• After thirteen months of declines in miles driven in the U.S., Pep Boys highlighted that both April and June showed increases. While it is still early in the recovery process, Pep Boys management believes the miles driven trend has stabilized. Importantly, on an absolute basis, total miles driven remains well below 2007 levels.


  • After one of the toughest years on record in luxury retailing, Neiman Marcus suggested that the bulk of its cost cutting efforts (both near and longer-term) are essentially complete. The company will continue to look for additional savings but it appears at this time there is little opportunity to cut meaningfully from current expense levels. If sales were to dramatically take a turn for the worse, then the company would consider store closures. However, with some improvement in August in the full priced selling of early Fall merchandise, a “doomsday” scenario does not seem likely at this time. We do wonder how customer service levels are holding up, given the company has 18% fewer associates than a year ago and 20% less than two years ago.


  • Without the aid of calendar shifts related to Back to School or Labor Day, Talbots is seeing substantially improved trends quarter to date. Current same store sales are down 10%, which marks a 15% sequential improvement from 2Q. While it’s still early, management attributes the improved performance to better product/merchandising, a significant increase in the number of transactions, increased units per transaction, and a very significant increase in conversion. Interestingly, compares for Q3 to-date are still tough for the next several weeks at which point they will become substantially easier.


  • In an effort to drive sales (knowingly at the expense of margins), Men’s Wearhouse continues to show positive results from its aggressive promotional stance in the suit category. Over the first half of the year, MW generated a 4.1% increase in dollars and a 23% increase in unit sales in its suit business. MW stands out as one of the few retailers that is strategically attempting to grow or hold unit share at the expense of aggressive promotion (while controlling inventories along the way).




-Peak Sport, Chinese Sportswear Maker Sponsoring NBA Players, Files for IPO - Peak Sport Products Co., the Chinese sportswear maker and distributor that sponsors seven U.S. National Basketball Association players, may raise as much as HK$1.9 billion ($246 million) in a Hong Kong initial public offering, according to a sales document. <>


-Walmart Supplier Li & Fung Reports More Orders, `Positive Buzz' in U.S. - Li & Fung Ltd., the biggest supplier of clothes and toys to Wal-Mart Stores Inc., sees a “more-positive buzz” in the U.S. and has been getting “pretty strong” re-orders from retailers, driving up its shares. <>


-Beige Book release shows Back-to-school purchases helped improve sales for retailers in some parts of the country but volume was weak - Based on anecdotal reports from retailers, economic activity in the U.S. “firmed” toward the end of summer. Overall, the majority of the 12 districts in the Fed report said consumer spending was still soft, but stabilizing. Boston, Kansas City and Philadelphia attributed marginal improvements in sales to b-t-s purchases. Boston observers said value-driven shopping will be the “new norm” and recovery could be long and slow. Philadelphia-based stores said the b-t-s shopping in August drove a small increase in sales, with youth apparel described as “solid or strong.” New York stores said consumer spending was close to expectations for July and August, but was significantly lower than a year ago. <>


-Fred Schneider, CFO at Skechers USA Inc., has resigned from his post, effective February 2010 - Skechers announced the news early Wednesday and said David Weinberg, Skechers’ COO, will assume the additional CFO responsibilities. Weinberg had served as CFO for the company before Schneider was named to the position in 2006. Schneider served on Skechers’ board of directors and as chairman of the audit committee for two years prior to becoming CFO, and has also held senior roles at Pasadena Capital Partners, Leonard Green & Partners and KPMG LLP. <>


-Affliction Holdings LLC is evolving its rock ’n’ roll image -The company announced on Wednesday it had inked two licensing deals with Evolutions Footwear and August Accessories. Evolutions will develop a line of boots, sandals, athletic and sport-casual shoes under the Affliction label, to be sold in department stores, specialty chains and boutiques in spring ’10. Meanwhile, August will produce belts, hats, watches and cold weather accessories bearing the Affliction moniker.  <>


