The cold wet weather that has dogged the Midwest this year has caused projected harvest start and completion times to be delayed for staple grains, with Corn and Soybean harvests off to the slowest start in decades.  As of October 11, the USDA estimated that only 13% of the total corn crop had been harvested versus an average of 35% by that time in the past five harvests.  Although the harvest is seriously delayed, in absolute size it’s anticipated to be a bumper crop: The USDA estimates a 13 billion bushel season for 2009, which would make it the second largest harvest on record. 


Futures markets ultimately function as insurance markets however, and despite the size of the yield, anticipated prices have risen sharply as more time in the field creates further risk of weather damage and other unknowns. With the harvest expected to drag into late November, the price of December delivery corn has bounced back from last month’s low close of $3 per bushel on September 4th  to  almost $3.85 per bushel in today’s session.


Sanderson Farm (SAFM) is trading lower after being downgraded at KeyBanc.  The thesis is that rising corn prices make feed costs more expensive.  As the story goes corn prices will continue rising due to a declining U.S. dollar boosting exports and expectations that ethanol producers will use more corn.


Keith bought SAFM today on the downgrade.  At research edge we do not agree that corn is headed much higher.  At the current prices for crude oil, Ethanol is not a concern and the bumper crop for corn will ultimately dictate the future of corn prices, which is likely lower.   In two weeks, SAFM will be holding an analyst meeting updating the investment community on where the company is headed and the state of the industry.  Notwithstanding a slight uptick in the price of corn, the industry outlook is positive and SAFM is one of the best managed companies in the space.


Our bottom line: Corn has a broken TAIL and a bullish TREND… within an industry that’s been wrecked/consolidated, broken TAIL prices are positive for producers.


Andrew Barber



Kerry Bauman

Senior Analyst







McCarran Airport reported a decline of only 1.2% in September passenger traffic. However, the September revenue comp is the most difficult for the foreseeable future.



A 1.2% drop in enplaned/deplaned McCarran passengers is the smallest since February 2008.  The airport traffic comparison was relatively easy.  Nonetheless, the number was decent and could contribute to positive growth in Las Vegas visitation.  We now project visitation will show ever-so-slight growth - the first growth month since May 2008 - when the Convention Authority reports its numbers in a few weeks.


What's going on?  The calendar was very favorable, hence the easy comparison, with Labor Day weekend falling mostly in August of last year versus September of this year.  We also think the 17.5% year-over-year decline in gas prices in September will help drive auto traffic from California up around 10%.


So revenues will be strong too, right?  Not so fast. We are projecting Strip gaming revenues to fall 13% despite the decent traffic number.  Slot and table hold last September were each a full percentage point above the average.  The high hold % last year contributed a 10% offset to the gaming revenue decline.  Gaming revenues would've fallen around 15% rather than the relatively strong 5% that was reported in September 2009.  Of course our projections assume normal hold percentages this year and relatively stable Baccarat volumes.  Visits from a few Baccarat whales can have a big impact on revenues.  Indeed, an otherwise dreadful August was somewhat saved by strong Baccarat volumes.


The details of our projections are portrayed below.  Investors may be disappointed when the revenue numbers are released in a few weeks, particularly given the potential enthusiasm surrounding last night's airport numbers.













October 20, 2009





After months of publicly expressing a desire to make acquisitions, Li & Fung announced a deal to acquire privately held Wear Me Apparel Group for $400 million.  While the Street was likely awaiting a more exciting and public deal, once again we are reminded of how much business still takes place in private hands within the apparel industry. ‘Wear Me’ holds licenses for brands including Calvin Klein, Timberland, Disney, Marvel and Nickelodeon and generates sales of $800-$900mm annually. Interestingly enough, the deal includes everything except the hard retail assets, supporting our view that Li&Fung wants brands, and not boxes. Let’s give these guys props as it relates to timing, as it is happening just days after Disney hints at taking its Disney Retail store count up meaningfully. It also happened weeks after Liz Claiborne struck an exclusive deal with JC Penney for all ‘Liz Claiborne-branded product and sub brands.’ Remember that LIZ sold its sourcing operation to Li&Fung earlier this year, and now will be shifting production on the margin through JCP’s sourcing infrastructure, which is one of the best in the business. I’m not suggesting that Li&Fung did this deal in response to LIZ, as the scope is much larger and all adds up to a net positive.  But the chain of events here between LIZ, Disney and Li&Fung remind us that that the retail landscape is much more interconnected globally than most people think.




