Despite recent management assertions to the contrary, we believe the big slot expansion at Sands Bethlehem will be delayed past year end.



Everyone knows that the retail and hotel portion of Sands Bethlehem is being mothballed until both economic and liquidity conditions improve. However, we have now confirmed that LVS will only "modestly" increase its slots at Bethlehem by 250 units instead of the 2,000 units commonly expected (by the sell side).  We've also seen incorrect sell side projections of almost 3,000 units shipping into PA in 2010, despite the fact that only one of the two Philadelphia projects has even broken ground and the other still hasn't nailed down a site.  But we're used to the sell side being wrong.


Back to Sands Bethlehem, the property appears to be promoting very aggressively to increase visitation to the property, especially midweek.  Our EBITDA estimate for Bethlehem is $22MM in 2009 and $38MM in 2010 (vs the Street close to $70MM).  Unless there is a miraculous economic recovery, it could take at least three years for the property to reach mature margins approaching 20%.  The Street consensus numbers suggest Sands hitting 19% margins after just 2 full quarters of operations.  Pipe dream.  As a reminder, when you include the fees payable to PA, the real tax rate is close to 60%.  According to another PA operator, there is no way that labor will be less than 10% of revenues, and then one has marketing and all the other costs to consider.  That same competitor allocates 4-5% of gaming dollars to marketing, but given that Sands' property is brand new, its spending on marketing is materially above that percentage.


LVS is still all Macau, all the time, and that is certainly our focus.  The Bethlehem situation is only marginally negative for LVS and the slot manufacturers.






 AUGUST 26, 2009




  • Despite outside appearances, Staples believes this year’s promotional level for the back to school season is consistent with last year. Sales are off to a good start for the season. Within the quarter PC sales had a strong showing with comps up mid single digits, driven by strength in laptops and notebooks. Overall, same store sales trends in the North American market have now improved sequentially for the third quarter in a row.


  • It might be “too little, too late” for Borders as the company re-merchandises its stores by substantially shrinking its multimedia department while increasing the focus on children’s. As a result of inventory clearance, declining secular trends, and poor competitive positioning, Borders’ music/dvd same store sales declined by 50% in the quarter. The category overall accounts for roughly 8% of total sales vs. a 23% peak in 2002. Despite all the changes underway, Borders continues to lose market share, which same store declines in the quarter of 13% vs. Barnes & Noble which posted a 6.9% decrease over the same period.


  • As Winn Dixie continues to execute a corporate turnaround, it recently relaunched the Jacksonville market with the completion of 51 remodels. In response to the massive market upgrade, Publix responded immediately with a zoned circular program focused specifically on the trade area. The competitive response, while not overly aggressive on price or breadth, is clear acknowledgement that Publix isn’t going to sit back and watch WINN regain share easily. Expect more competitive response from Florida as Winn remodels additional districts against what is already one of the most challenging state economies in the country.


  • In a sign that new management is comfortable with the merchandising changes underway at Chico’s, the company returned to television advertising for the first time since August 2006. The ad campaign will run through October during programming oriented towards women viewers. Coinciding with the return to TV, was the reporting of the company’s first positive same store sales result in 11 straight quarters. Momentum has carried into August and the company expects to report another quarter of positive same store sales trends in 3Q.


  • Rather than wait for lease expirations, Casual Male is taking their efforts to reduce rents on offense. The company is attempting to renegotiate every one of its 487 leases. Approximately 100 stores per year are expected to come up for renewal based on the normal course of business.


  • One of the key beneficiaries of the weakness in the video game industry is close-out retailer, Big Lots. After testing video game sales in 25-30 stores, the company is expected to rollout the category to the entire chain by the middle of September. The company noted there is great value being offered by the studios and gaming manufacturers in an effort to clean up inventories. The pet category also remains a key area of focus for BIG, with double digit same store sales increases in the category.


  • Concerns over a potential surge in cotton prices due to the same drought conditions that drove sugar prices up 20% in the first 8 days of August have subsided. Sugar prices are now flattening and cotton is 11% off its highs over the last 8 sessions. This is positive for both Hanesbrands and even more so for Gildan (cotton is roughly 30% of COGS).





