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The Week Ahead

The Economic Data calendar for the week of the 8th of November through the 12th is full of critical releases and events.  Attached below is a snapshot of some (though far from all) of the headline numbers that we will be focused on.


The Week Ahead - cal1

The Week Ahead - cal2

Buck Breakout? US Dollar Levels, Refreshed

POSITION: Long US Dollar (UUP), Short Euro (FXE)


If you are in this game for real, you will get run-over. I did for three days this week. Lessons were learned.


Three days, fortunately, does not a career in risk management make. The best you can do after you get yard-saled at center ice is to pick up your teeth, go back to the bench, and get ready for the next shift.


We did that yesterday. We shorted the Euro and bought the US Dollar Index. Yes, these are immediate term TRADE calls. But, remember, all TRENDS start as TRADES. It’s the job of the macro story teller to outline why the direction of price momentum can continue.


Dollar DOWN and Euro UP – are you kidding me?




Don’t forget that only 7 months ago, when the Street was parroting their “Euro Parity” call, we went the other way. Currencies are baskets of one another. The US Dollar can go up if the Euro starts going down – sometimes it’s that simple.


Why could the Euro go down? Well, re-print any Euro “parity” sellside research that’s 6 months old and you’ll have plenty of reasons – it’s all associated with sovereign debt default risk and, as of the last few weeks, European CDS and sovereign yields (selectively) are at a bare minimum flashing amber lights.


How about Euro PIIGS printing moneys? QE-EU? Part Deux? Every central Fiat Fool for dem-self, eh.


The other 3 reasons why the US Dollar could continue higher in the immediate term are: 

  1. Mean Reversion
  2. G-20 meetings in Korea next week
  3. Obama on a 10 day roady w/ Asians who are right p.o’d 

Oh, and dare I mention that little critter that’s ruined pretty much every emerging market at some point in human history – inflation. That’s a catalyst too.


The immediate term TRADE support line for the US Dollar Index is in the chart below (right where we bought it yesterday). Immediate term TRADE resistance is up at $77.08. In other words, the USD could easily put on a +2.2% mean reversion TRADE to the upside and nothing will have changed the quantitative setup.


A breakout above $77.08 puts the $80.46 range in play. If you were to only ask Mr. 10 and Mrs. 30 year US Treasury Yield what they think about that, they’d agree. Like the “parity” call of 6 months ago, let the storytelling about how Bernanke will never allow the currency of the American citizenry to survive begin.


Macro musings from a man who is nursing his black eye, but with all 10 of his bare knuckles intact,



Keith R. McCullough
Chief Executive Officer


Buck Breakout? US Dollar Levels, Refreshed - USD index 6 months

Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.46%
  • SHORT SIGNALS 78.35%


Conclusion: We at Hedgeye aren’t alone in our stance that the Fed’s Quantitative Guessing won’t end well. Several important countries and figureheads have joined in the anti-QE parade and we feel that this, combined with other factors is bullish for the U.S. Dollar – and bearish for [nearly] everything else.


Position: Long the U.S. Dollar (UUP); Short the S&P 500 (SPY); Short the Russell 2000 (IWM); Short Emerging Market Equities (FFDs);


On our Morning Macro Call (email if you are an institutional client and need a live dial-in code), Keith identified three catalysts that are potentially bullish for the U.S. dollar in the near term, which could potentially trigger a 6-9% compressed correction in U.S. equity markets. Those catalysts are: 

  1. Obama’s trip to Asia (starting now for the next ten days): Simply put, Asia is peeved with U.S. monetary policy. Central bankers from China, Japan, Hong Kong, Korea, and India are calling out U.S. monetary policy for what it is – “uncontrolled money printing” and pursuant of a weak dollar. Further, most of these nations are continuing to take measures to counter the inflation Bernanke’s printing press is creating in their countries. Obama will have to answer some tough questions and his rhetoric could prove dollar bullish if he attempts to pander to his Asian counterparts.
  2. October Global Inflation Data (now-month end): We’ve seen countries from China to India to Australia to Sweden raise rates in the last two weeks. Simply judging by the performance of the CRB Index during October, there is further tightening on the horizon. Global hiking could, on the margin, drag U.S. Treasury yields higher and the U.S. dollar with it. To some extent, we’re starting to see that occur on the long end of the curve (see chart below).
  3. G20 Summit in Seoul (Nov. 11-12): Tim Giethner might wind up playing a game of one-versus-nineteen on U.S. dollar policy. For a glimpse of what might come, see commentary out of Brazil’s Finance Minister Guido Mantega on the effectiveness of QE: “It doesn’t work to throw money from a helicopter because this won’t make growth flourish”. Germany’s Minister of Finance, Wolfgang Schauble said Thursday, "I don't think that the Americans are going to solve their problems with [QE2], and I believe that it is going to create extra problems for the world”. Timmy’s got some explaining to do come next Thursday. 



