five quarters of deceleration from 3.3% year-over-year growth in March 2015 all the way to 1.3% in June 2016.

 

The ISM Manufacturing report from yesterday is further confirmation. As you can see in the Chart of the Day below, the ISM numbers started to signal that we were lapping the recessionary lows of the Industrial economy back in August.

 

Take a look at the breakdown of data below:

 

  1. August 2016 ISM = 49.4
  2. October 2016 ISM = 51.5
  3. September 2016 ISM = 51.9
  4. November 2016 ISM = 53.2
  5. December 2016 ISM = 54.7

 

"In other words, in addition to ISM, Industrial Production, Durable Goods, etc., there’s now plenty of evidence to suggest that the Industrial & Manufacturing #Recession that the US experienced bottomed in August-September 2016," Hedgeye CEO Keith McCullough wrote in today's Early Look. In the fourth quarter of 2016, as the U.S. economy was bottoming, Gold and Long-Term Bonds lost -13.1% and -14.1% respectively.

 

The U.S. Economy Is Growing: Sell Long-Term Bonds & Gold - 01.04.17 EL Chart

the U.S. Economy Will continue to Grow...

#GrowthAccelerating (tickers: TLT, GLD)

 

All of this supports our current research call on U.S. growth accelerating. It's also why investors should now short Long-term bonds (TLT) and Gold (GLD).

 

Our predictive tracking algorithm suggests U.S. GDP will come in at 1.9% growth in the fourth quarter of 2016 (the Federal government's first estimate will be released on January 27th). Add all this together and we'd expect more carnage for investors in Long Bonds and Gold.

 

Sell it.


Here’s The Only Emerging Market We Like Right Now

 

RUSSIA.

 

That’s right. We like Russia, even after Russia’s RTSI stock index rose 52.2% in 2016 and after President Barack Obama’s recent retaliatory sanctions against the country for alleged interference in the 2016 presidential election.

 

Why?

 

Our predictive tracking algorithm – the GIP model (which stands for Growth, Inflation, Policy) – suggests the Russian economy will continue growing while inflation slows through the first half of 2017. We call this setup Quad 1 and it is very bullish Russian stocks, explains Senior Macro analyst Darius Dale in the video above. (Click here to learn more about how we model global economies.)

 

As Dale wrote recently in a note to subscribers:

 

“Part of our bullish thesis on Russia – which is the only emerging market we like here – is the deepening of Trump/Putin relations that may eventually lead to an unwind of sanctions on trade and capital flows which have helped perpetuate one of Russia’s most protracted recessions in the modern era.”

 

Or as Dale puts it more succinctly in the video above, the Russian economy is growing and you could also get some “goodies from the Trump White House as well.”


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