Putin, Cheney and Chicken

Recently, Putin accused the US of backing Georgia, and as a result he put the squeeze on the US chicken processors by banning exports from 19 US plants.

According to the FT, Dick Cheney, the US vice president, pledged on Thursday that Washington would stand behind Georgia, helping rebuild the country’s economy and promoting Georgian efforts to join NATO to protect against Russian aggression. If I’m a CEO of one of the major chicken processors in the US, I could not be happy with the Bush Administration. If Putin is punishing the US chicken processors because of our stance on Georgia, the future of that export market can’t be good.

Today in NYC, the CEO of SAFM said the loss of Russia as an export would be devastating to the industry. We also learned today that TSN is increasing its liquidity position by selling equity. Why would TSN be increasing it liquidity position as this point in the cycle? Interesting timing on the part of TSN!

  • I’m taking the cynical view of this move….

"Macro Time's" Math: Why It's Easy To See Why "They" Won't Cut Rates...

My inbox is getting berated with uninformed macro wanna be pundits telling me that today's stock market swan dive is the European Central Bankers fault.

Of course, in this business, bad team's point fingers when they are losing - so this emotional response is not a surprise. What is a surprise is that people refuse to respect the math. See the two 10 year charts below that overlay Europe's reality - stagflation.

There is a reason why Paul Volcker raised rates in a stagflationary environment. It's the only way out!

Sales/Comps: Breaking Point

Just for a minute, let’s stop worrying about ‘back-to-school’ and fashion trends. The bigger question is square footage growth and productivity in a consumer downturn.

The gap between sales growth and comp growth for US retail has widened by 4 points in 14 months ending August. What does that mean? Either a) new store productivity is knocking the cover off the ball, or b) square footage growth remains unchanged despite ominous signs that square footage growth is too high. I think we can all agree that it’s the latter.

We’re at a critical juncture. Looking at the past two recessions (90/91, and ’01) as well as 4 other notable consumer slowdowns (’94-’95, ’97, ’03, ’06), we’ve never seen this gap widen consecutively by more than 15 months. Something’s gotta give. Either a) the consumer needs to pick up, b) square footage growth needs to slow, or c) productivity continues to erode.

I’m hoping for option ‘B’. But as we say here at Research Edge, ‘Hope’ is a lousy investment process.

Sales growth less comp growth is heading the wrong way.


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Eye On Putin Power: Hunting For Chickens?

That other VP of ours, Cheney, is in Georgia today...

The UK Swan Diving Olympic Training Center

As we push towards the 2012 Summer Olympics in London, it appears that the Brits are getting an early start to their training. This chart of British housing prices formed a perfect pike, and is now in free fall...

This morning's UK home price report came in at -12.7% year over year. Since this was an August report, this is relatively current compared to most of the US housing data that we've been issued.

The UK housing bubble popping may very well be louder than the one in the USA. That's very hard to imagine. But facts are what they are, and the race to the bottom of this cesspool of consumer leverage is heating up.

It is global this time, indeed.

The Russian Bear Hunter Chart: Crashing...

Alongside their stock market, the Russian Ruble is crashing. The Ruble is in the midst of having its worst down day vs. the US$ since they introduced the new FX basket in 2005 (see chart). As Tim Russert would have said, "this is BIG" folks. Pay attention to this global risk factor.

The Ruble was down -7.5% in August, so the follow through here in September, is as alarming as that tiger hunting photo of Putin that we flashed you in this past weekend's postings.

The US Dollar is winning; Global Currency markets are losing, big time.

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