Some Notable Call Outs

  • Dueling comments this morning as it relates to European VAT (value-added tax), which is a key factor in driving retail consumption and retail margin.
    • Bulgaria’s Finance Minister vowed to cut VAT from 20% (one of the highest in the world) to 16% by 2013. If Borissov’s government can pull this off without breaking the bank, it will be a clear positive.
    • On the flip side, the UK (clearly, a much larger component of European consumption than Bulgaria) is taking up VAT on January from 15% to 17.5%. That’s not new, but saber-rattling in advance of the proposed event continues to increase. The latest opposition is quite interesting. Retailers are questioning return policies around the holidays. If someone gets a gift in late December, and then price goes up 2.5% on Jan 1, then how do they handle product returns?  Well…I hate to break it to them, but the consumer will demand the better price, and the government certainly won’t make up the difference. Yes, that means it comes out of the supply chain.


  • The Consumer Electronics Association released its 16th annual holiday survey and the results are bullish (after all, would the industry organization paint a bleak picture of itself?).  All kidding aside, the results were interesting with the survey showing that 4 out 5 adults plan on buying  Consumer Electronics this holiday (the highest percentage in 16 years).  Additionally, consumers are expected to spend about 8% more this holiday on CE products vs. last year for an average spend of $222.


  • Let the book wars begin.  Not surprisingly, is matching recent Wal-Mart and Amazon price cuts with an $8.99 offering on this holiday’s anticipated best sellers.  While the retailers are getting aggressive, it should be noted that the biggest losers in this scenario are the publishers, which for decades have been the most profitable component of the book supply chain.  Hardcover bestsellers now appear to be relegated to a traffic driving item with very little profitability.


  • In a sign of the apocalypse, someone actually came out positive on UA this morning. Are people finally starting to get it? Check out our note from Sunday. 


  • The first “boot induced” positive pre-announcement took place this morning with Steve Madden announcing substantial upside to its 3Q results.  Positive boot callouts have been on the radar for a few months, but this is the first confirmation that the trend is meaningful and one to watch for other brands and retailers with exposure to this higher price point category.  Before we extrapolate the trend however, it’s worth highlighting that we’re focusing on fashion boots, not snow boots (at least not yet!).




-Down Under Retailer Kathmandu Floats an IPO - After months of speculation, Australasian outdoor-gear retailer Kathmandu has confirmed a dual listing in both Australia and New Zealand with the launch of its IPO on Monday, offering between 166.9 million and 197.4 million shares for sale, or 84% to 99% of the issued capital. The shares will be priced at between (NZ$2.01 and NZ$2.32 (A$1.65 - A$1.90), raising a total of between $NZ338.6 and $NZ457.2 million. The retailer currently has more than 80 stores in Australia, New Zealand and the U.K. Kathmandu, which Goldman Sachs and Quadrant bought for NZ$275 million (A$204 million) in 2006, is offering its shares to the market at around 13-15 times its forecast 2010 earnings, a discount to the Myer offer at around 14-17 times and in line with the overall market. Kathmandu, which will have a market cap of up to A$380 million after the IPO, has a gross profit margin of 64% percent of sales, which makes the offering all the more attractive. <>


-Carl Icahn Offers CIT $6 Billion Loan - American financier Carl Icahn, CIT Group Inc.’s largest creditor, has offered the beleaguered lender an alternative option in the form of a $6 billion loan. In a letter to CIT’s board, Icahn said the loan would save the company $150 million in fees to prospective lenders, and would not force bondholders to vote for a revised debt exchange. Icahn in his letter criticized the proposed $6 billion in a secured term loan being offered by the company as a “bad-faith attempt to buy votes for the company’s exchange offer/plan of reorganization, since all prospective lenders must vote their CIT debt in favor of the company’s plan in order to receive an allocation of the new loan.” He also chastised the proposed prepackaged bankruptcy plan because it would give the board “releases against certain claims that shareholders and bondholders would have against them.” <>