-Helly Hansen Names CMO, Plots Retail Expansion - Helly Hansen appointed former Timberland marketing exec Erik Burbank as its global head of marketing. The hiring comes as the Norwegian outdoor clothing brand revealed plans to ramp up its retail expansion efforts, particularly in opening up flagship stores. <>


-Speedo extended its long-time partnership with swimming superstar Michael Phelps through 2013 - As part of Phelps’ new Speedo deal, the brand will donate $10,000 to the Michael Phelps Foundation for every World Record Phelps sets; Phelps has committed to match each donation as well. <>


-New York Fashion Mega-Party Opens as Designers Scramble to Beat Slump - As New York Fashion Week opens today, the bottom line is survival, with hundreds of couturiers showing spring collections geared to getting them through a long sales slump. <>


-The Container Store thinks outside the box and expands purchase pick-up - The Container Store recently offered a 15% discount on orders purchased on its web site but picked up in stores, resulting in online average ticket orders doubling those of in-store purchases.<>


-YesAsia gives a makeover - is giving its apparel e-commerce site,, a complete redesign and making the brand multichannel. <>


-Bluefly rehires its former chief marketing officer - Online apparel retailer Bluefly has rehired Bradford Matson as chief marketing officer. Matson resigned in January, but has been working in a consulting role with Bluefly since then. <>


-Columbia Sportswear launches new ecommerce site with an emphasis on brand and user experience - Demandware, Inc., the leading on-demand ecommerce solutions provider, today announced that Columbia Sportswear Company (NASDAQ: COLM), a global leader in the active outdoor apparel and footwear industries, has launched its first ecommerce site - -- using the Demandware eCommerce Platform. The site is part of Columbia`s expanded direct-to-consumer strategy, which also includes branded stores and outlets in key global markets, and was designed to help build and drive demand for the Columbia brand across all of its sales channels.   <>


-Hanes endorsement of Michael Jordan Continues to Payoff - Michael Jordan will go down not only as one of the greatest athletes of all time, but he’ll likely be remembered as the greatest endorser of all time. Hanes Brands has aired over 25 commercials with Jordan over the past two decades, including the most recent spot with Charlie Sheen pitching the brand’s Lay Flat Collar undershirts and No Ride Up boxer briefs. “Michael’s appeal is extraordinary,” said Sidney Falken, senior vice president of the Hanes brand. “He is able to appeal to such a wide range of people, men and women, young and old.” Hanes execs also say that Jordan appeals to people of all classes. Unlike its main competitor, Fruit of the Loom, the $4.5 billion apparel brand is sold in both high-end stores and in the mass market retailers. As a result, Hanes has one of its products in 85 percent of US households. ” Despite the fact that Jordan has been retired for almost 6 ½ years, a Harris Poll taken in June revealed that he was America’s second favorite male athlete, behind Tiger Woods. Jordan was the only male athlete on the list who is retired.  <>


-China’s silk garments exports from January to July 2009 is down 21.94% but silk exports to Italy are  up 3.63% - Silk exported to Italy was the only market to register an export volume growth. The US remained the largest market of China's silk garment exports, accounting for over 40% of market share. In the first seventh months of 2009, China’s exports of silk garment to the US was down 34.45%. Average unit price stood at $13.5 per set, up 11.75% year on year. Zhejiang, Guangdong, Jiangsu, Shanghai, and Sichuan are the key export provinces and cities of silk garment manufacturers. Exports from Zhejiang accounted for nearly half of China’s silk garment exports. <>


-Men have become big spenders on accessories in 2009 - Belts. Bags. Bracelets. In the latest evidence of Modern Man’s indulgence of the self, sales of men’s accessories in the first half of 2009 were up more than 7 percent over the same period in 2008, according to NPD Group, which tracks retail sales. (Women’s sales were down 11 percent.) The best sellers seem only too fitting: wallets (to pump up your currency) are up 30 percent; belts (to slim down your debt) are up 38 percent. And there are plenty of other hot spots, from well-known and expensive brands to obscure and thrifty ones. Pricey designer sneakers are walking out the door at Barneys New York and Jeffrey New York. Men’s bags, sales of which are up 14 percent, are among the year’s top sellers at Gucci and Prada.  <>


