What's New Today in Retail (11/19)

Takeaway: FW picking up esp VFCs TBL/Vans. ICSC growth above ly 3-wks running. AMZN toys cheaper than WMT – for now. WMT scares factories into action.



DKS - Earnings Call: Tuesday 11/19 10:00 am

TJX - Earnings Call: Tuesday 11/19 11:00 am

JCP - Earnings Call: Wednesday 11/20 8:30 am

LOW - Earnings Call: Wednesday 11/20 9:00 am

COH - Morgan Stanley Retail Conference: Wednesday 11/20 9:45 am

M - Morgan Stanley Retail Conference: Wednesday 11/20 10:55 am




ICSC - Chain Store Sales Index


Takeaway: Chain stores posting sales growth above last year for the third week in a row. This supports the statements by many retailers about how October was the strongest month of the quarter, but has carried into November so far.


What's New Today in Retail (11/19) - chart5 11 19

What's New Today in Retail (11/19) - chart6 11 19


Monthly Athletic Footwear Data


Takeaway: Good month for the industry -- in line with commentary from retailers overall about October being the strongest month. Sales were up 5.7% -- balanced evenly between units and average price. Nike, Jordan and UnderArmour are the clear winners  -- but stating that sounds broken record-ish. One of the real callouts for the week are VFC's footwear brands -- Vans and Timberland, which were up 20% and 16%, respectively.


What's New Today in Retail (11/19) - chart1 11 19

What's New Today in Retail (11/19) - chart2 11 19

What's New Today in Retail (11/19) - chart3 11 19

What's New Today in Retail (11/19) - chart4 11 19




AMZN, WMT, TGT, SHLD - Amazon’s Toys Cheaper Than Wal-Mart Online



  • " Inc.’s toy prices were lower than those available online from Wal-Mart Stores Inc. and Target Corp. last week as retailers seek to attract shoppers heading into the crucial holiday selling season."
  • "Amazon’s prices, excluding those from its third-party sellers, were 3 percent lower on average than Wal-Mart’s on a basket of 87 toys, according to a study conducted by Bloomberg Industries on Nov. 14."
  • "Wal-Mart’s prices were 2.4 percent lower than at Target, 5 percent less than Sears Holdings Corp.’s Kmart and 7.2 percent lower than Toys “R” Us Inc., according to the study."


Takeaway: Not for long.


WMT - Wal-Mart to match competitors’ Black Friday deals a week early



  • "...Wal-Mart said Tuesday it will match competitors’ best Black Friday deals a week early.
  • At 8 a.m. on Friday, Nov. 22, Wal-Mart will cut prices on some of the most popular toys and electronics to match the best Black Friday offers from Target, Toys R’ Us and Best Buy."
  • "Starting Tuesday, Wal-Mart will also extend its Christmas Ad Match to online customers. Shoppers who buy an item online and find a lower in-store competitor price can recoup the difference via a Wal-Mart gift card by emailing That policy has been in place for in-store shoppers, and it runs up to Dec. 24, excluding Thanksgiving Day and Black Friday."


WMT - Bangladesh Factory Audits Stir Calls for More Action



  • "Wal-Mart Stores Inc. became the first major retailer to release a large-scale audit of factories from which it sources in Bangladesh, outlining the failure and improvement rates in fire and building safety at 75 facilities. The company manufactures in more than 200 factories in Bangladesh and said it plans to publicly release results from the audits of all of the factories it uses in the country."
  • "Of the 75 companies in the first round of safety assessment reports made public by Wal-Mart late Sunday night, nearly 10 factories failed the initial audit, according to Wal-Mart executives. However, in a second, follow-up safety audit, 34 factories improved their initial grades from a D (a high safety risk) or C rating to an A (the lowest safety risk) or B rating."


Takeaway: Gotta hand it to WMT, they can scare the pants off of any vendor, manufacturer, or factory with the blink of an eye.


MW - Men's Wearhouse Teams Up With Esquire



  • "In the latest incarnation of editorial merging with e-commerce, Men’s Wearhouse has teamed up with Esquire to launch the Esquire Ultimate Shirt and Tie Collection. The line of men’s dress shirts and ties, which sport the Esquire label, is currently rolling out to Men’s Wearhouse stores and will also be available online. The assortment, which was chosen by the editors of the magazine, retails for $79.50 for shirts and $59.50 for ties."