-Bernanke: Asia Leading Recovery - Policymakers searching for an economic engine to drive the recovery are looking beyond the U.S. consumer and toward rebounding economies in Asia. Bernanke also warned Monday that the trade imbalances with Asia, which have improved as U.S. consumers save more and Asian consumers spend more, could reassert themselves as the economy perks up and trade volumes rebound. Current Asian growth helps makes Asia a better candidate to lead the recovery than the U.S. consumer, who helped fuel growth and kept Asian factories humming earlier in the decade, but has reprioritized over the last year in favor of saving over spending. “The Asian recovery to date has been in significant part the result of growth in domestic demand, supported by fiscal and monetary policies, rather than of growth in demand from trading partners outside the region,” Bernanke said. <>


-Global Textile Production Increases in Second Quarter - Global fabric and yarn production posted major gains in the second quarter, spurred by a double-digit surge in output by Asia, marking a major turnaround after two years of continuous falls, an industry survey said. World yarn production during the April to June period expanded 22.4 percent compared with the previous quarter, and was the first gain registered after falls since the second quarter of 2007, said the International Textile Manufacturers Federation. World fabric production notched 14.4 percent increase in quarter, ITMF said, but production increases in Asia, up 16.7 percent, and in North America, up 7.8 percent, were offset somewhat by slight declines in Europe and South America. <>


-TJX Raises Profit Guidance Again - Off-price giant The TJX Cos. Inc. on Monday raised its third-quarter profit guidance for the second time in as many weeks and said October comparable-store sales would climb 9 percent to 11 percent. For the third quarter, profits from continuing operations are now expected to rise to 77 to 79 cents a diluted share. On Oct. 8, the company said earnings for the quarter would rise to 71 to 74 cents, and in August the projection was for earnings of 62 to 68 cents. Year-ago earnings tallied 58 cents. <>


-U.K. Retailers call for extension of trade credit insurance top-up scheme - Retailers have voiced their concerns that trade credit insurers do not assess risk accurately and said that the Government’s temporary Trade Credit Insurance Scheme was yet to help their business. 38% of large retailers and 28% of small and medium-sized retailers revealed in the British Retail Consortium’s Quarterly Credit Conditions Monitor report today, that the reduction or withdrawal of credit insurance has negatively impacted their businesses over the last year and want the Government’s trade top-up scheme extended beyond the end of this year. The temporary Trade Credit Insurance Scheme introduced by the Government in its April budget comes to an end on December 31 and 77% of large businesses and 59% of smaller retail businesses believe this should be extended, said the BRC. <>


-Jean Paul Gaultier Set for Target Collaboration - Target confirmed on Monday that Jean Paul Gaultier will be the third in its series of Designer Collaborations, a relatively new concept intended to boost the discounter’s cheap-chic status. The program features well-established designers who draw inspiration from a collaborative partner, muse or creative element. Designer Collaborations is separate from Target’s Go International initiative. The exclusive Jean Paul Gaultier for Target collection will debut on March 7 in more than 250 stores nationwide and on The collection will be available through April 11. Gaultier’s Designer Collaboration will have a tighter distribution than the last participant, Anna Sui, whose collection was sold in about 600 Target units. <>


-Quelle to Liquidate in Germany - The 82-year-old German catalogue company Quelle, which belongs to the insolvent Arcandor Group’s Primondo mail-order division, is being liquidated. About 7,000 employees in Germany are affected. Quelle’s overseas operations are healthy, according to the insolvency administrator, and will now be sold in an independent process. Separate buyers are also being sought for the remaining Primondo businesses, which includes the catalogues Baby Walz and Hess Natur as well as the TV shopping channel HSE24. The search for an investor for Arcandor’s Karstadt Department Store group is ongoing. <>


-LVMH, Analysts See Luxe Rebound Near - While still faint, there is light at the end of what has been a long and dark tunnel for the luxury sector. That was the word from LVMH Moët Hennessy Louis Vuitton on Monday as it reported a 3 percent dip in third-quarter revenues and trumpeted improving trends in all its businesses versus the first half of the year. Meanwhile, Deutsche Bank issued a bullish profits outlook on luxury goods and, at a meeting in Milan organized by Italy’s Fondazione Altagamma association, Bain & Co. predicted a full recovery of the market in the 2011 to 2012 period. <>


