US Dollar Update: Pandering Politicians

After having a huge move to the upside yesterday, the Buck is Burning again here intraday. Why? That’s easy:


1.       Timmy Geithner came back from wherever he was and was back on TV

2.       The FOMC minutes were released


The first point is more of the same. The Chinese laugh at this guy; he’s a squirrel hunter with little to no credibility in supporting America’s currency. The second point is the more alarming one. These puppets at the Fed A) don’t get paid and B) must be aspiring to get paid.


The only way to achieve B) is, ostensibly, to pander to the political wind. Of course, when any outside Chinese auditor looks at this they must think they are looking at Japan. Nevertheless, here’s the upshot of the Fed’s Minutes:


  1. There was “uncertainty” about nearly everything other than the Great Depression Part 2 no longer being a certainty
  2. Several members indicated “concerns about counterparty risk and access to liquidity” becoming a problem again
  3. I didn’t understand the rest


Point 1 really amplifies the Japanese like credibility crisis our economic “experts” perpetuate. These guys seriously have no idea or they are willfully blind. The second point is the more alarming point. With the TED Spread (the measure of global counterparty risk) hitting a new cycle low this morning at only 20 basis points wide; 3-month US Treasury yields at 0.13%; and 3-month LIBOR hitting new lows at 0.33%, these people have to be seriously kidding me.


With Japanese style money this cheap, so are the opinions of these Pandering Politicians.


The US Dollar is hitting her lows of the day here, trading down -0.49% at $78.37, breaking our immediate term TRADE line again. In the immediate term, this will stoke the REFLATION trade. In the long term, if this politicization of the US Federal Reserve continues, our Buck will Burn.



US Dollar Update: Pandering Politicians - BURN


Managing Risk: SP500 Levels, Refreshed...

I am getting a lot of questions this morning. That means the players in the market are confused. They should be.


Right now we have a very dynamic daily setup in the SP500 where the immediate term TRADE lines (buy 994, sell 1004) are only 1% apart (see chart). Tight is as tight does, so for now, trade that range.


A close and continued breakdown of the SP500 below the 1004 line keeps the intermediate term TREND line in play (947). Whereas a close above 1004, and a breakdown of the US Dollar Index below the $78.54 level, puts 1020 in play again on the upside.


The topside of this risk management picture is, of course, a lower-high, versus the YTD closing high of 1030. On the margin, that’s bearish. Fundamentally, I do see a bearish unemployment report coming on Friday. So managing risk with tight stops today/tomorrow is paramount.



Keith R. McCullough
Chief Executive Officer


Managing Risk: SP500 Levels, Refreshed...  - a1


Trends Looking Good For Sports Apparel

The second half of 2009’s back to school season appears to be picking up with industry sales positive and incrementally better than the previous week.  As a reminder, we don’t look at the absolute growth in these SportscanINFO numbers given our view that the sample is somewhat flawed. But the fact is that it is a consistently flawed sample, and as such the directional changes have proven to be quite relevant. The bottom line here is that the industry’s total dollars are picking up steam. Is it coming at the expense of price point? Yes, somewhat. But the ASP trends are nowhere close to what I’d consider panic levels.


Total industry sales grew by 3% driven by growth in Sport Retailers and Family Retailers while the Discount/Mass Retailers channel continued to underperform.  All channels sequentially improved on sales while ASP growth remained positive across the board.  Major deltas between this week and last week are the sales jumps of 5% by Sport Retailers and Family Retailers and the 15% jump in ASPs by Discount/Mass Retailers.


Full Line Sporting Goods, Mid-Tier Department Stores, and Family Footwear stores were positive for the week with Athletic/Urban Specialty stores sequentially improving but remaining negative.  All geographic regions of the US were positive with the exception of New England, the Middle Atlantic, and the East North Central who were all down less than 5% which was an improvement.