-Levi Strauss & Co. is celebrating the official opening of its largest Levi’s store in Europe today, a 6,480-square-foot flagship in Rome - The new flagship store is intended to herald a new direction for the brand in Europe. A new customer direction is becoming more prevalent in Northern Europe and the company intends to make moves to capitalize on the shift. Levi’s has opted for an understated and almost minimalist design approach with the Rome location, with little furniture and bare walls in order to enhance the feeling of space and put focus on the product. <>


-Salty Dog apparel brand is sold to a resort destination firm - Joint venture between Gordon Brothers Brands and Branded, LLC announced today the sale of the Salty Dog(TM) apparel brand to Jake Dog, LLC, a well-known resort destination firm based in Hilton Head, SC. Salty Dog is authentic. It's one of the few great main floor department store brands and a natural fit for Jake Dog LLC. Salty Dog, a historic American Heritage brand first introduced in 1937 by Canton Textile Mills, was later owned by the Gant Corporation and then Phillips Van Heusen before being acquired in a joint venture between Gordon Brothers Brands and Branded, LLC. "We are excited to acquire the Salty Dog apparel brand. Working with Gordon Brothers Brands and Branded, LLC proved to be a smooth and seamless transaction and we look forward to furthering the success of the vintage Salty Dog brand," stated Robert Gossett of Jake Dog LLC.  Jake Dog, LLC operates five restaurants throughout the island of Hilton Head in South Carolina. In addition to the cafes, they have three apparel shops on the island. Both the restaurants and stores are extremely popular tourist destinations.  <>


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


09/09/2009 10:35 AM


Runkle was long it; we sold it; and now we want to be short it. Seems like an objective thought process. Kindle's issues are pending. Compares here are tough. Very expensive stock. KM


The Brink

“We have taken this economy back from the brink.”
-President Obama (September 9th, 2009)
Time stamp and YouTube it. Last night’s US Presidential speech will surely find its place in US History. Every one of them does. Rarely, in the moment, do we know how prescient or shortsighted Presidential conclusions really are. Particularly when it comes to immediate term economic prognostications, Presidents have an awful historical batting average.
Have we taken this economy bank from the brink? Or have we taken Wall Street back from the brink? Are they one and the same? What about a country’s currency? Does a crashing currency signal coming back from, or going toward, The Brink?
Hope may be part of this President’s process, but it is not an investment process. That isn’t a politically partisan point. It is, as our President likes to say, “the truth.” It’s the Research Edge truth at least!
Our Managing Director of Healthcare, Tom Tobin, often says that the US Government’s plan is to “create a crisis, so that they can solve it.” Again, from Bush to Obama, Tobin has said the same thing. One created “weapons of mass destruction”, the other went with “great depression.” Politicians get paid to fear-monger. It’s the sad “truth.”
My greatest fear, when analyzing the global economy, is that the United States of America’s political leaders don’t get it. Again, from Paulson to Geithner, this isn’t about being politically partisan  - it’s about America’s economic policy becoming as politicized as it has ever been.
For those of you who aren’t economically paid and politically scored on being willfully blind, let me remind you of something that’s been happening in America this week. The United States of America’s currency is crashing.
Dear Mr. President,
I am not going to yell at you from a cheap Congressional seat, but I am going to say that one more time. Under your administration’s watch, like President Bush’s, you are Burning The Buck. I can only “hope” that you don’t write me back saying “that’s not true”…
Keith R. McCullough
New Haven, CT
So what do we do with that this morning Mr. Righteous Mucker? Good question. Everything in investing starts with asking the right question at the right time. I think THE question this morning should be: Have we taken the US economy back from the brink, or are we about to go right back over it?