-Neil Cole, chairman, president and chief executive officer of Iconix Brand Group Inc., oversees a company that owns and manages 19 brands — from Badgley Mischka and London Fog to OP, Rocawear and Candie’s, all of which are known for their provocative marketing campaigns. “You’ve got to do something exciting and innovative and touch consumers’ sensibilities to get share of mind,” said the ceo, the brother of designer Kenneth Cole. Overall, the brands include over 200 fashion licenses and 15 direct-to-retail licenses and represent over $8 billion in annual retail sales. When asked if Iconix is hunting for more acquisitions Neil Cole replied "Definitely. That is part of our growth strategy. We were just named one of Fortune Magazine’s 100 fastest-growing companies and a lot of that comes with acquisitions: Today we have 19 brands, our goal is to own 50 over the next three to five years, and it’s going to come through acquisitions. As a public company we can’t talk specifics, but we’re now engaged with five different iconic brands we feel would be wonderful additions."  When asked about the role  of social media in Iconix's marketing and advertising Neil Cole replied, "In our youth brands, it is huge now, and a critical component in every campaign. We use it today in every one of our brands. We work with Facebook, Twitter and many different blogs and ways of connecting to consumers wherever they are. We have young people in marketing who understand how to get the word out without spending a lot of money. We’re launching campaigns through social networks where we hit millions and millions of people before we spend a nickel on traditional media." <>


-The Finish Line on Tuesday announced the creation of a new e-commerce division- The Finish Line on Tuesday announced the creation of a new e-commerce division and appointed former chief information officer and EVP of information systems and distribution Donald Courtney as president of the group. The new division brings together the e-commerce advertising, design and content team, which had been divided between the marketing and information systems departments. It will focus solely on content, sales and the customer experience at Courtney will report directly to CEO Glenn Lyon. <>


-As they trudge through the back-to-school season, retailers don’t see much of a break for holiday - The latest predictions call for holiday same-store sales to be flat to down in the low single digits compared with a year ago. On the upside, profit margins are expected to be better, due to conservative buying, possible pent-up demand and lower prices to project an aura of greater value and dodge the markdown mania of a year ago. Stores will benefit from easy comparisons with last year’s depressed season, and an extra day for shopping between Thanksgiving and Christmas — 28 this year, versus 27 in 2008. “It’s going to be a tough season,” said Lisa Schultz, executive vice president of apparel design at Sears Holdings Corp. Apparel, apart from denim, cashmere and festive styles, is expected to be less of a factor than ever as demand increasingly skews toward small electronics, such as the Kindle, and giftables. Previews of the upcoming holiday merchandise indicate a wider array of items at stores’ lowest or “opening” price points and more exclusives either through private label products or working with suppliers.  Also high on the merchandising agenda are:  Giftables, such as candles, picture frames, soaps, chocolates and tree ornaments, which will usurp some space traditionally devoted to more expensive products like apparel and outerwear.  Cashmere, which seems to grow each year as a percentage of the offering, as well as skinny jeans, embellished jeans and pet apparel and accessories. While retailers are better prepared than last year, executives recognize there is still immense economic uncertainty that could keep consumers out of stores and throw even their ultraconservative projections out the window. <>


-Esprit Profit Falls 26% on Europe Recessions, Missing Analyst Estimates - Esprit Holdings Ltd., the biggest clothing retailer listed in Hong Kong, said full-year profit fell 26%, the first decline in more than a decade, after its biggest markets in Europe fell into recession. The clothier’s profit growth may resume as Germany and France haul Europe out of its worst economic slump since World War II, unexpectedly returning to growth in the second quarter. Esprit, which makes more than four-fifths of revenue in Europe selling products from jeans and sunglasses to towels and bed sheets, suffered as the euro-region economy slid into recession. The company expects to see earnings improve the first quarter next year as economies recover. <>


-Belle Profit Climbs 15% on China Shoe Sales, Beating Analysts' Estimates - Belle International Holdings Ltd., China’s largest retailer of women’s shoes, said first-half profit rose 15%, beating analyst estimates, after it boosted promotions to raise footwear sales. The shoemaker, whose brands include Staccato and Joy & Peace, continued to open stores and focused more its footwear business, which has higher margins. Belle this month agreed to sell its Fila sports brand business in China, Hong Kong and Macau to Anta Sports Products Ltd. for as much as HK$600 million ($77 million).  <>