Trends Looking Good For Sports Apparel - Sports Apparel Table


Trends Looking Good For Sports Apparel - Sports Apparel   chart


Trends Looking Good For Sports Apparel - Sports Apparel ASP chart



Enter your email address to receive our newsletter of 5 trending market topics. VIEW SAMPLE

By joining our email marketing list you agree to receive marketing emails from Hedgeye. You may unsubscribe at any time by clicking the unsubscribe link in one of the emails.


It was reported this morning that the head of Starbucks’ U.K. and Irish business, Darcy Willson-Rymer, stated, “I think where we are now is that we're certainly serving more visitors than we were last year on a like-for-like basis."  Specifically, he said that a couple of areas, such as the City of London or airports in particular, have suffered more but that overall the business is performing well.


This signals that the U.K. has continued to improve on a sequential basis as the company stated on its fiscal third quarter that trends had gotten better throughout the quarter.  More visitors on a year-over-year basis would mark a positive shift from the negative international traffic trends in the last couple of quarters.  Prior to the fiscal third quarter, both the U.K. and Canada (about 80% of international same-store sales) had been the primary drivers of international weakness. 


According to our July Grass Roots Survey, the U.S. business has continued to improve in July as well.  We will follow up with the details of the survey findings shortly. 







Is it me, or is online Luxury retail setting itself up to have wide ranging implications in 2010? Following in the footsteps of online fashion off-pricers Gilt, Ruelala, and eLuxury is the introduction of The Fairest. The site aims to bring invitation only, limited time sales events to the beauty sector. While offering steep discounts on premium beauty products, the site also marries content to ecommerce in the form an extensive blog. Again… content wins, and legacy distribution needs to be proactive and strategically astute about how not to get run over. My prediction is that Macy’s, Sak’s and others start scooping up these little .com assets starting in 1Q as the retail M&A wave picks up steam.




Some Notable Call Outs


  • In a unique twist on recycling, Target is taking the vinyl used in its Times Square billboards and turning it into limited edition totebags. As the billboards are refreshed, the recycled bags will be available for sale on


  • Despite posting strong results and successfully clearing through excess inventories, J Crew is hosting its 5th sample sale in Manhattan beginning September 10th. The merchandise is being advertised as true samples, so size and selection are expected to be limited.


  • A Craigslist advertisement seeking employees for a new Best Buy to be located in Union Square (NYC) reveals that the store will be open 24 hours. This is the first store in the chain slated to be open 24/7. The store will fill a vacant Circuit City and will be located above a new Nordstrom Rack (formerly the Virgin Megastore). This is one landlord who is benefitting from a tenant upgrade.




-The wealthy are more conservative with shopping in the consumer environment - Affluent consumers are being thriftier and are more concerned about U.S. economic recovery than health care reform, according to a new study. The report by BIGresearch of Columbus, Ohio showed consumers with household incomes of at least $100,000 or more were making numerous concessions to the economic downturn. Supposedly its become more and more chic to save money, and the affluent talk about coupons and sales at the country club now. Among consumers with household incomes of $150,000 or above, 49.5% described themselves as being “more practical in their purchases” compared with 31.5% of those surveyed two years ago, and 44.2 % said they were more budget-conscious, up from 25.1% in August 2007. The percentage of respondents saying they only bought apparel on sale moved up slightly, to 15% from 13.7%, but those saying they made greater use of coupons more than doubled, to 30.8% from 15.1%. Apparel purchasing was more affected among those in the $100,000-to-$149,000 household income category, with 21.4% indicating they were only buying clothes on sale, compared with 15.7% in August 2007. <>