Takeaway: Another example of where the MW brand is headed -- on its own, without Jos. A. Bank. It's shifting to a higher-end, more aspirational mix of product to attract a better demographic. Admittedly, these changes take a looooong time to impact consumers' shopping patterns, but this strategy is definitely the right move for MW.


COLM - Columbia Unveils New High-Performance Construction Technique



  • "...Columbia Sportswear introduces PED, Performance Enhanced Down, a patent-pending construction technique."
  • "TurboDown is a new technology that leverages the strengths of both science and nature, layering natural down, synthetic Omni-Heat thermal insulation, and Omni-Heat Reflective technology into every baffle. The result is an industry first, a product that has the warmth, look and feel of natural down, and performs in all conditions, wet or dry."
  • "Columbia's...collection will be tiered in three categories, Gold, Platinum and Diamond.  And the jackets and vests will range in price from $130 to $325. TurboDown styles will be available to men and women in September of 2014 and will include 14 pieces in myriad colors and styles."


Takeaway: Let's see how long it takes COLM to sell this technology into Kohl's.




Bangladesh Garment Workers Stage Fresh Protests After Two Deaths



  • "Bangladesh garment workers took to the streets today in the Ashulia industrial zone outside of the capital Dhaka, protesting the second-lowest wages in Asia, after another demonstration yesterday left at least two dead."
  • "Hundreds of workers demanded a higher monthly salary of 8,000 taka ($103) today and the protests forced 50 clothing factories to suspend production, Abdus Sattar Miah, a spokesman of Industrial Police, said over the phone. A group of plant owners held a meeting with the home ministry seeking help to control the labor unrest, said Abdus Salam Murshedy, president of Exporters Association of Bangladesh."
  • “'We are very frustrated,' Murshedy said. 'It seems that we have to fold our business, hand over the factory keys to the government and go home.'”


What's Selling: Men's



NEXT, Cleveland, Ohio

  • Dr. Martens Gideon Fold-Down Lace Boot 
  • Timberland’s 40th anniversary limited collection of heritage-inspired looks
  • Filling Pieces Mountain boot

Top fall trend: “Boots are stronger this year than last,” said co-founder Steve Silver. “The action is in hybrid sneaker-boots. Overall, guys have become very specific about items.” 


  • Florsheim’s Indie military-inspired boot
  • Timberland Earthkeepers zip military boot in tan
  • Cole Haan’s Lunargrand wingtip on colored outsole

Top fall trend: Military-inspired boots take the top spot, said owner Abe Rogowsky, and they include pointy- and round-toe ankle versions. 


  • Gram’s 470G cap-toe sneaker boot in black  
  • WESC Saddle Runar style on running outsole
  • Troop Vibram lace-up boot 

Top fall trend: “We’re seeing a lot of military and black boots,” said owner Scott Starbuck. On the dress side, he noted young consumers gravitate toward cleaner looks. “Classic English brogues and bluchers are really trendy. There’s a [move] to quality and cleaner styling.”      

LOUIE’S SHOES, Portland, Ore.

  • Frye Phillip harness boot
  • Bed Stu oxfords
  • Wolverine 1,000 Mile boots

Top fall trend: “Heritage brands are connecting with our customers,” said owner Pam Coven, noting authentic brands such as Frye and Wolverine. “They’re hipsters in their 30s. Younger guys like the look, too, but can’t afford the prices.”


  • Bed Stu Bryden boot
  • Wolverine 1,000 Mile boot
  • Red Wing Iron Ranger

Top fall trend: “Many of our best-selling brands are made in America,” said Josiane Pilon,social media and marketing manager. “The DNA man is a trendsetter and likes to wear something [he] can dress up and down at the same time, from weekday to weekend casual.”

Polar Perspective

“Difficulties are just things to overcome, after all.”