-'Affordable Luxury' Bucks the Crisis - Tommy Hilfiger just opened a 22,000-square-foot store on Fifth Avenue in Manhattan, a move that, in this economy, some might call insane. But the Hilfiger line, like many midrange designer brands, is growing, while other labels, notably at the high end, are struggling to hang on to market share. Brands like Tommy Hilfiger, D&G from Dolce & Gabbana, or Tory Burch, all selling below the luxury designer category, are growing now because they expanded or reorganized, repositioned collections or introduced new lucrative lines before the first signs of the recession. <>


-Columbia Sportswear to Open Store in Germany - Columbia Sportswear Co. announced it will open a store in Munich, Germany. The 4,800-square-foot store is expected to open in December on Munich’s Sendlingerstrasse, one of the city’s fastest-growing shopping streets with 50,000 visitors each day. The Munich store will be the the company's third branded store in Europe. Its Frankfurt store opened in August followed by the London store last month. In a statement, Columbia said Sendlingerstrasse is one of the fastest developing shopping streets within Munich, with approximately 50,000 people visiting each day. <>


-Michigan Avenue Gets Mall Flavor - Luxury labels have some new company on the Magnificent Mile here, with recent entrants such as Best Buy, Zara and Forever 21 adding a dose of the mall. As part of the thoroughfare’s evolution, Tiffany & Co. now sits next to a new 18,000-square-foot Victoria’s Secret and its pink facade, which opened this week. Saks Fifth Avenue will be joined at the Chicago Place mall by the nation’s largest Zara, a three-level, roughly 35,000-square-foot space set to open Oct. 30. Doors away, fast-fashion retailer H&M sits around the corner from Ralph Lauren. <>


-Puma opens development center in Vietnam - German sporting goods company Puma AG opened a new product development center in Vietnam on Tuesday, part of an effort to streamline the creation of new apparel and reduce costs. Puma said the center in Ho Chi Minh City pulls together suppliers, researchers and developers under one roof. <>


-US Lacrosse Partners with Champion as the Official Performance Apparel - US Lacrosse announced a new partnership with Champion Athleticwear. Champion has been selected by the sport`s national governing body as the "Official Performance Apparel of US Lacrosse." Champion shares US Lacrosse`s commitment to the responsible development and growth of lacrosse across the country. <>




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


10/19/2009 10:13 AM


We shorted it for an immediate term TRADE fading the Goldman call. I'll take that off now, keeping a trade a trade. KM



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US Strategy – Housing on tap

On Monday, the S&P 500 closed at 1,097, up 0.9% on the day.  The S&P 500 has now risen nine of the last ten days, albeit on decelerating volume the S&P 500 hit another higher-high, while the USD hit another lower-low. 


Driving the market higher is (1) the trend of better-than-expected Q3 earnings and upbeat guidance, (2) M&A generally, but the highlight is in Technology. 


Yesterday’s portfolio activity included selling our long position in the XLU and EWT and buying SAFM and MPEL.  Todd Jordan has Keith warming up the Macau bus again; we are buying MPEL back on a down day.  We also covered our short in NKE. 


We continue to be short the XHB and expect that the recent enthusiasm around the home builders to wane in the coming days.  The National Association of Home Builders housing market index dipped to 18 from 19 in September, falling below market expectations for a reading of 20.  Home builder sentiment is waning for the market for newly built single-family homes, as the November 30 expiration of the government's $8,000 tax credit for first-time buyer’s approaches. The WSJ also notes today that the IRS is examining more than 100,000 suspicious claims for the first-time home-buyer tax break.  Not a good sign that the program will be extended.


The momentum behind the “currency creditability crisis” continued to weigh on the dollar index, which fell for five of the last six days, finishing down 0.35%.   For the first time in ten days the VIX rose 0.3% on the day.  In early trading today Oil traded above $80 as the dollar index fell to its lowest level since August 2008. 


Yesterday, six sectors outperformed the S&P 500 and every sector was up on the day.  The three best performing sectors were Energy (XLE), Materials (XLB) and Utilities (XLU), while Financials (XLF), Consumer Staples (XLP) and Healthcare (XLV) were the bottom three. 


