Thank You: One Of the Best Emails I Received Today...

In reference to another client response I received this morning, one of my best friends in life pointed out, "well, you're making a market out there!"...

That is the goal of building a business on cummulative knowledge, indeed. Although I have been more right than wrong this year, we're looking for the right answers over here, and those certainly won't always be my answers.

Here's the note - enjoy; especially the Grantham link - definitely on the required reading list for the objective seekers of truth out there.



"Although Ben takes a lot of heat and should pull a Volcker (btw, I find it interesting that Volcker is on Obama's advisory board - or inner circle of advisors or whatever you want to call it) - regardless, it was Greenspan that got us in to this mess. Ben has the toughest job on the planet right now and is not doing us any favors by trying to nice to everyone. Raising rates will crush everything people say. My response is "we are going there anyway" To me, it's simply "get it over with rather than dying a death by 1,000 paper cuts." Nobody like a guy who spoils the party, which is why Volcker lasted a short time and Greenspan, conversely, lasted a long time. Ben seems to be trying to be somewhere in between. But he needs to pull a Volcker (so I can make a ton shorting these stupid fertilizer stocks).

anyway, Avery signed with the Stars, the Tour de France starts this weekend and the Olympic swimming trials continue. The market is incredibly inefficient right now. Quality assets are for sale. Ben needs to do the right thing and correct Greenspan's mess. If he doesn't, a hot dog (believe me, I know protein fundamentals real well) will cost $30 next July 4. Viva la Pig.

read the last newsletter (1Q2008 letter to clients midway down the screen). this is outstanding work, even if there are no hockey analogies."

Best regards,

A Friend Of Mooner's

India's Bear Market Crash: Where Is Support In This Chart?

Since I just wrote a "Bullish" note on the VIX, I better issue a "Bearish" one to make sure someone doesn't think I am going into the long weekend long. I am actually running -14.1% net short.

India has been one of my big macro short positions, and things there have really deteriorated this week. India's stock market cracked for another -3.7% down move overnight, taking the Sensex Index -37% since January 2008 alone!

Stagflation is bad, especially when your country is ran by bureaucrats who are facing the political headwinds of social unrest like those in India are.

Inflation is global this time , indeed.

(chart courtesy of

A Bull Market In Volatility (VIX)!

While Wall Street is trying to figure out if they can squeeze an up day out of the shorts into the long weekend, let's try managing risk proactively ahead of everyone coming back to work on Monday.

Volatility, measured by the VIX, is one of the few charts, next to that of Gold, that I write about objectively in the context of a resoundingly bullish formation.

The only good thing about the VIX selling off -5% so far today, is that today is going to end soon. Doubting the "Bear" is setting the VIX up to make higher lows and higher highs.

I have a near term price target of 26.12 for the VIX, and remain comfortable with my call that the 31-32 level is coming to a theatre near you this summer.


(chart courtesy of

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US Employment Trends: Hope Versus Reality...

This morning's headline June Employment Report told us nothing other than nothing has changed. At -62,000 US non-farm payrolls the reported "Trend" remains negative.

Interestingly, away from the headlines CNBC is flashing you, there were 3 other callouts within this morning's employment data to consider:

1. The weekly jobless claims print of 404,000 takes us higher yet again on a 4 week moving average basis, ensuring that the July employment #'s could be worse

2. The non-farm payroll # for May was revised down from -49k to -62k. I know, it's worse when the right number is even worse than the one that initially freaked you out.

3. The -62k monthly change in non-farm payrolls was 10x as bad in 1974. Pull up the data set for some perspective. We're just getting started here folks!

After 16 years and 64 consecutive quarters of real growth, the US Consumer spending bull market is ending. This is only the beginning of the end.

Selling My Lehman (LEH) - Keep a Trade A Trade!

This is a bear market that can and should be traded, not invested in with any level of concentration, until it washes itself out. I bought LEH on the "take under" rumor, and I am selling it for a +13.5% gain here.

Keep a "Trade" a trade.

Ugly Chart of the Month!

In a 'how could I not have seen this coming' moment, I realized that my '3 points in lost margin over 3 years' thesis for apparel has another nail in the coffin - a meaningful slowdown in the growth of the number of core customers.

All my clients (and then some) know my thesis on apparel - that the industry will give back 3 margin points over 3 years as the supply chain gets stress-tested to a degree not seen in over 10 years. This will be driven by 1) a reversal in a massive sourcing tailwind, 2) tightening capacity in Asia, and 3) the US consumer heading into a 'consumption depression' as the personal savings rate heads higher to offset at least a temporary pause (if not long term) in a 25 year bull market for home prices and equities.

I think that the lack of sourcing savings disarms the industry of a powerful weapon previously used to stimulate per capita unit demand (up 50% in 15 years). But shame on me for not accounting for the chart below. Demographics for this space are absolutely abysmal.

While it's easy to look at the aggregate population numbers in the US, those usually don't mean much when looking at a specific industry with unique consumers. My Jr Analyst Zac (one of the best collegiate sailors in the world) took this analysis to the next level and calculated the percentage of apparel spending by age group versus the growth in each of each of those individual age groups.

His major takeaway is that from 2001-2005, the apparel population grew at a favorable rate relative to the overall population. This rate started to roll in 2006 (around the time the industry started to show more stress) and headed lower into 2008. The bad news is that this rate accelerates further all the way through 2012. This is bad bad bad.

Not only are my previous concerns enough to take out 3 points of margin, but now the demographic picture seems like the nail in the coffin. Again, I completely realize that the future demographic trend is not a new development, but that my realization of it is. But I've been covering this industry for a long time. If it's news to me, then I'm willing to bet that its news to most others as well.

I'm not trying to be negative here folks, but these are facts I simply can't ignore.


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