-Ernest Shackleton


Sir Ernest Shackleton was one of the principal figures of a period known as the Heroic Age of Antarctic Exploration.  Initially, this period was most identified by Roald Amundsen reaching the South Pole in December 1911.  Shackleton decided to try to one up Amundsen and launched an expedition to cross Antarctica from sea-to-sea over the pole.


In 1914, Shackleton began fundraising for this “Imperial Trans-Antarctic Expedition”, which was eventually launched in September 1914 despite the outbreak of World War I.  Misfortune struck Shackleton and his crew early in the trip when their ship, the Endurance, was frozen into an ice flow in the Weddell Sea.  The ship eventually had to be abandoned.


For the next almost 500 days, Shackleton and his men were stranded in Antarctica.  They had no contact to the outside world and routinely faced temperatures that dipped below -50 degrees Celsius.  Eventually after an almost impossible trip to a nearby whaling station, the entire crew was rescued.  While the expedition fell short of its goal, Shackleton and his colleagues certainly gained some polar perspective.


Back to the global macro grind...


Similarly, for many hedge fund managers this has been a year to gain perspective, if not outperformance.   As an example, as of the end of October 2013 the Hennessee Hedge Fund Index was up 9.9%, which paled in comparison to the return of the SP500 of north of 23%.  Now to be fair, returning close to 10% on 2 and 20 money isn’t the worst thing in the world, but undoubtedly for many underperforming a passive strategy by more than 1,000 basis points is frustrating.


Keith touched on this yesterday, but a key reason for the underperformance of hedge funds is the outperformance of heavily shorted stocks.   Specifically, heavily shorted stocks are outperforming the SP500 by some 570 basis points this year.  That’s enough to make any great short seller bi-polar!


Long / short equity managers likely aren’t the only investment managers going a little bi-polar this year. As an example, the PIMCO Total Return Fund has returned a capital eroding -0.87% in the year-to-date.   Clearly, the big bond boys at PIMCO are having some performance issues (not to say that it would at all be easy to steward that much capital!).


The broader issue with bond managers of course is how far afield they eventually have to search for yield.  Just like Shackleton and his crew in Antarctica, who eventually found land, the question for bond managers is ultimately: what is the cost of this search for yield?


As it relates to the PIMCO Total Return Fund, prospective underperformance may even be more concerning given the fund’s holdings and where the managers have gone to find yield.  According to analysis by our Financials Team, almost 34% of PIMCO Total Returns holdings are in agency mortgage backed securities.  In the Chart of the Day, we highlight the spread of agency MBS to the 10-year Treasury Yield.   As the chart highlights, prior to the financial crisis this spread was ~126 basis points, but has now narrowed to ~68 basis points.


The almighty chase for yield has effectively priced mortgage backed securities to one of the lowest levels of risk that we’ve seen in the asset class.  Even if the spread for Agency MBS just normalized by 50 basis points to pre-crisis levels, it would have a meaningful impact on the market.  By our estimation, allowing for modified duration, a 50 basis increase (reversal of tapering for instance) in yield would lead to 5% downside in the Agency MBS market.


The issue for firms like PIMCO is that a 5% correction in one of its more significant asset class exposures is likely to lead to continued underperformance and accelerated outflows.   Outflows and decreased liquidity, of course, are only likely to exacerbate any move in price in the MBS market.


The Financial Times this morning emphasized this point even further in an article looking at managers of collateralized loan obligations.  According to the article, managers of CLOs have increased the proportion of risky loans that their investment vehicles are allowed to buy to the highest level on record.  Currently, 55% of new leveraged loans come in the covenant lite form, which eclipses the 29% reached shortly before the financial crisis. 


Covenant lite loans are fine, in theory, if the economy is stable, but if there is volatility in economic activity, these loans get much more difficult to repay for many corporates.  A good analogy is probably Shackleton and his crew in -50 degrees Celsius weather in Antarctica.  You know weather that cold is dangerous but it is survivable, until the wind starts to blow and wind chill sets in . . .


To dig further into the topics of asset allocation, our Financials Team will be hosting a call his Thursday November 21st at 11am with Carl Hess who is the global head of Towers Watson’s investment advisory services that provides asset allocation recommendations to more than $2 trillion in assets under advisement.  We think this call will provide an interesting perspective on asset allocation and active management, and if you’d like details on how to get access to the call, please email .


