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The Economic Data calendar for the week of the 5th of October through the 9th is full of critical releases and events.  Attached below is a snapshot of some (though far from all) of the headline numbers that we will be focused on.  


Monday Oct. 5


North America

At 10 AM ISM Non Manufacturing Index data for September will be released. At 1 PM on Monday, the Treasury will reopen 10 year TIPS.



On Monday, Reuter’s PMI -Services for September will be released for the Eurozone, Germany, France, and Italy while CIPS will release Services PMI in the UK.



September CPI will be released for both Taiwan and the Philippines on Monday, with Taiwanese data arriving in the morning and the Philippines figures arriving in the evening. In Singapore, September PMI will be announced in the morning while in Australia, the monthly RBA board meeting begins in the evening shortly after Balance on Goods and Services data for August is scheduled for released. China’s Markets will be closed on Monday and Tuesday in observance of the National Day holiday.



Tuesday Oct. 6


North America

The treasury will auction 3 year notes on Tuesday at 1 PM. Weekly ICSC, Redbook and ABC Consumer Comfort index data will also be released at normal scheduled times. In Canada, IVEY PMI for September is scheduled for release at 10 AM.



UK Industrial and Manufacturing Production figures for August will be released in the early morning.



August Housing Finance data will be announced in Australia during the evening on Tuesday, as will September FX reserves for both Japan and the Philippines.  China’s Markets will be closed on Monday and Tuesday in observance of the National Day holiday.



Wednesday Oct. 7


North America

At 1 PM on Wednesday the treasury will reopen its 10 year note auction while at 3 PM Consumer Credit for August will be released by the Federal Reserve.  Weekly MBA Mortgage application data will be released at the normal time as will EIA oil gas and distillate stock levels.



The third release of Q2 GDP for the Eurozone is expected at 5am, including the second release for Q2 Household Spending, Gross Fixed Capital Formation, Government Expenditure, and Exports and Imports. Germany will release preliminary Factory Orders for August.



In Japan, Leading Index levels for August will be published in the morning and September trade balance and August current account data will be issued in the evening. Taiwanese September Exports will also be released on Wednesday morning, as will FX reserve levels from September for Hong Kong, Malaysia and Singapore. At 8:30 PM Australia’s official unemployment rate for September will be announced.



Thursday Oct. 8


North America

August Wholesale Sales and Inventory data will be announced at 10 AM and the treasury will reopen auction for 30 year bonds at 1 PM. Weekly Initial Claims, M2 and EIA Natural gas stocks data will be released at the normally scheduled times. In Canada, September Housing Start data will be published at 8:15 AM.



French Trade Balance figures for August are scheduled to be released on Thursday morning. The ECB will meet to discuss the Refi Rate and official announcements should come at 7:45AM.  Preliminary annual German Industrial Production numbers for August will also be released.



August Trade data will be announced in Malaysia on Thursday morning while in the evening August export levels will be issued at 9PM and South Korean PPI for September will be announced at 11 PM. Weekly Wholesale Inflation will be released in India.



Friday Oct. 9


North America

Census Bureau Goods & Services figures for August will be announced at 8:30 AM.  Canada has a slew of data points scheduled for release on Friday morning including Merchandise Trade for August, the September Unemployment Rate and BoC Outlook and Loan Officer survey figures for Q3.



Friday brings a host of major data points:  UK PPI and Trade Balance data for September as well as August Industrial and Manufacturing Production figures for Italy and France are scheduled for release in the morning.  Germany will announce its Trade Balance for August while Italy will release Industrial Production.  Both Norway and Germany will issue CPI levels for September. In the UK HBOS will release September House prices.



There are few major data points slated for release on Friday among the major Asian economies.



Today’s unemployment report hitting another new high is dollar bullish!


U.S. employers cut a larger-than-expected 263,000 jobs in September; pushing the official unemployment rate to 9.8%.  Today’s print represents a 10 basis point increase from the previous peak, but a deceleration versus the 30 basis point jump last month.  In the rear view mirror, the improvement in August now appears to have been a statistical blip.   


Today’s unemployment rate (in terms of its growth) is, on the margin, US dollar bullish and bearish for equities in turn.     


Since the start of the recession, the number of unemployed people has soared by 7.6 million to 15.1 million in total.  While the worst of the labor market deterioration may be over, the trajectory of job losses is still positive. 


The “jobless recovery” now appears to be firmly entrenched, as corporate America appears unconvinced that the economy is truly on a rebound.