-An exciting trend could emerge from the upcoming spring runway shows: relevance - That is exactly what stores are eagerly expecting with the onset of the collections, even if they’re buying a lot less inventory. And brands are striving to deliver it, along with lower prices. “In the pre-collections, we saw an emphasis on more wear-now products and an attempt to really understand the price-value relationship,” said Joseph Boitano, Saks Fifth Avenue’s group senior vice president and general merchandise manager of women’s. “I believe we will see some serious fashion down the runway — realistic prices, good quality, beautiful fabrication, a lot of creativity and some very big happy surprises,” predicted Stephanie Solomon, Bloomingdale’s vice president and fashion director for women’s ready-to-wear and accessories. The biggest relevance will be with reality-based prices. Designers appear to be thinking strategically, by merchandising collections with a greater variety of items and price points, while demonstrating less dependence on a classification or two that may have historically sold well. For months, retailers have been pressing designers for change to better reflect their customers’ lifestyles and, even more, desire to spend less. For spring, retailers will allocate a greater percentage of the overall budget to the highest-margin categories — which include bridge and contemporary women’s sportswear, private label, men’s accessories, women’s shoes and accessories — and to the best performing classifications within each designer or brand. <>


-Book cracks the case for what women want on a consumer level - In researching the book Women Want More, the authors found brands such as Apple, Adidas and Nike were named most often by women as “catering to their needs, making them feel the best and capturing their imagination,” Silverstein said. “They’re not classical female brands. They are all affordable luxuries.” As digital, activewear and athletic shoe brands are ringing true, Silverstein said, “there are huge opportunities” for other marketers to address women’s desires. The authors found what women want more of is time, money and love. “Above all other issues, women everywhere intensely feel a lack of time in their lives and the pressure of trying to contort time to accommodate everything they want to achieve,” Silverstein and Sayre write. In the realm of apparel consumption, women’s desire for more time is now “trumping” their longtime priority on fit as the primary element influencing a purchase, Silverstein said. If a woman doesn’t make the time to shop, how a garment fits becomes irrelevant.  In short, the days when shopping was a popular leisure activity are continuing to fade. “Billionaires are now role models for women,” Silverstein said. “It is fair now for women to want to be billionaires.” If they expect to win the attention and money of these well-educated, economically powerful people “marketers will have to look at the purchasing cycle from the consumer’s point of view,” he said. From this vantage point, the question becomes how to shorten the time in which, and increase the ease with which, women decide to buy something, actually purchase it, and begin using it. Among those answering the call in the apparel sector has been H&M, with its quick-and-out offers of exclusive, well-priced designer collections. <>


-Skateboarding pushes the limits of fashion - From Nike and Sport Chalet to DC Shoes and Vans, men’s skate brands are extending their retail reach and launching new clothing lines. Nike Inc., the world’s largest athletic apparel and footwear company, unveiled a 3,400-square-foot shop in Laguna Beach, Calif., in July to highlight its four action sports brands: Nike 6.0, Nike SB, Hurley and Converse. Skate shops seem to be more resilient than their surf counterparts during the recession. A study commissioned by Surf Industry Manufacturers Association, an Aliso Viejo, Calif.-based trade group, said skate-focused stores tallied sales of $2.85 billion last year, which was the same as in 2006, the last time the report was issued. Surf-focused shops, however, posted a 6.8 percent decrease in sales to $2.47 billion in the same period. In those two years, 156 surf doors shuttered, resulting in 7.4% fewer stores. The skate sector has “been one of the highlights in this very slow economy,” said Paul Smedley, senior merchant of apparel at La Canada, Calif.-based Sport Chalet. Sport Chalet reported a double-digit increase in sales at its skate-centric shop-in-shop, Project Fifty Nine, which is in five of its 18 stores across the West. Double-digit growth is also giving a boost to Vans as it solidifies its strength in skatewear. Despite seeing fewer wholesale accounts because of the economic downturn, Luciano Mor, category director for men’s apparel at Vans, a Cypress, Calif.-based subsidiary of VF Corp., said skate has been a bright spot. To be sure, the skate sector hasn’t been immune from cutbacks. In a move to trim costs, Quiksilver eliminated about 10% of the positions at subsidiary DC Shoes in August, after layoffs at the flagship brand and Roxy. But unlike surfing, which requires proximity to the beach and optimal water conditions, skateboarding is accessible to a larger and diverse group. <>