Given the challenges faced by large asset allocation funds that rely heavily on yield for performance, going forward it might be prudent that managers of these funds search for analysts for their investment teams with a similar advertisement to what Shackleton used to find his crew:


“Men wanted for hazardous journey. Small wages. Bitter cold. Long months of complete darkness. Constant danger. Safe return doubtful. Honour and recognition in case of success.”




Keep your head up and stick on the polar ice,


Daryl G. Jones

Director of Research



Polar Perspective - chartofday


Polar Perspective - Virtual Portfolio

Early Look

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Fed Breeding Contempt

Client Talking Points


The impact of Janet "Mother of All Doves" Yellen was precisely what it should have been on both currencies and interest rates. See Dollar Down, Rates Down with no plan to taper anytime soon. The US Dollar Index failed at our Hedgeye TREND of $81.39 which makes the EUR/USD look stronger now even though the ECB cut rates.


Treasury yields sold off into and out of the Yellen Dove-Fest. Now it gets interesting as my TREND line of support is 2.63%. Resistance is 2.81%. For now, I’m looking for 2.63% to hold. So shorting Treasuries is back in my head again.


It's been just a disaster of a year for Commodities. The CRB Index hit a fresh year-to-date low yesterday down -7.8%, in spite of US Dollar weakness. After selling Gold into that Thursday Yellen bounce, my asset allocation to Commodities is back at 0%. We are short Oil too in #RealTimeAlerts.

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

Our bullish call on the British Pound was borne out of our Q4 Macro themes call. We believe the health of a nation’s economy is reflected in its currency. We remain bullish on the regime change at the BOE, replacing Governor Mervyn King with Mark Carney. In its October meeting, the Bank of England voted unanimously (9-0) to keep rates on hold and the asset purchase program unchanged.  If we look at the GBP/USD cross, we believe the UK’s hawkish monetary and fiscal policy should appreciate the GBP, as Bernanke/Yellen continue to burn the USD via delaying the call to taper.


WWW is one of the best managed and most consistent companies in retail. We’re rarely fans of acquisitions, but the recent addition of Sperry, Saucony, Keds and Stride Rite (known as PLG) gives WWW a multi-year platform from which to grow. We think that the prevailing bearish view is very backward looking and leaves out a big piece of the WWW story, which is that integration of these brands into the WWW portfolio will allow the former PLG group to achieve what it could not under its former owner (most notably – international growth, and leverage a more diverse selling infrastructure in the US). Furthermore it will grow without needing to add the capital we’d otherwise expect as a stand-alone company – especially given WWW’s consolidation from four divisions into three -- which improves asset turns and financial returns.


Financials sector senior analyst Jonathan Casteleyn continues to carry T. Rowe Price as his highest-conviction long call, based on the long-range reallocation out of bonds with investors continuing to move into stocks.  T Rowe is one of the fastest growing equity asset managers and has consistently had the best performing stock funds over the past ten years.

Three for the Road


Yellen is so scary for American Purchasing Power (USD) that even the Euro hangs in post rate cut @KeithMcCullough


Realize that if you have time to whine and complain about something then you have time to do something about it. - Anthony D'Angelo


$13,000,000,000: The Justice Department and JPMorgan Chase are nearing completion of a $13 billion settlement related to the bank's past mortgage practices. A final deal is expected as soon as today.

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TODAY’S S&P 500 SET-UP – November 19, 2013

As we look at today's setup for the S&P 500, the range is 30 points or 0.87% downside to 1776 and 0.81% upside to 1806.                  