On another note, it seems everyone is bearish on the U.S. dollar and bullish on commodities and global equities, including Franklin Templeton’s Mark Mobius. More signs that dollar bearishness are at its peak are: 

  • Belarus is going to become the first country outside Russia to issue debt in rubles to borrow at cheaper rates than U.S. dollars. Countries tend to want to borrow money in currencies they think are going to depreciate, so yields on dollar bonds have gotten too expensive for Belarus. The same is happening to Chinese companies, who are seeking cheaper dollar bond rates by borrowing in Hong Kong vs. mainland China.
  • RBC said the Argentine peso (per U.S. dollar) was the most “attractive currency in the universe they watch”.
  • Turn on CNBC and listen to pundit-after-pundit tell you how QE2 will crush the dollar. For their collective references, the U.S. dollar index is down roughly (-8%) since Bernanke tipped his hand in Jackson Hole, which is a substantial move for the U.S. dollar in a short period of time. 

Clearly, we were early and right calling the accelerated decline in the dollar starting this summer, but evidence is continuing to mount that a weak dollar is solidly consensus. President Obama and his cabinet will see mounting pressure over the next two weeks to adjust their policy towards the dollar as they travel abroad.  Longer term, it is not in their best interests to ignite a currency war, so we would expect their rhetoric to adjust accordingly and be supportive of a stronger dollar policy.


Have a great weekend,


Darius Dale


R3: UA, LVMH, Cotton, & HOTT

R3: UA, LVMH, Cotton, & HOTT 

November 5, 2010




  • As an example of how much impact a viral YouTube video can have, KSWS highlighted the success of their recent Tubes training shoe effort featuring Kenny Powers from HBO’s “Eastbound and Down.” The ads, which feature Jeremy Shockey of the New Orleans Saints, mixed martial artist Uriah Faber, and Patrick Willis of the 49ers have had over 2million viewers over the BTS season and increased the company’s Facebook fans 10x since the campaign’s inception. The youth consumer has been an elusive demographic for California brand which could be changing as a result of these unconventional marketing efforts . If you haven’t seen the campaign yet have a look (http://www.youtube.com/watch?v=0_sCW1_fRDA )
  • H&M is debuting its augmented reality app, which includes a virtual fashion show comprised of looks from the retailer’s fall/winter collection. Users can view, interact and snap pictures of virtual apparel and accessories in front of any of its 10 New York City locations. Consumers will instantly receive a 10 percent discount on any purchase just by selecting the items they want to view and “capturing” them by taking a photo. H&M junkies can also use the app to try on outfits (virtually, of course), take photos and post these images to Facebook to create personalized look books. 
  • Fashion jewelry company Monet, a division of Liz Claiborne Inc., launched an e-commerce site last week. Monet.com will include more than 500 styles, with prices ranging from $24 to $148, as well as editorial content with “how to wear it” advice, videos and styling tips.  Notice the integration of editorial and e-commerce remains a key factor in fashion retailing online.



High street giant vows to increase prices by 8% to protect profits in face of rocketing cotton costs. Next stands to lose £60m profit in the first half of 2011 if it does not pass the spiralling cost of cotton on to customers, according to chief executive Lord Simon Wolfson. Wolfson this week lambasted a report by analysts Investec Securities which claimed the price of the average autumn shopping basket at Next had already surpassed its equivalent at Marks & Spencer for the first time in a decade - but conceded the retailer would be forced to pass on price hikes of about 8% next year. <drapersonline.com>

Hedgeye Retail’s Take:  One of the most vocal examples of cotton inflation and its impact on retail.   While most have been dismissive about cotton’s impact and strategies to deal with it, Next is about as clear as can be.  Cotton up, AUR’s up.


UA Sponsoring Manhattan’s Largest Sports Complex- Under Armour Inc. has inked a deal with Chelsea Piers, a sports and entertainment complex on the West Side of Manhattan, to be its official athletic apparel and footwear sponsor. Under the terms of the deal, Under Armour will outfit the trainers, coaches and instructors at the Field House, which offers indoor soccer, basketball, batting, rock climbing and gymnastics, as well as at the center’s health club. The brand will also be the exclusive athletic performance apparel to be sold at the two venues. Other Chelsea Piers sponsors include Izod, Capital One Bank, Coca-Cola, Johnnie Walker and Jet Blue Airways.  <wwd>

Hedgeye Retail’s Take:  While not on the same caliber of a Tom Brady signing, the grassroots local sponsorship is more akin to the company’s core marketing efforts.


