At least one major supplier to the Echelon project may have been shown the green light to ramp up production again. The go ahead was apparently given 1 week after stoppage was ordered. It is unclear from the supplier whether BYD is resuming the project or has decided on a more definitive time table for resumption of construction.

Management indicated that they are sticking to their conference call commentary and that my information is inaccurate. Their best guess is that construction will resume in 3 or 4 quarters but nothing is certain.

The Echelon project could go in many directions. A change in scope (downsized if anything), an agreement with a new JV partner, or just more conviction on a financing time table could all be drivers of an earlier restart.

Echelon is a major part of the Bull and Bear thesis on BYD so we’ll keep digging.

Research Edge will keep digging. BYD may or may not

QSR and the $5 price point!

A few weeks ago, I pointed out that Subway was having big success promoting the $5 price point. Looks like Arby’s is moving in the same direction, with its 5 for $5.95 promotion.


For the casual dining operators, Applebee’s and Outback, they are using a $9.95 price point to drive traffic. I can understand the $9.95 price point for Applebee’s, but for Outback it appears like a desperate move.
  • The last I checked Outback’s average check was over $20. How is this good news for profitability?
Outback’s newest promotion
Applebee's newest promotion

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The violence continues. Gaming stocks are moving at double digit rates, this time higher. The State of Nevada reported June Strip revenues down 3%, sparking a massive rally in casino stocks. Expectations were apparently much lower. I’d like to caution investors with the following points:

• Companies already reported Q2 EPS

• An accounting quirk shifted $11m of May’s slot revenue into June. The Strip would’ve declined by 5% excluding this shift.

• Strip gaming revenue for the major casinos (over $72m in annual revs) actually fell by 7%.

• Strip slot volume (coin in, drop, handle etc.) actually fell by 9%. Casinos either tightened their machines considerably (consumers will figure that out) or they played lucky

We view slot volume as the relevant metric to be gleaned out of the monthly reports. The trend there is not good as depicted in the chart; negative since October 2007. Slot revenue only ticked higher in June on the higher hold percentage.

If anything, trends are bad and likely worsening. You wouldn’t know it by the stock action.

Don't be fooled by June's slot revenue increase


We recently launched our "Hedgeye Portfolio" as a beta test. All of my security level decisions are time stamped there for accountability purposes.

We think this will solve for the #1 issue that the Street struggles with in paying for research - timing. I sold the trading position I have in the S&P 500 (SPY) at $131.32 today (that's and S&P 500 level of roughly 1312).

No Medals For The Italians Here...

On Friday, Italy, the world’s 7th largest economy (3rd largest in the EU), printed GDP numbers for the second quarter that were down -0.28% from Q1; today’s CPI numbers came in holding on at the 6 year high of 4% reported last month.

For context, here's a longer term chart overlaying these two economic factors. There are no medals being handed out here to the Italians.

Andrew Barber

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