-Westfield Says Property Values Have Bottomed After Writedowns Prompt Loss - Westfield Group, the world’s largest owner of shopping centers, said property values in the U.S., U.K, Australia and New Zealand markets have reached their low and the company doesn’t need to sell shares to raise capital. <>


-Target, Digital Fusion team up for ad play - MTV Networks’ Digital Fusion has partnered with Target to unveil a potentially high-impact ad treatment for online video called The Scrubber, which -- at least in this case -- incorporates Target’s colors and logo into a video player. The two companies have presented a demo of The Scrubber using a video clip from the site The "Scrubber" name appears to refer to the way Target’s messaging and brand imagery envelope the player itself, as well as any corresponding ad units. For example, during a short clip featuring a craft project for kids, Target branding takes over the bottom of the video screen, as the company’s recognizable bull's-eye logo actually serves as the video’s playback timer -- moving from left to right through the duration of the clip. Also, as the video streams, the Target bull's-eye interacts with several branded icons placed within the bottom border of the player, triggering various overlay ads to appear on the screen touting different, theoretically timely offers.  In addition to the iconography, Target also runs a brief pre-roll ad message prior to the clip as part its Scrubber treatment. Plus, the retailer’s logo is seen persistently in the lower right hand corner of the player. <>


-Sears builds home improvement site - After two years of beta testing, Sears Holdings Corp. has finally switched on, a site designed to help consumers with home improvement projects. The site went live Tuesday, and Sears Holdings—which owns Land’s End, Kmart and Sears—is positioning it as a one-stop online destination for home-related projects. This will also serve as Sears' main selling point to differentiate from other home improvement portals, said Jim Hilt, vp of divisional holdings for Sears. He argued that while many do-it-yourself sites already exist, only a few actually give homeowners the motivation and resources to succeed. “It’s not just about giving [homeowners] another place to store information or keep track of stuff, but . . . to help them actually do it,” Hilt said. Sears Holdings is relying on word-of-mouth, social media and home enthusiast blogs to build buzz. Likewise, the company is driving traffic to via e-mails to customers who’ve made a significant home furnishings or equipment purchase.  <>


-Survey and analyst agree: Old Navy leads in back-to-school retail sites - A new study by the National Retail Federation and an industry expert both rank Old Navy as one of the best back-to-school retail web sites. <>


-Ike Behar is rounding out its offering for the dressed-up man with its first license for outerwear, which will hit stores for fall 201 - The deal partners the family-owned dress shirt maker with a new entity, Harbour International, a company formed by one of the owners of the leather coat resource Boston Harbour LLC, and an investment group from China. “In the last six months, Ike Behar has worked to become the premier American dresswear brand,” said Behar president Alan Behar. “Since my father started making shirts, we have added neckwear, small leather goods, cuff links and, most recently, tailored clothing. It made perfect sense to complete the story with a range of dressy outerwear.” The Ike Behar outerwear business will be headed by coat veteran Carlo Quintiliani, who joined Harbour International from Stuarts Leathers. He said retailers can expect a 20-piece collection of suit-friendly coats and jackets with modern, sophisticated styling. The coats, all 38 inches in length or shorter, will come in cashmere, luxury wools, leathers and technical materials, and will be sold at better specialty stores. “These will be coats for the guy with the corner office who wants confidence, fashion and elegance in his clothes,” Quintiliani explained. <>


-A new concept at the newest Bass Pro Shops takes bowling pin target shooting to a whole new level - The new Bass Pro Shops store in Altoona, IA features a 15,000 square foot bowling center.  The nautically themed Uncle Buck’s Fish Bowl and Grill was an extensive joint effort between Brunswick and Bass Pro Shops to create the first-ever in-store bowling center. This new 15,000 square-foot bowling center features 12 custom-designed lanes divided into two 6- lane areas, billiards room with a fireplace, two tournament pool tables and a casual family dining area for up to 150 people. An island-themed bar features an elevated 750-gallon saltwater aquarium of exotic fish. Bowlers will walk up to a wooden ship to rent shoes and reserve lanes, while surrounded by hand-painted wall murals of ocean life along with fish mounts suspended from the ceiling.  <>