Yesterday, the Financials were the worst performing sector and it was not the only sector down over the past week.  The banks are dragging the group down, with regional banks being hit the hardest.  This was highlighted by the results from BBT yesterday, on concerns over credit deterioration.  The trend will likely continue as STI, SNV and MI are all scheduled to report on Thursday.


Today, the set up for the S&P 500 is: TRADE (1,079) and TREND is positive (1,003).   Day 7 of perfection - the Research Edge quantitative models have 9 of 9 sectors in the S&P 500 positive on TREND and 9 of 9 sectors are positive from the TRADE duration.         


The Research Edge Quant models have 1% upside and 1.5% downside in the S&P 500.  At the time of writing the major market futures in the U.S. were higher.


The Research Edge MACRO team.



US Strategy – Housing on tap - S P500


US Strategy – Housing on tap - s pperf

US Strategy – Housing on tap - s plevels




The Macau Metro Monitor. October 20th, 2009




Hyatt Hotels & Resorts today announced the opening of Grand Hyatt Macau located on the Cotai Strip in the new City of Dreams development.  The 791-guestroom hotel has fifteen individual function areas spanning more than 968,000 square feet.  Grand Hyatt Macau now has one of the largest event spaces in Macau.




Las Vegas Sands Corp is seeking $1.75 billion to $2 billion five-year financing for its subsidiary, Venetian Macau, almost twelve months after cancelling a $5.25 billion financing and mothballing its Macau projects, according to banking sources.  Funds from the new deal will be used to complete Lots 5&6.  The news could come as a boost ahead of the company’s upcoming $1.5billion - $2 billion initial public offering in Hong Kong in November.


The financing is said to comprise of revolving credit and a term loan. LVS is rumored to be seeking a rate of 400 basis points over LIBOR, while “bankers looking at the deal” said they would expect pricing over 500 basis points all-in. 

Confirmation Bias

“I ask you to judge me by the enemies I have made.”
-Franklin D. Roosevelt
Where did all of the Great Depressionistas go? It is funny and predictable all at the same time. This is Wall Street. We tell stories until they stop making sense – then we drop the context of the narratives altogether, hoping that no one YouTubes us.
It wasn’t too long ago that the Roubinis and Rosenbergs were calling for the end of the US stock market as we know it. After clocking another fresh YTD high on the SP500 last night, I’d have to agree with them. A +62.3% nine-month Minsky Meltup puts an end to what we knew as the Depressionista storytelling, for now…
But why is it that we stop remembering history? How can we go from everyone becoming an expert on 1929-style crashes to dismissing 1933-style recoveries? That’s easy to answer. Wall Street and Washington have what neuroscientists have labeled “Confirmation Bias.”
Per our friends at Wikipedia, Confirmation Bias is “an irrational tendency to search for, interpret or remember information in a way that confirms preconceptions or working hypotheses.” For the common sense crowd, this isn’t new – writers like Francis Bacon (1) and Leo Tolstoy (1) had observed Groupthink phenomena a long time ago…
The reason why I quoted FDR is to contextualize this Confirmation Bias point. Right here and now, how many “economists” and “strategists” are reminding you of the Q4 US Dollar Devaluation period of 1933? The time period is in the same area code of what the Depressionistas sold a lot of books about. Wasn’t the 1933 recovery that made FDR plenty of enemies worth mentioning?
By October of 1933, Roosevelt had devalued the US Dollar by -30%! Then, on October 22nd of 1933, he and his Cornell farmer/economist friend, George Warren, decided to Burn the Buck further by announcing that they’d buy gold in the open market. No one in FDR’s old boy network of Washington economic advisors supported the decision. Plenty of the James Warburgs (the “smart” Wall Street banker crowd) were initially up in arms, but FDR pushed his policy forward.
In Q4 of 1933, FDR effectively Bombed Out the Buck by another -10%, and ran over every patriotic short seller of his policy while doing it. Equities, from Britain to America REFLATED, big time, and John Maynard Keynes became a modern day George Soros.
Today is October 20, 2009, and the US Dollar is trading down again, hitting fresh YTD lows of $75.20. At the same time, on the heels of what didn’t look like Depressionista earnings out of Apple to me, US equity futures are looking to open at higher-YTD-highs. There is no narrative fallacy here folks – this is math.
A monkey or a brain surgeon can figure this out at this point. So don’t get upset with FDR or Obama or whomever might be running you over covering their consensus short position at the highs. Just see this immediate term story line for what it is. Respect it. Manage risk around it.
Across the world today, I am surveying headlines that hardly look deflationary to me. Ben Bernanke was in San Francisco talking about Asia and suggesting that “the United States must increase its national saving rate”. That’s cool Benny, but in what country should we save? And at what rate?
In the US, Japan, and the UK interest rates are effectively ZERO this morning. So American Savers and Creditors alike, even though everything priced in US Dollars is going up, you might want to take a gander at how much slower those US prices are going up versus everywhere else.
Here’s a peak at what the Global Equity Depressionistas have in terms of YTD losses on the short side:
1.      Russia, up another +1.1% this morning to +130% YTD