-Sri Lanka incentivizing investments in manufacturing - The Sri Lankan Board of Investment (BOI) has invited garment companies to invest in the Northern region of the country and has asked the Joint Apparel Association Forum (JAAF) to suggest incentives to attract investments in these areas. Apparel manufacturers have voiced out that they are willing to invest in the Northern region where companies can enjoy a lower labour cost advantage but are waiting for clear policy directives and plans of the government in the meantime regarding what kind of investor facilities will be provided, according to the Secretary General of JAAF Rohan Masakorala. Incentives suggested by JAAF include tax-free holidays and duty-free vehicles, both of which can kick start investments in the former war-ridden region. Garment companies are also urging the government to identify and allocate suitable land to set up their factories, while prospective investors should be allowed to buy land based on a government valuation. <>


-UK traffic down in August - Hot weather and the Ashes cricket tournament meant footfall in August dropped back 4.1% - the steepest decline for the past seven months. <>


-Payless ShoeSource is expanding to Russia - PSS signed an agreement with current franchisee partner M.H. Alshaya Co. to open two Payless stores in Russia beginning in 2010. Alshaya is Payless' franchisee partner in the Middle East and has opened stores in the United Arab Emirates, Saudi Arabia and Kuwait. The two companies said that Russia, with a population of 140 million people who have rising household incomes and are attracted to affordable fashion, is a strong fit for Payless. About five stores will bow there late next year, with a minimum of 90 stores in about five years and at least 300 expected in the long term. <>


-Lululemon introduces new brand for young women between 6 and 12 - lululemon athletica inc. is introducing ivivva athletica, a new brand the vertical retailer said is focused on 6-12 year olds and will feature technical, multi-functional apparel that will include many of the design features found in lululemon product. <>


-Barneys Said to Weigh Debt Swap, Bankruptcy as Holt Renfrew Shows Interest - Barneys New York is weighing a debt restructuring or bankruptcy filing that may wrest control from the Dubai government-owned firm that loaded it with debt in a 2007 leveraged buyout, three people briefed on the matter said. <>


-EBay Will Sell Skype Stake to Silver Lake-Led Group for About $2 Billion - EBay Inc. agreed to sell 65% of its Skype Internet-calling unit to an investor group led by Silver Lake for about $2 billion to focus on reviving sales at its main e-commerce site. <>


-American Apparel ad banned - A “provocative” fashion advert for American Apparel featuring a model showing part of her nipple has been banned because the model looked like a child. In six photographs the model wore little make-up and posed in a fleeced hooded top and shorts, revealing more skin in each picture until she partially exposed a nipple with the top unzipped. American Apparel argued the pictures were supposed to show different fashion looks, and the model was actually 23 years old. <>


-Blue Nile aims to sparkle with redesigned web site - Online jewelry retailer Blue Nile launched its first redesigned e-commerce site in 10 years with new features including larger imagery, expanded product detail and improved site search capabilities on category pages. <>


-Sam’s Club steps into web-enabled foot-scanning kiosks - The wholesale club division of Wal-Mart Stores is testing in several stores web-enabled kiosks from eSoles that are designed to scan customers’ feet and match them with custom-fitted footwear insoles. <>


-Amer Sports lowers FY guidance, exploring sale of its cycling brand - Amer Sports said it is currently exploring alternatives in respect of its cycling business Mavic, including a divestiture. It also warned that current estimates for FY09 are too "too optimistic" given current economic conditions while unveiling a €150 million ($215 million) rights issue to bolster its balance sheet. <>


-Spyder Active Sports hires new VP of Sales and Marketing - Russ Rowan has been named vice president of sales and marketing for Spyder Active Sports. Rowan’s background includes tenure at other worldwide performance apparel and action sport brands such as Helly Hansen, Burton, and O’Neill. <>


