Short Selling Opportunity: SP500 Levels, Refreshed



I’ve decided to come out of retirement. Short selling is too much fun.


The risk management setup here is getting as interesting as it was on Valentine’s day. We’ve effectively seen a -6.5% correction all but recovered on low-volume, slowed fund-flows, and an almost complete collapse in volatility.


Top-down, our view remains that market expectations that hang in the balance of what a few humbled men in the Keynesian Kingdom do next are going to perpetuate Price Volatility. We can’t get upset about that – we just need to deal with it – and one of the most obvious ways to capitalize on that is to manage risk around the inverse correlation between the SP500 and the VIX. 

  1. SP500: Pre-open this morning my immediate-term upside TRADE target in the SP500 was 1334. Now it’s 1341. Interestingly, but not ironically, that’s right back to the range I outlined as 3 standard deviations overbought using my intermediate-term TREND duration back in February (1). 
  2. Volatility (VIX): we’ve seen a -43% draw-down in the VIX in 12 trading days. A) that’s the biggest move down over that duration ever and B) ever is a very long time. I don’t expect this up USD, down VIX, UP stocks thing to continue for the next 3 weeks. 

The VIX has a ton of immediate-term TRADE support between 16.36 and it’s long term TAIL level of support at 15.29. So the highest probability risk management decision I can make from here is to sit tight and Wait & Watch for that volatility zone to be realized on the downside as 1 is tested on the upside. We’re inching closer to these key zones today.


Inasmuch as it was a great call to cover most of our short positions at SP/VIX 29.40, it’s been a bad call coming back to the short side too early. I think I’ve thought about the setup better than I’ve executed on it – and, again, that doesn’t make my being short the SPY here right – but it does provide a healthy reminder that the discipline of patience is what will really drive performance in Q2 of 2011. The next few months will not be for the faint of heart.


Cover low, short high – and stay transparent, my friends.



Keith R. McCullough
Chief Executive Officer


Short Selling Opportunity: SP500 Levels, Refreshed - 1

R3: Japan, Hermes, GOOG, New Balance



April 1, 2011






  • In speaking to the impact of rising cotton prices, American Apparel management expects an industry-wide price increase to take effect July 5th to help mitigate pressure at wholesale. With Gildan having just announced price increases of 8% - 12.5% on core products mid-March and several more price adjustments expected in the industry before year-end, we suspect American Apparel isn’t likely to wait until July to take prices up.
  • Following the likes of its competitors, New Balance is launching a site today where consumers can customize the brand’s classic 574s. With various color and embroidery options available, customer customization is soon going to become an expectation versus the exception.
  • According to Babycenter’s 2011 Mobile Mom Report, moms with smartphones spend 6.1 hours/day on average with the mobile Web compared to 4.1 hours/day on the PC-based Web. More importantly, 46% of moms surveyed claim to have taken an action due to a mobile ad – further evidence that retailers may want to consider increasing mobile ad spend which currently accounts for 0.5% of retailer’s budget on average.



Japanese Retailers Down Double-Digits in March - Uniqlo, Isetan Mitsukoshi and Takashimaya reported Friday double-digit drops in March sales, providing the latest indications of how much Japanese consumers are holding back in the immediate aftermath of the earthquake and tsunami disaster. Uniqlo’s corporate parent Fast Retailing said that same-store sales at the fast-fashion chain slid 10.5 percent last month. The comp figures refer exclusively to Uniqlo’s Japan operations. Isetan Mitsukoshi said preliminary March sales at its nine Isetan stores dropped 28.4 percent and those at its 14 Mitsukoshi stores fell 22.8 percent. Similarly, Takashimaya said sales at its 14 stores in Japan slid 17.3 percent in March. J.Front Retailing, which operates 21 Daimaru and Matsuzakaya department stores, said March sales dropped 9.6 percent. Matsuzakaya branches in the Tokyo neighborhoods of Ueno and Ginza saw their sales drop 29.6 percent and 28.9 percent respectively. <WWD>

Hedgeye Retail’s Take: Uniqlo is actually fairing surprisingly well given the circumstances and the fact that 2/3 of the month’s sales were post quake.


Hermes in Discussions to Sell 45% Stake in Jean-Paul Gaultier - Hermes International (RMS) SCA, the French maker of Birkin and Kelly bags, is in talks to sell its stake in the Jean-Paul Gaultier fashion house less than a year after the designer relinquished his role at the luxury-goods maker. Hermes received “an expression of interest from potential buyers” of the 45 percent holding, the Paris-based company said today in a statement, without elaborating. PPR SA is one candidate that may study the sale of the stake, French daily Les Echos said today, without citing anyone. Gaultier stepped down last year as the artistic director of Hermes’s women’s ready-to-wear unit after seven years in the role and was replaced by Christophe Lemaire. The designer has had a relationship with Hermes since 1999, when the company bought a 35 percent stake in his fashion house for $23 million. The stake was later raised. <Bloomberg>

Hedgeye Retail’s Take: Following the death of former Hermes’ Chairman Jean-Louis Dumas who recruited Gaultier last summer, the designer’s relationship with the firm has been tenuous. First he lost his position and now the brand is looking to sell its stake in the fashion house completely.


Google Updates its Site Search Tool for e-retailersGoogle Inc. this week updated its site search tool, giving retailers the ability to show consumers local product inventories and  more flexibility in setting online promotions. With the launch of Google Commerce Search 3.0, the search engine also says it will test a product recommendation feature that retailers can install on their e-commerce sites. This release builds on the last update to Commerce Search, released in June, and includes a tool similar to Google’s Instant Search. Google introduced that feature to its search in September, enabling consumers to see search results on the page as they type search queries. The Commerce Search update enables shoppers using a retailer’s site search feature to see more product information with every keystroke.  <InternetRetailer>

Hedgeye Retail’s Take: Another tool from the dominant search provider. Innovation will remain key to Google’s ability to maintain its steady 65% share of the search market.


