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Retail First Look: Let the Comparisons Begin


 November 17, 2009





With the reporting of HD and TGT this morning (both on the surface better than expected), the inevitable comparisons will now begin between their results and those of their biggest competitors. The SIGMA overlay charts below speak for themselves, highlighting the differences and similarities between how each of these companies has performed over the past several quarters. The consistency in margins is eye-opening for WMT, which has barely budged from a profitability standpoint since the “recession” began.


Retail First Look: Let the Comparisons Begin - TGT   WMT


Retail First Look: Let the Comparisons Begin - HD   LOW SIGMA





  • It’s not often that I draw attention to advancements in textile technology, but this caught my eye. A textile “treatment” has been developed that reduces heat build-up and provides UV protection in dark colored textiles. In lab tests, Coldblack finished black garments displayed a 9 degree cooler temperature than a comparable shirt constructed of conventional fabric. The material has been used in some higher-end brands so far, but the potential is widespread for anyone or any product that prefers black over white in the blazing sun!


  • Lowe’s 3Q results were in part driven by a sequential same store sales improvement in 45 out of 50 states. The biggest improvements were noted in states that have been hit the hardest by the housing downturn. Additionally, after 5 quarters “indoor” related products are now out-comping “outdoor” related categories (by a margin of 300bps). Management also noted that while inventory commitments to the trim-a-tree category are planned down this year, sales are off to a “solid” start this season.


  • A few weeks ago it was widely expected that the $99 Blu-ray DVD player would be one of the key items for Black Friday. Now with the recent leaking of Wal-Mart’s Black Friday circular, it appears that they are setting the bar even lower, with a $78 unit. Now granted that price is only available during door-buster hours, but the price is still aggressive especially when considering a similar unit was promoted at $129 over the same event.




PPR Starts African Unit IPO to Raise $1.5 Billion - PPR SA, the owner of Gucci Group, started selling shares in its African unit CFAO today to raise as much as 1 billion euros ($1.5 billion) in France’s first initial public offering for two years. Paris-based PPR is offering 31 million existing shares and may add 4.65 million additional shares for a total of 35.65 million at a price range of 24.80 euros to 29 euros apiece, the Paris-based company said today in a statement. If the over- allotment is exercised, PPR will sell almost 58 percent of CFAO. PPR said it plans to give up majority control of CFAO, which sells cars, pharmaceuticals and consumer drinks in Africa and France’s overseas territories. The retailer said two weeks ago the sale is part of a “reconfiguration” of its businesses, which include Gucci, the Conforama furniture chain, bookseller Fnac, mail-order unit Redcats and a controlling stake in the German sporting-goods company Puma AG. Investors and analysts have speculated that the company may target luxury makers such as Italian jeweler Bulgari SpA.  <bloomberg.com>


Yoox Kicks Off IPO - Internet fashion retailer Yoox Group launched an initial public offering on Monday that could raise as much as 126 million euros, or $187.9 million at current exchange. Shareholders in the Bologna, Italy-based company, which include venture capital firms Balderton Capital, Kiwi and Nestor 2000, are selling 24.3 million shares at an indicative price per share of between 3.60 euros, or $5.37, and 4.50 euros, or $6.71, through the end of November. If demand is high enough, a further 3.65 million shares will go on sale via an overallotment option, known as a greenshoe. Goldman, Sachs & Co. and Mediobanca are managing the placement, which values Yoox at as much as 226.8 million euros, or $338.2 million. Shares will start trading Dec. 3 on the Milan Stock Exchange STAR segment for small companies.  <wwd.com>


Bernanke Signals ‘Extended’ Low-Rate Period May Become Longer - Federal Reserve Chairman Ben S. Bernanke’s diagnosis of a weak U.S. economy and labor market signaled that the central bank’s extended period of low borrowing costs may get even longer. Bernanke said “significant economic challenges remain,” with lending constrained and the jobless rate above 10 percent. Speaking in New York yesterday, he said U.S. asset prices aren’t out of line with underlying values, and central bank policy will ensure that the “dollar is strong.” Treasury two-year notes rose and the dollar weakened as investors reduced bets the Fed will raise interest rates by August. In his most extensive comments on the economy since July, Bernanke repeated the Fed’s Nov. 4 pledge to keep rates low for an “extended period,” and he said forecasters anticipate “moderate” growth this quarter after the 3.5 percent pace of expansion in the prior three months.  <bloomberg.com>