THE HEDGEYE DAILY OUTLOOK - 10                                                                                                                                                                  



  • YIELD CURVE: 2.40 from 2.39
  • VIX closed at 13.1 1 day percent change of 7.47%

MACRO DATA POINTS (Bloomberg Estimates):

  • 8:30am: Employment Cost Index, 3Q, est. 0.5% (prior 0.5%)
  • 9:am: Chicago Fed’s annual agriculture conference
  • 11am: Fed to purchase $2.75b-$3.5b in 2021-2023 sector
  • 11:30am: U.S. to sell 4W bills
  • 2:15pm: Fed’s Evans speaks in Chicago
  • 4:30pm: API weekly oil inventories
  • 7pm: Fed’s Bernanke speaks to Economists Club in Washington


    • 8:40am Institute of Medicine holds workshop on impact of Affordable Care Act on preparedness resources,  programs. Asst HHS Sec. Nicole Lurie to speak. National Academy of Sciences
    • 1:30pm: Vice President Joe Biden travels to Houston to speak on infrastructure, economy; Transportation Sec. Anthony Foxx attends.
    • 1pm: Media briefing by Press Sec. Jay Carney.
    • 1pm:U.S. Department of the Interior Bureau of Reclamation holds a public meeting and technical workshop on cost allocation study for the Central Valley Project
    • 3pm: Senate Cmte on Homeland Security and Governmental Affairs holds hearing on risks of virtual currencies, with Bitcoin Foundation General Counsel Patrick Murck. 342 Dirksen
    • 2pm: Office of the Comptroller of the Currency’s Mutual Savings Association Advisory Cmte holds a public meeting on current condition, regulatory changes of mutual savings


  • JPMorgan said to agree to final details of $13b settlement
  • JPMorgan said in talks to sell $4b private-equity stakes
  • U.S. opens probe of fires in Tesla’s Model S electric sedan
  • OECD cuts global growth forecasts on emerging-market slowdown
  • Apple can pursue U.S. block of Samsung smartphones, court says
  • Apple said to be in talks to Buy Israel’s PrimeSense
  • Sony said hiring Bain to find $100m in entertainment cuts
  • Dropbox said to be seeking more than $8b value in funding
  • Yellen nomination for Fed chairman to get panel vote this wk
  • NLRB accuses Wal-Mart of illegally firing workers who protested
  • Cepsa to Buy Coastal Energy for $2.2b to raise Asian Output
  • CLP agrees to pay $1.8b for stakes in two Exxon units
  • European car sales rise second straight month on Spain surge
  • Camp aide said to tell groups tax proposal possible by January
  • U.K. said to investigate traders’ personal currency dealing
  • Spain sells 1-yr bills to yield 0.678%, lowest on record


    • Best Buy Co (BBY) 7am, $0.12 - Preview
    • Campbell Soup Co (CPB) 7:30am, $0.86
    • Diana Shipping (DSX) 7:45am, $(0.06)
    • Dick’s Sporting Goods (DKS) 7:30am, $0.39 - Preview
    • George Weston (WN CN) 8am, $1.44
    • Home Depot (HD) 6am, $0.90 - Preview
    • La-Z-Boy (LZB) 4pm, $0.26
    • Medtronic (MDT) 7:15am, $0.90 - Preview
    • Saks (SKS) 8am, $0.11
    • TJX Cos. (TJX) 8:28am, $0.74 - Preview
    • Trina Solar (TSL) 6:30am, $(0.21)
    • Valspar (VAL) 7:30am, $0.92


  • Indonesia Weighs Ore Ban as Citigroup Increases Nickel Forecast
  • Gold No Slam-Dunk Sell in China as Aunties Pounce: Commodities
  • WTI-Brent Nears Widest Since March Amid Stimulus Taper Talk
  • Copper Declines to Three-Month Low on U.S. Builder Sentiment
  • Cocoa Halts Rally as Ghana May Accelerate Sales From Next Crop
  • Rubber Declines for Second Day as Yen’s Rebound Weakens Appeal
  • Gold Swings as Investors Weigh Stimulus After Rally in Equities
  • Wall Street Pushes Back on CFTC’s Advisory for Overseas Swaps
  • Egypt’s Thirst for Cheap Gas Threatens Export Prospects: Energy
  • Japan Seeks to Buy Most Milling Wheat in Three Months in Tender
  • Zinc Premium Said to Be Steady in Past Month During Supply Talks
  • Onions Bring Tears to RBI’s Rajan as Prices Surge: India Credit
  • Rio Tinto, Paladin Uranium Mines in Namibia Face Water Shortage
  • Rebar Advances in Shanghai on Lower Stockpiles, Demand Outlook



























The Hedgeye Macro Team














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