-Miley Cyrus' upcoming CD "The Time of Our Lives" will release Aug. 31 only at Walmart stores and its online site - The latest release from the "Hannah Montana" star will feature seven tracks, including her new single "Party in the USA." The CD, which will retail for $8, is currently available for preorder at A digital album version is also available for $7. Earlier this month, Walmart rolled out its new Miley Cyrus & Max Azria clothing line, offering tops, pants, graphic tees, shoes and accessories. Everything in the collection retails for less than $20. The fourth season of Disney's "Hannah Montana" will begin production in 2010. <>


-Country music star Kenny Chesney plans to roll out his first apparel line at an invitation-only concert next week, coinciding with MAGIC - Chesney's Blue Chair Bay clothing label will feature T-shirts, shorts, khakis, button-down shirts and hats. The line will retail from $35 to $72. "MAGIC is the biggest show in the world for this sort of the thing and I love the idea that these clothes are out there for the buyers to get to see them," says Chesney. "The clothes are casual, comfortable and easy to wear wherever you're headed... and that was the whole point. Whatever you've got to do, something in this line will work." <>


-Peru has decided not to impose any safeguard duties on Indian cotton yarn imports - Peru has decided not to impose any safeguard duties on Indian cotton yarn imports, an effort made by the Cotton Textiles Export Promotion Council (Texprocil) and the diplomacy by Indian Embassy in Peru. Exports of Cotton yarn from India reached US$ 94.45 million during 2008, representing a growth of 73.62%. Due to the safeguard investigations, imports of Cotton yarn from India during the first six months of 2009 recorded a sharp decline of 54.25% to US$ 24.79 million. In face of a downturn faced by Cotton yarn factories in Peru represented by Sociedad Nacional de Industrias, a complaint was filed to National Institute of Defense of Competition and Protection to the Intellectual Property claiming that rising imports of Cotton yarn are causing threat to the domestic Cotton yarn producers in Peru and requested imposition of safeguard duties on imports of Cotton yarn from all countries including India. <>


-South African clothing manufacturers and companies are going to meet up with union leaders this week to try to prevent a strike - South African clothing manufacturers and companies are going to meet up with union leaders this week to try to prevent a strike of 60,000 workers due to wage disputes. Under annual wage negotiations, the Southern African Clothing and Textile Workers Union has been asking for income to rise by 7.9%, compared to the 5% offered by employers. If the talks on Wednesday (Aug 26th) fail to strike a deal, the union will ballot its members on the possibility of industrial action.  <>


-Fast-fashion specialty retailers have outperformed department stores a study says - Fast-fashion specialty retailers “with exceptional speed-to-market” have outperformed department stores and less nimble specialty stores not only in their profit margins, but also in their pace of revenue growth, according to a study by The Sage Group LLC’s Apparel and Retail Group. Surveying results from 47 retailers, all of them publicly held and the overwhelming majority of them based in the U.S., Sage found in the last 12 months, the five stores with the best EBITDA margin — earnings before interest, taxes, depreciation and amortization as a percentage of sales — were Hennes & Mauritz, at 23.4%; The Buckle Inc., at 22.5%; Zara operator Industria de Diseno Textil SA (Inditex), at 20.3%; Urban Outfitters Inc., at 19.8%, and Fast Retailing Co. Ltd., owners of Uniqlo, at 18.6%. Other specialty retailers — such as Gymboree, Jos. A. Bank Clothiers Inc., Aéropostale Inc., Gap Inc. and American Eagle Outfitters Inc. — filled out the top 10 rankings with marks ranging from 18% down to 13.9%, but Kohl’s Corp. distinguished itself as the best broadlines retailer with an 11th-place finish at 12.6%. Abercrombie & Fitch Co. (11.7%) and Limited Brands Inc. (11.6%) followed, before the first upscale department store appeared on the list, Nordstrom, whose 11.4% mark placed it at 15th. “On a market-cap weighted basis, stock prices for the fast-fashion subset have gained 17.3 percent over the past year, trading at 11.3 times [EBITDA for the last 12 months], on average,” Sage noted. By comparison, the department stores cited in the study — Macy’s, J.C. Penney Co. Inc., Nordstrom and Dillard’s — had seen their stock prices decline 17.8 percent over the last year and were trading at an EBITDA multiple of 7.9 times.  <>