New Balance Signs Kevin Youkilis - Boston-based New Balance announced Wednesday it has signed hometown third baseman Kevin Youkilis to a multi-year endorsement deal. New Balance will be the Red Sox player’s official on-field footwear brand, as well as provide shoes and apparel outside of the game. This season, Youkilis will wear a special makeup of the New Balance 1103 baseball spike. The athletic company also will sponsor Youkilis’ charity, Youk’s Kids, which supports existing community-based children's charities and medical research programs in New England. And New Balance will support a new Athletes for Heroes program, providing financial support for children who have lost a parent or have a parent who has been severely injured in military service.<WWD>

Hedgeye Retail’s Take: Great fit for the Boston-based brand, which up to now hasn’t allocated any money towards athletic endorsements. Do we expect a flurry of new signings – no, but the move reminds consumers NB is still in the game.


Magazines Eye E-Tailing - Vogue and Elle have long influenced what clothes and handbags image-conscious consumers buy. Now, in a bid to reverse flagging sales and stay relevant, fashion magazines may sell the products they feature in their articles. As Apple Inc. iPad and other mobile devices change the way people stay informed and shop, e-commerce is creeping onto editorial agendas. Fashion magazines that have gone as far as to add links on their websites to online vendors such as Yoox SpA, may integrate the reading and buying experience, a move that would transform the likes of Vogue and Elle from just trendsetters into virtual shopkeepers. “Gone are the days when consumers want to flip through the back of a magazine to find an index,” said Shannon Edwards, European director of online shopping portal ShopStyle. Combining retail and editorial “is natural from an economic standpoint and natural from a consumer standpoint.”  <Bloomberg>

Hedgeye Retail’s Take: The only surprise here is that it’s taken this long.





March closed on a very strong note.



Incredible results from the last four days of March (~HK$750MM daily table revenue) propelled Macau revenues to a new monthly record of HK19.5BN, representing 48% YoY growth.  March's average daily total revenue was HK$629MM.  We'll know next week how much hold impacted results.  The Asian operators continue to do well, while US operators lag.


Here are the total revenue (including slots) market shares for March:



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Manufacturing PMI In Europe Inflects to Downside

Positions in Europe: Long British Pound (FXB); Short Spain (EWP)


We’ve been calling for some of the high frequency data in Europe to slow on the margin. Today’s release of Manufacturing PMI from the 16 European countries that reported is quite telling: only 2 countries saw an improvement in the number month-to-month, while 14 declined (see chart below).


We remain long the British Pound via the etf FXB and short Spain (EWP) in the Hedgeye Virtual Portfolio. We continue to like countries such as Germany and Sweden due to their fiscal strength and strong export base, but remain generally cautious on the region due to ever-present sovereign debt contagion threats.


Matthew Hedrick



Manufacturing PMI In Europe Inflects to Downside	 - manu

Hedgeye Names The Most Interesting Investor In The World CEO; McCullough To Become Chairman Emeritus

This note was originally published April 01, 2011 at 10:08AM ET

Information contained on this page is provided by companies via press release distributed through PR Newswire, an independent third-party content provider. PR Newswire, WorldNow and this Station make no warranties or representations in connection therewith.

SOURCE Hedgeye Risk Management

NEW HAVEN, Conn., April 1 /PRNewswire/ -- Hedgeye Risk Management, a leading independent provider of real-time investment research and ideas, today announced that The Most Interesting Investor in the World has joined the firm as CEO effective immediately.

Keith McCullough, Founder and retiring CEO of Hedgeye notes, "I’m thrilled to have The Most Interesting Investor in the World accept our offer to become CEO of Hedgeye Risk Management.  He has decades of experiences across markets, and he is really the only person in the world I could envision taking over the helm at Hedgeye as I pursue my lifelong goal of playing in the National Hockey League.”

The Most Interesting Investor in The World has over 50 years experience trading global markets. His vast business experience includes: passing his entire CFA in six months; discovering the Tupi Oil Field in Brazil; teaching Henry Kravis about leverage; advising the Federal Reserve on the creation of Maiden Lane I and II; and managing Warren Buffett’s personal account.

A brief video providing the background of The Most Interesting Investor in the World can be found here: (copy and paste the link into your browser if it doesn't open)


<iframe title="YouTube video player" width="480" height="390" src="" frameborder="0" allowfullscreen></iframe>

Daryl “Big Alberta” Jones, Managing Director, adds, “This is clearly an inflection point in the growth of Hedgeye Risk Management, as our competitor, Goldman Sachs, was purportedly interviewing The Most Interesting Investor in the World to succeed Lloyd Blankfein who is rumored to be moving on to replace Timothy Geithner at the Treasury Department.”

According to The Most Interesting Investor in The World, “In fact, I share many beliefs with my new partners at Hedgeye, but most important it is our common view of Keynesian Economics.  In one word: No.  While replacing retiring CEO Keith McCullough will be no easy task, I, too, will wake up at 4:00 a.m. to manage risk for Hedgeye’s subscribers.”

In addition to his new role as CEO, The Most Interesting Investor in the World will also be recommending Dos Equis for Hedgeye’s annual summer picnic.




Hedgeye Risk Management is an online financial media and research company that operates as a virtual hedge fund.  Focused exclusively on generating and delivering actionable investment ideas, the firm combines quantitative, bottom-up and macro analysis with an emphasis on timing. The Hedgeye team features some of the world's most regarded research analysts – united around a vision of independent and un-compromised real-time investment research accessible to all market participants.  Visit <>  <> for more information.

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