In order to attempt to answer THE question that only we “macro” guys care about (i.e. what’s the market going to do today), let’s consider 3 major events that occurred in the real-time US economy yesterday:
1.      At 1033, the SP500 made a higher-high for the YTD

2.      At $77.01, the US Dollar Index made a lower-low for the YTD

3.      President Obama defined the economy’s scorecard by only 1 of these 2 factors

To ignore “the truth”, of course, does not mean that it ceases to exist. Someone needs to pass someone in Washington an economic history book that dates back more than the last 200 minutes on their crackberry. Try the last 200 years. Maybe throw in another country or two. Maybe get the Great Depressionista Professor, Ben Bernanke, to order up the required reading.
The “truth” is that there has never been an economy that has sustained itself with her currency being on The Brink. Never. The US Federal Reserve monetizing the nation’s debt is no different than the government of Zimbabwe doing so. It’s country balance sheet bearish. It’s country currency bearish. It’s country credibility bearish. If you revert to doing it consistently enough, creating free moneys from the heavens will provide you a bridge to economic hell.
Those who have been critical of my Burning the Buck investment theme for 2009 are now losing a lot of money. Since March, the “truth” is in the math. The SP500 is up +52.8% and the US Dollar Index is down -13.5%. The political leverage that the US Government thought they would get by betting on the stock market being the “economy” has been almost 4:1 (Dollar crash versus Wall Street reflation).
So, if the US economy’s “Brink” is defined only by her stock market price, why is it that Obama’s Administration continues to see lower-lows in their approval ratings?
The “truth” is that Americans aren’t as stupid as Washington/Wall Street keeps telling them they are. The “truth” is that this isn’t new. For hundreds of years a citizenry of savers and consumers look to their currency as a barometer of their own personal Brink!
I’ve said my piece this morning. If I just marked the YTD bottom in the US Dollar, so be it. Take it from me, the Burning Buck Boy, to call what his own bottom looks like in the rear view mirror. Dollar up will = everything priced in Dollars down. That’s why I have been selling for the 3 out of the last 4-days of this rally. President Obama is too smart not to understand this investment thesis. The Chinese get it. They’ll force him to get it too. China is The Creditor of this mess.
My intermediate term TREND target for the SP500 remains my Range Rover target of 1041. My first line of immediate term TRADE support is 1016. As opposed to the last 2 trading days, my risk management model is saying that the risk in the US stock market finally overrides the reward.
Best of luck out there today,


VXX – iPath VIX We bought volatility on its lows on 9/3 ahead of last Friday’s employment report.

XLV – SPDR Healthcare We’re finally getting the correction we’ve been calling for in Healthcare. It’s a good one to buy into. Our Healthcare sector head Tom Tobin remains bullish on fading the “public plan” at a price.

EWH – iShares Hong Kong
The 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.  

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.

EWU – iShares UK We’re bearish on the UK’s leadership and monetary policy to weather its economic downturn. Although we’re seeing improved fundamentals within the country and across Europe we continue to see the country’s financial leverage as a headwind and increasingly the data suggests that inflation is getting ahead of growth. With the FTSE reaching a YTD high on 9/9, we shorted EWU.

DIA  – Diamonds Trust We shorted the Dow on 9/3.  In the US, we want to be long the Nasdaq (liquidity) and short the Dow (financial leverage).

EWJ – iShares Japan While a sweeping victory for the Democratic Party of Japan has ended over 50 years of rule by the LDP bringing some hope to voters; the new leadership  appears, if anything, to have a less developed recovery plan than their predecessors. 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.


CEO will hit the Street for financing in Q4 to resume construction on Revel by Jan. A May 2011 opening is targeted which could provide a small shot in the arm for the slot makers but wreak further havoc on the AC operators.