RESEARCH EDGE PORTFOLIO: (Comments by Keith McCullough): AMZN


08/21/2009 10:38 AM


I've been looking for an out in this position, and what else can I say - I'm out. Selling green. KM



Despite the steep recovery in property prices on the mainland and in Hong Kong, Macau has been slower to rebound.  In Shanghai and Beijing, prices are back to their pre-crisis peak levels and in Hong Kong prices are now within 6% of last year’s peak levels.  Macau’s property prices are still 33% below peak levels reached at the end of 2007.  

SCMP sees an implied upward trend, citing eight catalysts driving a recovery in the Macau property market: improving news flow, relaxation of visa restrictions, macro recovery, an equity market rebound, the successful opening of Melco’s City of Dreams, greater co-operation among operators, cost-cutting, and foreign exchange and tax changes.



Regulators could still find significant obstacles to put in the way of both Wynn and LVS’s IPO bids in Hong Kong.  Although news has emerged that visa restrictions could possibly ease from October, and stock market conditions are favorable, GC sees the listing committee as being less cooperative than analysts may be assuming.  LVS is singled out as having serious issues to resolve vis-à-vis its liquidity, stalled projects, and the Singapore project that is stretching its financial capacity.

There is concern over where LVS will put money to raise from an IPO.  Another question is whether or not LVS will be able to sell its Four Seasons condominiums to the public as planned.  There is a potential conflict, also, in that LVS could be incentivized to compel patrons to go to their venue in Singapore, where gaming tax will be lower.  Whether LVS has the right to run its CotaiJets ferry concession, “a key tool to support visitation”, is under litigation.  Yet another issue is whether Singapore will allow junket operators.  A South Korean junket operator with a VIP room at the Venetian Macau was recently arrested for “running an unlicensed gaming operation”.  To speculate that the Singapore government may be averse to inviting such characters to their shores might not be too wild an assumption.

For Wynn, there are rumors circulating that dependence on a certain junket operator could see its market share in Macau slip to fifth among Macau’s operators.  This could obviously, if true, affect the stock.



Taubman Centers has pulled out of Macau Studio City, recovering its 25%, US$65 million interest in the shopping mall development.  Morgan Parker, Taubman’s Asia Pacific region president is cited as saying, “Under the established agreement, if the developers, Cyber One, were unable to secure financing within an 18 month period, Taubman would get its 25% share back.  That’s what happened, as the set period expired on August 11th.”

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Part of Hell

“I'm not concerned about all hell breaking loose, but that a PART of hell will break loose... it'll be much harder to detect.”

-George Carlin


George Carlin passed away at the age of 71 last year. Like most of us wanna be market prognosticators, he was an author, an actor, and a comedian. If you can’t wake up and find something funny about this business, you are probably not awake.


We have just witnessed the 2 largest percentage moves in modern US trading history – and as my former (Montreal born) hockey roommate, Frenchie Magnant, would say: “those are two fried egg, side by each, eh.”


  1. SP500 October 10th, 2007 (1562) to March 9th, 2009 (676) = -57%
  2. SP500 March 9th, 2009 (676) to August 25th, 2009 (1028) = +52%


No, these eggs can’t be scrambled. They are already cooked. No matter what your storytelling narrative said, and no matter where you go this morning, there they are – right on your plate.


Not that I am keeping track of the score or anything, but Bloomberg did that for me anyway this morning. On that fine aforementioned morning of March 9th, 2009, one Nouriel Roubini called for the SP500 to hit 600. This business is funny, indeed.


What’s not funny is losing money. Now that we know that markets can crash versus expectations, both ways, we need to learn from it. We as an industry need to continuously evolve. Every day we have to address this market much like a patient. Take its critical signals for what they are, and move forward.


As I look forward, I’m not so much looking for Roubini’s or Rosenberg’s one way advice – I’ll go with Carlin’s. As of this morning, “I’m not concerned about all hell breaking loose, but that part of hell will break loose.”