2.      Turkey, up another 0.87% this morning to +86% YTD

3.      Brazil, up +1.6% yesterday to +79% YTD

4.      China, up 12% in the last 3 weeks (up another +1.5% overnight) to +69% YTD

5.      Australia, up another +1.1% last night to +33% YTD

6.      Hungary, up another +0.61% this morning to +73% YTD

Who cares about Hungary or Turkey? Probably the people who have been smart enough to buy low and flow capital there. The New Reality is that the world is increasingly interconnected. Capital flows, real-time, to rates of return that earn her respect.
Capital chases yield. Yield generates returns. Returns build Savings. Savings drive Investment. 1920’s America or 2010 China, anyone?
You don’t need me to remind you of 1933 economic history to understand how capital flows. Capital chases yield. That’s been a long standing capitalistic pursuit that investors have embraced for generations. So don’t get upset about the US Government’s transparency issues this morning. Just understand this Burning Buck policy and profit from it.
There is still immediate term TRADE upside to the SP500’s 1107 line. Then we’ll be overbought again. However, provided that the Buck continues to Burn, all pullbacks to immediate term SP500 support of 1079 should be bought, not sold. Get out there and make some enemies in the Depressionista camp while you are at it too! I’m starting to have some fun with this.
Best of luck out there today,




EWG – iShares Germany Chancellor Angela Merkel won reelection with her pro-business coalition partners the Free Democrats. We expect to see continued leadership from her team with a focus on economic growth, including tax cuts. We believe that Germany’s powerful manufacturing capacity remains a primary structural advantage; with fundamentals improving in a low CPI/interest rate environment, we expect slow but steady economic improvement from Europe’s largest economy.

CAF – Morgan Stanley China Fund
A closed-end fund providing exposure to the Shanghai A share market, we use CAF tactically to ride the more volatile domestic equity market instead of the shares listed in Hong Kong. To date the Chinese have shown leadership and a proactive response to the global recession, and now their number one priority is to offset contracting external demand with domestic growth. Although this process will inevitably come at a steep cost, we still see this as the best catalyst for economic growth globally and are long going into the celebration of the 60th Anniversary of the People’s Republic.

GLD – SPDR Gold We bought back our long standing bullish position on gold on a down day on 9/14 with the threat of US centric stagflation heightening.   

XLV – SPDR Healthcare We’re finally getting the correction we’ve been calling for in Healthcare. We like defensible growth with an M&A tailwind. Our Healthcare sector head Tom Tobin remains bullish on fading the “public plan” at a price.


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.

FXB – CurrencyShares British Pound Sterling
The Pound is the only major currency that looks remotely as precarious as the US Dollar. We shorted the Pound into strength on 10/16.

XLP – SPDR Consumer Staples
Strong day for Consumer Staples on 10/16, prompting a short versus our low beta long position in Utilities (XLU).

XHB – SPDR Homebuilders We were the bulls on a Q2 housing turn but, as the facts change so do we: now we are getting cautious on 1H 2010 US Housing. Rates up as access to capital tightens is not good for new home builders as we enter into a new year and series of potential catalysts for renewed pressure in the secondary market, including the expiration of the $8,000 tax credit.

WTIC Oil traded just north of our overbought line on 10/12. With the US Dollar hitting another higher-low, we shorted more of oil’s curve.

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 realis