Obama Urges China to Heed Commitment on Currency Appreciation - President Barack Obama called on Chinese counterpart Hu Jintao to make good on a commitment to allow the yuan to appreciate to help prevent trade imbalances that exacerbated the global economic crisis. “I was pleased to note the Chinese commitment, made in past statements, to move toward a more market-oriented exchange rate over time,” Obama said during a joint appearance with Hu after a meeting in Beijing today. America’s trade deficit with China widened to a 10-month high in September, raising concern that the combination of a recovering U.S. economy and a fixed yuan exchange rate against the dollar will worsen global imbalances. China’s dollar purchases to prevent appreciation swelled its foreign-exchange reserves to $2.3 trillion in the third quarter, more than twice as much as any other country.  <bloomberg.com>


Buffett Raises Berkshire’s Wal-Mart Stake, Adds Exxon, Nestle -  Warren Buffett’s Berkshire Hathaway Inc. took stakes in Exxon Mobil Corp. and Nestle SA, betting on the world’s biggest oil and food companies. Berkshire held about 1.28 million Exxon shares and 3.4 million American depositary receipts of Nestle at the end of the third quarter, the Omaha, Nebraska-based company said in a regulatory filing yesterday. The stake in Irving, Texas-based Exxon would be worth about $95 million, based on yesterday’s stock price, while the Nestle holding would be valued at $161.5 million. Berkshire also raised its stake in Wal-Mart Stores Inc., the largest retailer. “Berkshire is increasingly looking for companies that are world-leading brands,” said Tom Russo, partner at Gardner Russo & Gardner, which holds shares in Berkshire and Vevey, Switzerland-based Nestle.  <bloomberg.com>


Strickler Details Obama's Trade Stance at WWD CEO Summit - The Obama administration understands the importance of trade as an engine for economic growth and is committed to brokering sound trade agreements, said Gail Strickler, assistant U.S. Trade Representative for the office of textiles. USTR Ron Kirk “has given me an opportunity to serve the industry I know and love, and this opportunity is something I plan to take full advantage of,” said Strickler, a 30-year textile and apparel industry veteran who has been in her post just eight weeks. Strickler, who is in the position formerly called the special textile negotiator, is the lead negotiator for textile and apparel products and advises Kirk on industry trade matters. Although many in the apparel industry feel there’s a lack of clarity on the Obama administration’s approach to trade, Strickler said the administration is “committed to getting the science of trade right.” <wwd.com>


European Exports Rose Most in 20 Months in September - European exports increased the most in more than a year and a half in September as reviving global demand helped the region’s economy emerge from its deepest recession since World War II. Exports from the 16-nation euro area rose a seasonally adjusted 5.5 percent from August, when they fell 4.1 percent, the European Union’s statistics office in Luxembourg said today. The September increase was the biggest since January 2008 and pushed the trade surplus to 6.8 billion euros ($10.2 billion), the largest in more than five years. Imports advanced 1.1 percent after a 1 percent drop in August. The euro-area economy returned to growth in the third quarter after global governments stepped up stimulus measures and central banks injected billions into markets to revive lending. While Europe’s services and manufacturing industries expanded for a third month in October, the euro’s ascent is threatening to undermine exports by making them more expensive.  <bloomberg.com>


U.K. Inflation Rate Increases More Than Forecast - The U.K. inflation rate rose more than economists forecast in October, climbing for the first time in eight months as fuel costs and air fares climbed.

Consumer prices gained 1.5 percent from a year earlier, compared with 1.1 percent the previous month, the Office for National Statistics said today in London. The median forecast in a Bloomberg News survey of 30 economists was 1.4 percent. On the month, prices rose 0.2 percent.  <bloomberg.com>


Japan Deflation Concern Rises Even as Growth Quickens - The acceleration of Japan’s economy to the fastest growth pace in more than two years masked a slide in prices of goods and services that threatens to temper the nation’s recovery. The domestic demand deflator, a measure of price levels that excludes the cost of imports, fell 2.6 percent in the third quarter from a year earlier, the most since 1958, Cabinet Office figures showed yesterday in Tokyo. At the same time, gross domestic product jumped 4.8 percent, the most since early 2007. Sustained price declines threaten to curtail a corporate- profit rebound that’s already been insufficient to spur a rally in Japan’s shares this quarter. <bloomberg.com>


Money-losing GM to repay aid early, sees 2010 IPO - General Motors said Monday an improving global auto market will allow the struggling auto giant to repay government loans early and move forward toward a 2010 share offering. But the automaker that needed massive aid to avert collapse earlier this year also reported a net loss of 1.15 billion dollars in the period since emerging from bankruptcy in July.