Howard Penney

Managing Director






With some states releasing September gaming revenue figures next week, year-over-year comparisons could provoke some ill-founded optimism.


Over the next three weeks, gaming revenues will be released by the states and we expect that these figures will show the regional gaming industry through rose-tinted glasses.  The delta will look much better than August.  However, looks can be deceptive. Labor Day fell on September 1st in 2008, which means that most of the weekend’s gaming revenues were collected in August.  Labor Day this year was on September 7th, which resulted in all of the Labor Day weekend gambling revenues being attributed to September.  This calendar effect significantly contributes to the easy comparison for the coming monthly revenue figures that is shown in the chart below.




The hurricanes of 2008, Gustav and Ike specifically, destroyed homes and businesses in many Southern states last September, with Gustav making landfall during the Labor Day weekend.  Louisiana and Texas were hit particularly hard which had an adverse effect on the casinos’ revenues in Louisiana.  While the hurricanes had a broad impact on the gaming market in Louisiana, some properties were impacted more severely than others.  L’Auberge du Lac was closed for nine days, Boomtown New Orleans was closed over the Labor Day weekend (Pinnacle even had to close the Admiral riverboat in St. Louis for seven days due to flooding caused by Ike).  Delta Downs and Treasure Chest closed twice for a total of 10 and 13 days, respectively, including two weekends - one of which was Labor Day.  The impact on Louisiana’s gaming revenues is clear to see in the Lousiana Delta Chart.




The headline figures for states’ revenue releases could prompt an overly positive reaction among some investors in the coming weeks.  The Louisiana comparisons will not be helpful.  For the rest of the country, combining August and September 2009 and comparing to August and September of 2008 will give a more telling indication of the health of regional gaming.


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The Global Oil Chess Board

Position: Short Oil via the etf USO


A couple of quick call outs this morning from the global oil chess board.  We discussed some of the regional dynamics in our recent Oil Black Book (please email for a copy if it is part of your subscription or if you would like a copy) and are seeing these points highlighted this morning.


The Russians announced their September oil production this morning, which exceed 10MM barrels per day.  Interestingly, this is almost 25% more than its nearest rival Saudi Arabia and is a monthly record for Russian monthly oil production.  Obviously, with such a share of the global oil market, the Ruskies are incentivized by high prices. To wit, Russian President Dmitry Medvedev noted on Thursday that, “$80 to $90 per barrel would be a fair price for oil in the current economic environment.” Indeed.


The juxtaposition with Russia is, of course, China.  Below we have a chart that shows Chinese oil production versus Chinese oil consumption going back to 2000.  This quick and dirty analysis shows the % by which consumption exceeds production.  Back in 2000 consumption exceed production by some 50%, as of the most recent data this number is now above 100%.  Because of her dramatic growth in oil consumption over the last decade, China has become increasingly dependent on foreign sources of oil.


Do you think Chinese needs and Russia’s supplies are going to shape the relationship between these two powers? You bet your Madoff they are!


Daryl G. Jones

Managing Director


The Global Oil Chess Board - a1


No Crash, Yet: SP500 Levels, Refreshed...

Using subscriber feedback as a measurement tool, I think that it surprised some people that I was covering and buying things in the first hour of trading. It shouldn’t have.


The immediate term TRADE line of support for the SP500 that I issued prior to the market open was 1020. As we approached that line, I started covering shorts. No, I didn’t go hog wild on the long side. I simply covered 5 short positions. That’s risk management.


I bought 1 long position, but that was not a US Equity Asset Allocation. I used market weakness to buy back our longstanding bullish view on both Australian economic policy leadership and Australian fundamental economic resilience (EWA).


Back to the USA, the most important part about covering shorts rather than buying longs is respecting this market’s newly established immediate term TRADE line of resistance. That’s the red line in the chart below at 1040. All rallies to that line are to be sold unless, of course, it is overcome.




Keith R. McCullough

Chief Executive Officer


No Crash, Yet: SP500 Levels, Refreshed... - a1



OCTOBER 2, 2009





This morning Bloomberg made the call that our commodities guru, Andrew Barber, made in August (see our 8/28 note). Simply put, stress in the cotton supply chain likely created a floor for cotton prices in the mid $0.50s, and even today’s $0.61 has few fundamental reasons to fall.


With no change in the data out of China (the August report has yet be released) the incremental weakness has stemmed from persistent droughts in India along with regional issues in Brazil where commodity shortages in Argentina have producers rotating to more profitable crops.


