Drip…Drip…Drip…

The Chinese water torture continues... Contrary to what might be a glimmer of hope, China’s answer to ‘Hank the Tank’s’ bailout plan won’t help the apparel/footwear industry in the US.
Adidas, Nike, and Puma all have announced recently that they are relocating manufacturing capacity outside of China. Interesting that Nike and Adidas only source about a third of their footwear in China, versus 90%+ at most other US companies. These companies have been around the block a few dozen times. Most other players have not. There’s massive tail risk for those lacking a proactive strategy here.

While I take any statistical evidence from Chinese authorities with a massive grain of salt, Government stats show that 67,000 factories were shuttered in China in the first half of the year, and more than 100,000 plants will have closed by year-end. My math suggests that about 8-10% of this is footwear and apparel.

An interesting story highlighted in the LA Times noted the closure last week of China’s biggest textile dye operation — with four factories, a campus the size of 31 football fields, 4,000 workers, and 300 local suppliers that also face bankruptcy. Not good at all…

Is China’s stimulus package going to help? My two cents is that we should not hold our breath. Do you REALLY think that a domestic stimulus plan that could very well end up being the same size (in US dollars) as Paulson’s bailout plan is geared toward amping up the firepower for low-end export goods? Quite the opposite… That’s the exact business that China is trying to shift away from in its quest to morph into more of a local consumer-driven economy instead of a sweat-shop economy. That’s great for companies who’s net revenue base in China is greater than its sourcing base (Nike and Adidas are the only ones that come close), but everyone else will suffer the imbalance.

Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more