-Footwear brands Altama and Moskito branch out into new categories - As some footwear companies continue to tighten their product offerings in a tough economy, brands such as Altama and Moszkito are instead venturing into new categories. Military footwear producer Altama, a division of Tactical Holdings, is giving military personnel a chance to get step into something comfortable after a day in their combat boots. The Atlanta-based company is moving into new footwear territory with the introduction of Panamoc, a gored slip-on designed for everyday wear. The shoe features the brand's signature Sand Shark slip-resistant outsole, dual-density orthotic footbed and water-resistant leather and nubuck uppers. Available in six colors and materials, the shoe retails for $99. The men's Panamoc, available in medium and wide widths, will hit stores in October, with the women's, available in a medium width, will follow in December. It is being targeted to both military retail outlets and mainstream retailers. In a separate move, Moszkito, based in Scottsdale, Ariz., known for its collection of over-the-counter footbeds and Archy sandals with built-in arch support, has added a companion series of closed-up styles for men and women for fall. Like the sandals, the new casuals include four styles for women and four for men, all with a removable footbed with 16-millimeter arch support, retailing for $80 to $85. Rounding out the assortment are two styles each for men and women that come complete with a set of three footbeds in varying arch heights, retailing for $110 to $120.  <>


-Union-backed on Tuesday took aim at Wal-Mart Stores Inc. over health care - The coalition of unions, consumer groups and other organizations launched two health care-focused advertisements and outlined an agenda to address broader issues of workers’ rights, corporate responsibility and environmental issues at Wal-Mart. The push by comes as the retail giant has waded into the health care debate this summer. In July, Wal-Mart came out very publicly in favor of a controversial employer mandate provision in health care reform legislation being drafted on Capitol Hill. The endorsement, made in conjunction with the Service Employees International Union, ruffled feathers in the retail industry but garnered positive reactions from some supporters of the employer mandate. With Wal-Mart front and center on the health care debate, launched ads calling the retailer out for not offering employees enough health care coverage. The ads conclude with, “Wal-Mart can afford to be a better employer. Now would be a good time to start.” The ads highlight what calls “Wal-Mart’s failure to cover 700,000 of its employees, nearly half its workforce.” The ads were posted on the coalition’s Web site and are expected to air on television in Chicago, Boston and Philadelphia starting this week and elsewhere the following week. <>


-Columbia sues former footwear designer - Columbia Sportswear Co. has filed a lawsuit against its former lead footwear designer accusing him of working for competitors, including Crocs Inc., while it employed him. In a complaint filed Aug. 24 in a Multnomah County circuit court in Portland, Ore., the apparel maker alleges Brian O’Boyle had set up his own design business, 1 Pen Inc., in order to do freelance work for other companies. The arrangement violated an employee confidentiality agreement he signed in 2003, the company alleged. According to Columbia, O’Boyle undertook more than $50,000 worth of projects for Crocs and other competitors and incorporated “Columbia design elements” into his outside work. The company said he left in July but declined to disclose the circumstances of his departure. “Some or all of the competitive designs were made from Columbia’s offices and computers, and during Columbia business hours,” the sportswear firm said in its complaint, further alleging O’Boyle did not disclose the full breadth of his activity when it confronted him. O’Boyle could not immediately be reached for comment, as a phone number listed for him had been disconnected. Columbia is seeking an injunction barring O’Boyle from misappropriating its work, disgorgement of any profits ruled unjust, legal costs and other, unspecified damages. <>


We are proud to announce the availability of our PSS Black Book to subscribers to our exclusive Retail network. The report is available for institutions who are top tier subscribers of the Retail team, and on an a la carte basis for all institutional Research Edge subscribers.


About Research Edge's PSS Black Book

Research Edge's PSS Black Book provides an in-depth look at PSS, which has been, and continues to be one of our best fundamental ideas. The report includes detailed fundamental, Macro, and sentiment analysis to help our subscribers manage risk and maximize Alpha across multiple durations; TRADE (3 weeks or less), TREND (3 months or more), and TAIL (3 years or less).


Please email us at for a copy.



real-time alerts

real edge in real-time

This indispensable trading tool is based on a risk management signaling process Hedgeye CEO Keith McCullough developed during his years as a hedge fund manager and continues to refine. Nearly every trading day, you’ll receive Keith’s latest signals - buy, sell, short or cover.