Another dynamic worth noting is continued consolidation of the cotton industry’s traders. According to a Bloomberg report this morning, four major traders now control more than 50% of cotton trading worldwide. Not only do smaller traders play a critical role in price liquidity, but they also help mitigate both soft and hard collusion within the industry. Further consolidation means increased spreads and volatility. Heading into ’10, this translates to ‘long pricing power’ and short commodity exposure. Below are the key factors that we outlined back in August:


Stockpiles:  The most recent data point from China, released by the National Development and Reform Commission, was that China imported 131,400 tons in July, which was down 38% yy albeit a slight improvement from 41% yy declines in the 1H. This has led to a tightening of world stocks as reflected in a global stocks-to-use ratio of 51.0% in August down from 51.3% in July. In addition, there has been recent speculation that China might increase cotton volume import quotas over concerns that state stockpiles will not be able to supplement the shortage of supply. Since China is the world’s largest cotton importer, this could be bullish as it relates to future cotton prices.


Production: Global production levels are down with the U.S. at its lowest level in 11 years and estimates for India’s output (world’s second largest producer) is down 15-20% because of drought conditions.


Demand: We’re not making a bull case around global consumer demand, but we find it very difficult to make a compelling bear case. Inventories in the global system of both raw and finished product remain fairly low, healthy, and in synch with current consumer demand. Looking at all the different scenarios, we think it’s more likely than not that demand moves up over the next six months. Inventories are tight around holiday, and then wer’e looking at spring/summer ’10 where we comped against not only a horrible recession, but a weather-impacted period where many consumers simply extended the prior year’s wardrobe. There’s going to be pent up demand at some point.

If we actually start to emerge from this global recession with cotton stockpiles low, production down, and demand picking up on the margin, I’d hate to be on the short side of cotton exposure.

Of course, the theme here will be long pricing power (brands and large retailers), and short commodity exposure (Gildan and to a lesser extent Hanesbrands). It’s too early to see this play out in 2H09, but it will be an increasingly important theme in 2010.






Some Notable Call Outs


  • Amazon UK has launched its standalone footwear and handbag site Javari.co.uk. Javari.co.uk is based on Amazon’s Japanese footwear site Javari.jp, which launched in March. Amazon has sold shoes since 2007, but said that a standalone site will enable it to attract a larger range of brand names. We’re still rather amazed at how retail investors generally don’t realize the power and influence as Amazon scales into these new categories. Amazon has already owned footwear site Endless.com and in June acquired Zappos. Don’t be one of those people that starts to quantify the impact because a blowup in another name in the supply chain is telling you to.


  • Meetings at both Skechers and K-Swiss headquarters this week support our contention that FL is looking to broaden its product portfolio under new CEO Ken Hicks. Lady Footlocker is now carrying Shape-ups and spring orders for K-Swiss’s Tubes (running shoes) are expected to be solidified over the next month.


  • Early testing of Shape-ups in Europe is positive if not better than early domestic demand. Not only is interest accelerating to comparable levels at a faster rate, but demand from men accounts for nearly 30% of sales in Europe. By comparison, the vast majority of domestic demand is from women and children.




As we often say at Research Edge, prices don’t lie. The market is always telling us something. Here are some names that are showing outside movements relative to the market, peers, and volume trends...


  • ICON bounced yesterday after its blo up earlier in the week, but on dramatically lower volume. Too early to say if its found a bottom here.
  • BIG and WAG are up on all durations of price and volume.
  • Not fun to be a Household Durable yesterday. The space was off 4x the market with meaningful pick up in volume.
  • Overstock is still one of the best three-week performers, but is losing price momentum while gaining steam on volume. Interesting turn on an oft hated name.
  • PAG, MHO, FBN, SKS, and SPF are worth noting for negative performance on all durations with volume up across the board.






-Wal-Mart further taps into India & China; Marks down 100 holiday toys to $10 - The world's biggest retailer Wal-Mart is going to further expand its presence in new markets of India and China. As Asia will lead the global economy to recover, the retailer will speed up expansion in the region. It currently operates at about 630 locations in China, India and Japan, with 24%of its sales coming from its international division. Just in time for early holiday shoppers, the $10 toy section at Wal-Mart stores is back. This year the "rollbacks" have been expanded to more than 100 toys. Featured licensed toys in Wal-Mart's promotion include Transformers: Revenge of the Fallen deluxe action figures; Barbie Cut and Style Rapunzel; and Littlest Pet Shop Online Animals and play pack sets. <fashionnetasia.com> <licensemag.com>