Trying to call intermediate term tops in markets is for storytellers. Trust me, I try to tell mine every day! What I have learned from the Top, to the Bottom, and Back Again (sounds like a good name for a book), is that tops and bottoms are processes, not points.


In the immediate term, I am very comfortable making what Wall Streeters of responsibility in recommendation years past call “making the call.” I’ve had enough pucks to the head to try to do this every day. I guess the numbness of it all provides me with outputs.


Today will change tomorrow. But today, I see the risk in the US stock market beginning to cleanly outstrip the reward. On the margin, I have been bullish. So this is a change for me, and here are the reasons why:


  1. Daily risk/reward has shifted to the risk side for the 3rd day in a row – this is new
  2. Immediate term risk/reward in the SP500 is -2% risk versus +1% reward (1007-1040 is my new range)
  3. The range of probabilities (again, risk/reward) when I elongate my duration beyond 3-days is now 65 SPX points, that number was 40 points on Friday
  4. Daily volume studies are starting to flash bearish (up days coming on sequentially declining volume – yesterdays new high came on -7% day/day volume)
  5. The market’s breadth is no longer a layup (Advance Decline line was 59% to 38% yesterday – that’s barely bullish AT the YTD high)
  6.  Howard Penney’s S&P Sector Views has flashed only 5 out of 9 Sectors closing up in the last 2-days (that number was 7 or 8 out of 9 last week)
  7. US Healthcare and US Technology are almost flashing beyond 2 standard deviations overbought (my favorite sectors, but overbought is as overbought does)
  8. The US Dollar has been holding the critical line of $78 support for the last 3 days; with the WSJ + Barons parroting my thesis, it’s starting to morph into consensus
  9. If the US Dollar breaks out above $78.63 and the VIX breaks out above 25.04, everything REFLATION is going to go down


So, those are some of the quantitative reasons. However, any well rounded multi-factor model should incorporate Behavioral Psychology into its construction. On that front, I am seeing the most glaring level of groupthink I have seen on one specific factor since, well, the market was topping out in October of 2007.


That factor is the spread between Bulls and Bears in the weekly Institutional Investor Sentiment survey. This morning has finally registered more than 50% of the portfolio managers in the USA as being BULLISH. Yes, they will finally admit it! AFTER the move, of course, but no matter where they go this morning, there they are.


The Bulls have moved up from 48% last week to 52% this week (new highs). The Bears have been bludgeoned, dropping from 23% to 19.7%. The spread between the two is 32 points wide. This combined with 3-month US Treasury rates hitting a new low at 0.15% (yes, that’s ZERO lending rates), is a consensus cocktail for “part of hell to break loose.”


Sometime in the next 3 months, and I have not yet made my call from a timing perspective to the day yet (yes, I am numb enough to do that, and I will), “part of hell will break loose.” It won’t be in Brazil, or Hong Kong either. It will be right here, in the compromised US Financial System that we have barricaded ourselves with.


I have sold down my allocation to US Equities to 3%. That’s the lowest representation I have for any asset class currently. I’m going to go eat my eggs now.


Best of luck out there today,






EWH – iShares Hong KongThe current lower volatility in the Hang Seng (versus the Shanghai composite) creates a more tolerable trading range in the intermediate term and a greater degree of tactical confidence.  


EWZ – iShares BrazilPresident Lula da Silva is the most economically effective of the populist Latin American leaders; on his watch policy makers have kept inflation at bay with a high rate policy and serviced debt –leading to an investment grade credit rating. Brazil has managed its interest rate to promote stimulus. Brazil is a major producer of commodities. We believe the country’s profile matches up well with our reflation call. 


QQQQ – PowerShares NASDAQ 100We bought Qs on 8/10 and 8/17 to be long the US market. The index includes companies with better balance sheets that don’t need as much financial leverage.  


CYB – WisdomTree Dreyfus Chinese Yuan The Yuan is a managed floating currency that trades inside a 0.5% band around the official PBOC mark versus a FX basket. Not quite pegged, not truly floating; the speculative interest in the Yuan/USD forward market has increased dramatically in recent years. We trade the ETN CYB to take exposure to this managed currency in a managed economy hoping to manage our risk as the stimulus led recovery in China dominates global trade.