Jimmy Choo One Step Closer to Lifestyle Brand- Tamara Mellon has unveiled the latest iteration of the Jimmy Choo brand — fragrance. Beginning in January, the brand’s eponymous first scent, created with Inter Parfums SA, will be introduced.  “We’ve transitioned into a lifestyle luxury brand, and it seemed like the next natural step for us,” said Mellon, founder and chief creative officer of Jimmy Choo, at a London event to launch the fragrance last week. A similar event was held in New York on Tuesday. “Fragrance is such an important accessory for women — I think it will have a very broad reach. Our customer is every woman.” <wwd>

Hedgeye Retail’s Take:  With shoes, handbags, and now fragrance we wonder how long before apparel enters the Jimmy Choo line up?


LVMH/Hermes Soap Opera Evolves-  France’s market regulator AMF will investigate LVMH Moët Hennessy Louis Vuitton’s acquisition of a 17.1 percent stake in Hermès International to determine if rules were respected, an AMF spokeswoman said on Friday. LVMH filed a statement on Oct. 23 revealing that it had purchased more than 15 million shares, representing 14.2 percent of Hermès, and had options for another 2.9 percent.  In France, companies are required to declare stock purchases when they surpass 5 percent of the share capital.   Luxury mogul Bernard Arnault’s group said it achieved the Hermès stake through several cash-settled equity swaps, in which an investor essentially bets on the future value of a stock without actually owning the underlying shares. <wwd>

Hedgeye Retail’s Take:  As expected, this luxury house showdown continues to heat up.  Most likely a page one store for many weeks to come, especially in Paris.


Oil on the Rise, Biking Looking Attractive?- The League of American Bicyclists and the Alliance for Biking & Walking announced a three-year campaign to double federal funding for bicycling and walking by 2013, even while bemoaning the defeat of one of their great champions in Congress in Tuesday's mid-term election.  The League and Alliance have been awarded up to $1.2 million from SRAM over the next three years to unite active transportation advocates across the nation and give them tools and resources to secure increased funding from existing federal transportation programs for critical bicycle and pedestrian projects. <www.sportsonesource.com>

Hedgeye Retail’s Take:  This may be the first time we’ve included a blurb on cycling but probably not the last as many urban centers have and will become much more biker friendly over the next several years.  Did anyone initially believe NYC would permanently close traffic in Times Square to accommodate bikers?



Nielsen discloses flaws in how it measures online traffic- Audience measurement firm The Nielsen Co. today told its clients that its data for traffic to online sites is flawed. The company put most of the blame on its failure to properly account for longURLs, such as those used by shoppers when following links from a search engine to an online retail site. Nielsen said it expects to have fixed the problem in time for December reports, which will be released in January. <internetretailer.com>

Hedgeye Retail’s Take:  Interesting that even the data-driven internet can’t be tracked with a high level of accuracy.  Not good for what was once thought as THE king of measurement statistics.


Hot Topic Debuts Harry Potter Boutiques- Warner Bros. Consumer Products and retail partner Hot Topic are launching dedicated in-store boutiques with exclusive merchandise inspired by Harry Potter and the Deathly Hallows. The boutiques are opening in Hot Topic's 680 locations in the U.S. and Canada. Exclusive product includes juniors', young men's and women's apparel (i.e. Gryffindor and Slytherin polo and tie combination tees), bags, throws, jewelry, key chains, stationery and posters. Select items will also be sold only online at Hottopic.com. In addition, an in-store mobile application will offer challenges and rewards to shoppers who participate through their iPhone and Android phone. Harry Potter and the Deathly Hallows: Part 1 hits theaters on Nov. 19. <licensemag.com>

Hedgeye Retail’s Take:  Hard to believe that a retailer primarily known for goth and punk is going all-in on Harry Potter.  Clearly they expect to attract a different audience than the 7-10 year old Quidditch fan.


Li & Fung to source for Li Ning brand- Hong Kong-based multinational Li & Fung, the global consumer goods exporter, will become a sourcing agent for Li Ning’s brands in both international and domestic market. The agreement will cover sourcing for a certain range of brands in both international and domestic China market, including soft goods for Li Ning’s popular running, basketball and lifestyle lines.  <fashionnetasia>

Hedgeye Retail’s Take:  Even the Chinese need Li & Fung to navigate their own factory base.  Clearly a vote of confidence for the world’s largest sourcing conglomerate.

CMG - channel checks on Asian food


Our sources tell us that CMG CEO Ells has actually been poking around this Momofuku store in NYC. A loose association but an interesting data point.


Momofuku is more high end NYC, his underlying concept mixes asian flavors with high quality ingredients.


At one point at one of his places he also offered a korean style burrito called a Ssam. The main restaurant, Momofuku, runs an open kitchen and is primarily counter seating. 


If you are in NYC its worth a look....




CMG - channel checks on Asian food  - momo


This is also of interest 





Howard Penney

Managing Director

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