CEO Kevin DeSanctis made public comments that indicate he will pursue the remaining Revel financing in Q4 for the Atlantic City hotel casino.  If successful, construction would restart in January with a targeted opening in May 2011.  Initial specs for Revel included 3,000 slot machines and 1,900 hotel rooms (with the potential for a second hotel tower coming online at a later date).


For the slot guys this is good news and part of the long-term bull market of new markets/casinos.  2011 should be the first year of significant growth in the new/expansion segment and probably the second year of an improving replacement cycle.  While 3,000 slots is not overly significant in and of itself, there is a backlog of new casinos in AC and elsewhere that may be back on the front burner, particularly if Revel proves the financing markets are once again willing to fund new casino construction.


The existing casino operators in AC will talk a good game about new supply being a positive for the market, but given the wilting demand, they should be a little worried.  Borgata may be at risk considering the likely price point similarities with Revel and a possible mini Boardwalk resurgence.

Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.52%
  • SHORT SIGNALS 78.67%



Genting Singapore PLC said it will raise up to S$1.63 billion (US$1.14 billion) in a rights issue to boost its capital position and further develop its business.  The company estimates that the majority of the capital, 60%, will be used for “future strategic opportunities” while the remaining 40% will be used for working capital purposes. 


The operator’s S$6.59 billion resort-casino project on Sentosa island is due to open in 2010.  The company maintains that the project is adequately financed and will be completed on time.  Commentators speculate that some of the proceeds of the rights issue could be used to invest in casinos in Macau.  Genting Singapore, which owns 45 casinos in the U.K., is 54.3% owned by Malaysia's Genting Bhd.


I continue to believe that the casual dining industry is not out of the woods yet from a demand perspective and that 4Q comparisons might not be as easy as they look.


The Federal Reserve reported Tuesday that consumers ratcheted back their credit by a larger-than-anticipated $21.6 billion from June, the most on records dating to 1943. Economists expected credit to drop by $4 billion.  Clearly consumers are spending less and some could argue that banks are cutting back on lending.  Either way, lees credit available suggests a lower level of spending overall.  For most Full Service restaurants, 70-80% of transactions are done using a credit card.  The less credit available, the less money there is to spend on discretionary items like eating out. 


This chart clearly tells that story!



Sorry to knock the regionals again but are there any catalysts to get these stocks to reverse fortune?  The numbers look bad and that’s with a gas tailwind.



Illinois, Indiana, and Michigan are all out for August and they look like crap.  Same store revenue fell 10%, 12%, and 5%, respectively, and the moving average line is negative and trending downward for each state.  If this is recovery, I’d hate to see a depressed environment.

                                                                     REGIONAL ROLL - Illinois August Revenue

                                                                     REGIONAL ROLL - Indiana Delta Chart


Here are the catalysts.  Try and find a positive one among them.

  • ISLE did not provide any comfort on their 8/26/09 conference call:
    • “Cost reductions may be over”
    • “Discounting accelerating”
    • July no better than May and June
    • No improvement in August other than an easier comparison


  • Gas price tailwind reversal – this is a biggie
    • Despite 50% lower gas prices year-over-year, gaming revenues look terrible.  We’ve shown that every 10% change in gas prices has a 1.5% inverse impact on regional gaming revenue.  What happens when gas prices are up 50% in December and into 2010?  See our recent note “GAMING REGIONALS: NOT YET IN THE RECOVERY ROOM” (08/23/09)


  • The Consumer – Housing, the “wealth effect”, need vs want
    • We and our macro team have written extensively on the long-term structural issues facing the American consumer


  • Regression to the mean
    • Casino revenue as a percentage of PCE keeps falling from its mid-2008 peak.  We’ll have more on this in a later post


So why do the analysts show 2H09 growth in revenues for most of the regional gaming companies (see below)?  Growth in 2010 might even be a stretch, especially considering the gas headwind in the first half of 2010.  A recovery thesis looks very premature.  Look for estimates to come down for most of the regionals.



                                                                     REGIONAL ROLL - REGIONALS 2010 2H09



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