The number one US automaker said it is making progress toward reviving its fortunes, although predicted more losses in the coming months. "The business has performed better than we had expected going into bankruptcy," chief executive Fritz Henderson told a conference call. <google.com>


Fossil's New Retail Concept Focuses on Apparel - Fossil has introduced a new retail design that plays up the brand’s Americana image and puts more focus on clothing. The watchmaker, which has been opening stores rapidly and now counts 360 worldwide, cited strength in direct sales for the quarter ended Oct. 3, when comp store sales rose 6.4 percent, but net sales fell 6.9 percent to $381.4 million. Of Fossil’s 124 U.S. stores, 91 are accessory stores and 33 have both accessories and clothing. Next year, clothing will be added to Fossil’s unit at Covent Garden in London after a renovation and to a new store in Stuttgart, Germany, she added.  <wwd.com>


SG Footwear Acquires Rugged Shark - SG Footwear has acquired all the assets, trademarks, and registrations of the Rugged Shark brand from Gordon Brothers LLC. Rugged Shark, a marine and fishing footwear brand, was founded in 2001. Terms were not disclosed. The footwear is best known for its technical and comfort features targeting a core demographic group of men 25-55. "The acquisition of the Rugged Shark brand adds tremendous equity to our stable of brands with expansion into new channels of distribution," commented Bernard Leifer, President & CEO, SG Footwear. "In addition to immediate growth potential to the boating and fishing enthusiasts, Rugged Shark will be positioned as a lifestyle brand offering significant brand expansion opportunities." <sportsonesource.com>


One-On-One with UA CEO Kevin Plank - “Protect this house." That’s the marketing motto made famous by Under Armour in a series of commercials, which has been adopted by athletes on fields across the U.S. as a spirited rallying cry at their home games. The ads were overseen by Kevin Plank, founder, chairman and chief executive officer of the performance apparel and footwear maker — and a big fan of aggressive dictums, which he inscribes on an oversize whiteboard in his office at the firm’s Baltimore headquarters. “The Under Armour brand is very much like a team brand, and that is the way we run our company,” said Plank, a former University of Maryland football player who founded the company in 1996. “Sales and marketing are like offense; manufacturing and distribution are like defense; finance and I.T. are like special teams. But what you learn in this business is that not just one team is on the field alone, but we’re all on the field at the same time. The companies that will win are the ones that communicate the best.” <wwd.com>


A mixed message on sales—but possibly not so mixed for online retailers - Online retailers looking for clarity as to what to expect for the holiday sales period got a little glimmer of hope today as the U.S. Department of Commerce reported that while total October retail sales were down 1.7% from October 2008, general merchandise sales—the goods that consumers are most likely to buy online—were up 1.5% from a year ago. A big part of the overall decline in sales was the result of lower gasoline prices; sales at gasoline stations were down 15% year over year. The average nationwide price of gasoline was about 90 cents a gallon less this October than a year ago, according to the U.S. government’s Energy Information Administration. Another contributor to the drop was the result of a downturn in home-related purchases—housewares, home furnishings, building equipment and garden materials. Sales of building material and garden equipment fell 16.6% year over year.  <internetretailer.com>


Burberry Raises Dividend as Profit Meets Estimates - Burberry Group Plc, the U.K.’s largest luxury-goods company, raised its dividend for the first time in 18 months after reporting a drop in first-half profit that was no worse than analysts estimated. Shareholders will receive 3.5 pence a share, up 4 percent on the prior year’s 3.35 pence, according to the London-based company, which left the dividend unchanged last year. Net income declined to 56.8 million pounds ($95.7 million) in the six months ended Sept. 30, from 74.8 million pounds a year earlier, the retailer also said today in a statement, matching the average estimate of six analysts surveyed by Bloomberg. <bloomberg.com>


Rossignol Taps IMG Worldwide to Expand Brand - Snow, ski and mountain brand Rossignol has teamed up with IMG Worldwide to extend its licensing into a number of categories. Rossignol is newly independent from previous owner Quiksilver. IMG Worldwide is currently seeking partnerships for the brand in footwear, eyewear, sports bags and other related accessories. "It is a privilege to be handling an important part of the new strategy of this iconic 100-year-old winter sports brand," says Bruno Maglione, IMG Worldwide's executive vice president and co-managing director. < licensemag.com>


Birkhold Joins Lacoste Licensee as CEO - Devanlay U.S. Inc., the licensee for Lacoste apparel, has tapped Steve Birkhold as chief executive officer, effective Jan. 4, succeeding Robert Siegel, who will retire from the company at the end of the year. Birkhold is joining Devanlay from Diesel USA, where he has been ceo since November 2007. This is the second time in the past year Siegel has exited the top job at Devanlay. He originally left the company in December 2008, but rejoined in February when his replacement, Robert Skinner Jr., the former ceo of Kellwood Co., departed after less than two months on the job, citing “differences with the board.” <wwd.com>