TIP– iShares TIPS The iShares etf, TIP, which is 90% invested in the inflation protected sector of the US Treasury Market currently offers a compelling yield. We believe that future inflation expectations are currently mispriced and that TIPS are a efficient way to own yield on an inflation protected basis, especially in the context of our re-flation thesis. 


GLD – SPDR Gold - Buying back the GLD that we sold higher earlier in June on 6/30. In an equity market that is losing its bullish momentum, we expect the masses to rotate back to Gold.  We also think the glittery metal will benefit in the intermediate term as inflation concerns accelerate into Q4. 





XLP – SPDR Consumer Staples – We shorted XLP on a bounce on 6/21. One way that investors chase a bearish USD is buying international FX leverage in global consumer staples. Shorting green.


DIA  – Diamonds Trust- We shorted the financial geared Dow on 7/10, 8/3, and 8/21. 


EWJ – iShares Japan –We’re short the Japanese equity market via EWJ on 5/20. We view Japan as something of a Ponzi Economy -with a population maintaining very high savings rate whose nest eggs allow the government to borrow at ultra low interest levels in order to execute stimulus programs designed to encourage people to save less. This cycle of internal public debt accumulation (now hovering at close to 200% of GDP) is anchored to a vicious demographic curve that leaves the Japanese economy in the long-term position of a man treading water with a bowling ball in his hands.


SHY – iShares 1-3 Year Treasury Bonds – If you pull up a three year chart of 2-Year Treasuries you'll see the massive macro Trend of interest rates starting to move in the opposite direction. We call this chart the "Queen Mary" and its new-found positive slope means that America's cost of capital will start to go up, implying that access to capital will tighten. Yields are going to continue to make higher-highs and higher lows until consensus gets realistic.


Bernanke should depoliticize the Fed, critics say

SAFM – Comments as it relates to the Restaurant industry

The set up for SAFM looks to be very bullish for the next couple of years if all of the pieces of the puzzle fall into place.

(1)    The surge in corn prices in 2008 caused domestic chicken processors to cut back on production, reducing the supply of chickens

(2)    As we sit here today, feed costs look to be headed lower.  A bumper crop of corn could send it to $2.50.

(3)    Retail demand remains robust, but food service demand is challenged.

(4)    If food service demand picks up in 2010 and supplies are tight - chicken prices are headed higher. 

(5)    Higher chicken prices combined with favorable feed costs means better margins. 

(6)    In 2011, SAFM will be bringing on a new production facility, improving operational efficiencies.

Clearly, weather can ruin any good story, but the set up for SAFM looks to be positive for the foreseeable future.

Some comments from SAFM senior management as it relates to Restaurant investors:

FOOD SERVICE DEMAND – “We continue to believe we will not see a meaningful rebound in food service demand until well into calendar 2010 at the earliest, and then only if employment numbers begin to improve. Consumers need to get their jobs and confidence back before they're going to start eating out again.  Fewer chickens than normal will be needed this fall to meet demand, and fewer chickens will be available, but we won't know until we get there whether or not the industry has balanced supply with what we believe will be reduced demand.”

CHICKEN PRICES – “Overall market prices for our fresh chicken improved during the quarter, compared to last year's third quarter. But I continue to believe the improvement has more to do with production cuts than demand improvement.”

FOOD COSTS – ($2.50 Corn?) “We expect feed cost to remain below a year ago for the rest of this year. The USDA August crop report indicated there should be an adequate supply of corn next year, and that the record number of soybean acres should produce a harvest that should help prepare the soybean balance sheet.

However, while all indications are this year's corn and soybean crops will be adequate, and that significant progress should be made replenishing depleted soybean stocks, market volatility will continue as concerns grow for an early frost and yield issues.  This is particularly true for soybeans, as old crop supplies remain tight and the expected large crop is needed.”

CHICKEN SUPPLY – “The chicken markets are no easier to predict than the grain markets. While egg sets have remained below a year ago, and we are heading into the fall with fewer chickens on the market, we are also heading into the fall and the seasonal reduction in chicken demand with weak demand at most food service establishments.”

Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.