-India emerging as the leading organic cotton producer - Indian textile companies are going to take up a leading share in the global organic textile production as the country is emerging as the important organic cotton producer, said Selvam Daniel, Managing Director, global certification body ECOCERT India. "In 2007-08, global organic cotton production increased by 152% to 145,872 metric tons or 668,581 bales," said Daniel. <fashionnetasia.com>


-Clean Energy Bill May Increase Costs for Textile Sector - Climate change proposals before Congress could exact a toll on the U.S. textile industry, which will face a substantial increase in operating costs that could potentially jeopardize tens of thousands of U.S. jobs, according to a report released Thursday. President Obama has made clean-energy/climate-change legislation one of the pillars of his domestic agenda, and Congress is moving on the issue. Sens. Barbara Boxer (D., Calif.) and John Kerry (D., Mass.) unveiled a draft bill Wednesday kicking off Senate consideration for the first time this year. The legislation would mandate a 20 percent reduction in greenhouse gas emissions from 2005 levels by 2020. The House approved a bill in June that would cap greenhouse gas emissions beginning in 2012 and seek to reduce them 17 percent by 2020, relative to emissions in 2005 as a base year. <wwd.com>


-Pets at Home assesses IPO potential - Specialist retailer Pets at Home has moved closer to a flotation with the appointment of JP Morgan Cazenove as joint sponsor, joint bookrunner and joint global coordinator.JP Morgan Cazenove will “examine the options for a potential IPO of the company in 2010, subject to market conditions”, the retailer revealed. <retail-week.com>


-Nike Denies it Re-Signed Michael Vick; Quits Board of U.S. Chamber - Nike Inc. is denying a report that it signed Michael Vick to an endorsement contract. The Associated Press had said that the endorsement deal was announced during a panel discussion at the Sports Sponsorship Symposium by Michael Principe, the managing director of BEST, the agency that represents Vick. Nike spokesman Kejuan Wilkins said no endorsement deal is in place. In other news, Nike said it would resign from the board of the United States Chamber of Commerce, becoming the latest company to break with the group over climate policy. Nike said, however, that it would remain a member of the chamber, unlike three large utilities — Pacific Gas and Electric, PNM Resources and Exelon — which recently announced plans to pull out. The chamber has been under fire for its outspoken resistance to potential carbon regulation from the Environmental Protection Agency or from Congress. <sportsonesource.com>


-CIT Mulls Restructuring as Deadline Arrives - The fashion and retail industry again held its breath Thursday as CIT Group Inc. attempted to stave off bankruptcy for the second time in three months, this time with an exchange offer to eliminate 35 percent of its debt. Fashion industry executives and their lawyers, accountants and consultants were only somewhat reassured by word that, if CIT does go bankrupt, it would be the parent holding company that files Chapter 11 and not operating subsidiaries such as the commercial services arm responsible for the majority of factoring in the apparel industry. A prepackaged Chapter 11 is understood to be developed in case the debt swap fails. <wwd.com>


-Burberry Says Japanese Royalty Payments to Increase Next Year - Burberry Group Plc, Britain’s largest luxury goods maker, said royalty payments from its Japanese licensing partners will increase from next year, boosting annual operating profit by about 4 million pounds ($6.4 million). <bloomberg.com>


-Heelys' New CEO Elected to Board - Heelys Inc. said it has elected current CEO and President Thomas Hansen to its board of directors, according to a filing with the Securities & Exchange Commission. Hansen joined Carrollton-based Heelys in August, replacing former CEO Donald Carroll, who resigned. Hansen had worked in product development and marketing for about 30 years, before joining the company. <sportsonesource.com>


-CVS Union Critics Say FTC Seeks More Information - A union group that alleges anti- competitive practices by CVS Caremark Corp. said U.S. regulators have requested an additional meeting to discuss the issue. Officials of Change to Win, a 6 million-member union federation, said they have an Oct. 15 meeting with staff of the Federal Trade Commission on the group’s contention that the 2007 merger that created CVS Caremark has raised prescription drug prices. FTC Chairman Jonathan Leibowitz declined to comment on the possibility of a formal investigation. <bloomberg.com>


-Zara’s UK operations knocked by £20m pre-tax loss - Zara UK, the UK subsidiary of Spanish fashion giant Inditex, has slumped into the red. The group, which operates the eponymous chain, Pull and Bear, Massimo Dutti and Bershka in the UK, suffered a pre-tax loss of £20m in the year to January 31, versus a £4.5m profit the year before. <drapersonline.com>


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 80.46%
  • SHORT SIGNALS 78.35%