Oxxford President Departs - After 11 years at Oxxford Clothes, president Mike Cohen has left the company, reportedly to join competitor Hickey Freeman. Cohen could not be reached for comment at press time Monday and a spokeswoman for Hickey had no comment. Individualized Apparel Group, which owns Oxxford, a brand best known for its American-made customer clothing, has elevated Oxxford veteran Scott Ruerup to executive vice president, effective immediately. There are no plans to name another president. Cohen, who had worked at Polo Ralph Lauren Corp. before joining Oxxford 11 years ago, is said to be taking a job helming the Hickey Freeman brand, the other remaining American high-end suit maker. <wwd.com>


Brazil: Amazon rainforest destruction shows decline - Brazil's National Institute for Space Research (INPE) has reported that the country's Amazon rainforest resources shrank by 7,000 square kilometres from August 2008 to July 2009, the smallest amount of territory lost in the area since 1988. The figure is also better than the Brazilian government's prediction of 9,000 square-kilometres. INPE director, Gilberto Câmara, said: "This is a substantial drop in the rate of decline. It's by far the smallest amount of destruction since Inpe began observing. It gives us great happiness to be able to confirm that the efforts of Brazilian society to contain the destruction of the Amazon has reached such as satisfactory level." <fashionnetasia.com>

Don’t Ignore TGT Credit

People focus on TGT’s credit stats relative to its history. But let’s also not forget to do so relative to bank card issuers. TGT’s charge-offs are getting better, but at a slightly lower rate than these peers. Delinquencies (better indicator of future charge-offs) are still rising, and at a slightly higher rate than peers.  Is this any reason to derail any thesis a bull might have on Target? We don’t think so. But it can’t be ignored either.


Target reported October Monthly Master Trust data this morning. Net charge-offs declined 88 bps vs. September to 13.49%. This compares with a 70 bps decline for the top six credit card bank-issuers. On an apples to apples basis, the magnitude of the improvement as a percentage was slightly smaller at Target: 6.1% vs. 7.0% for the bank card issuers.


Don’t Ignore TGT Credit - TGT NCO Oct 09


On the delinquency front, a more forward looking indicator, Target reported a rise in delinquencies of 36 bps vs. September to 9.34%. This compares with a 17 bps increase for the top six credit card bank-issuers. Again, looking at it on an apples to apples basis, the magnitude of the deterioration as a percentage was slightly larger at Target: 4.0% vs. 3.1% for the bank card issuers.


Don’t Ignore TGT Credit - TGT DQ Oct 09


MPEL missed our EBITDA estimate but there were some encouraging signs. Mass drop was better than we thought in Q3 and November volumes look better than October.



"Our grind mass market business has demonstrated sequential volume improvements across the reporting quarter and this growth trend has continued into the fourth quarter of this year. We have not yet reached our full potential in this segment and the recent opening of the Grand Hyatt Macau is now having a positive impact on performance. We remain on target to complete and open a number of major new entertainment attractions at City of Dreams in the coming months as part of the second phase of development, which will culminate in the launch of the Dragone-inspired show at the Theater of Dreams in approximately six months' time. We remain confident in our outlook for Macau and believe our assets are strategically positioned to capitalize on the expected growth in the market."




  • Have held commission levels at proposed levels since opening
  • Doing great in the RC segment
  • Premium direct VIP business has been strong and they estimate that their share is as high as anyone else in Macau
  • They have some heavy lifting to do on the grind side of the Mass business
  • Remain confident that their Mass business will continue to build over the next 6 months and the expansion of the amenities yet to open (night club, 50% of their retail, Dragone show)
    • LVS does say that the Cirque show is a big money loser and hasn't driven traffic
  • Grand Hyatt was a "phased delivery" - have about 400 rooms available as of today and expect all rooms to be ready by year end
  • Too early to determine impact of Grand Hyatt on their Mass business but expect it to be benefcial
  • Expect that 2H09 will be a lot better than 1H09 and expect 2010 to grow 20% for the market as a whole (assuming no financial crisis)
  • Expect to spend 115MM on completing construction
  • 4Q09 guidance:
    • D&A $75MM
    • Net Interest expense $20MM
    • Pre-opening negligible
  • Will accelerate timing of quarterly results going forward
    • I bet they got a lot of complaints from the G2E contingent... myself included!


  • MPEL market share in Oct down due to lower hold on RC.  Oct is distorted to Mass typically, which makes their share look weak
  • They are seeing better volume in Nov than Oct
  • Any expected changes from new CE in 1 month?  Lots more talk about infrastructure resumed.  Remain very encouraged
  • Covenant on Macau credit facility?
    • Kicks in 4Q2010, needs to be under 4.5x.  Have $1.4BN net drawn now, and then will use cash from ops to lower leverage
  • If hold was normalized on CoD Mass?
    • Hold is just below 16% through the 3rd quarter.  Low hold is a function of lower length of play.  Would expect that hold will move up over time as the property matures.  Mature Mass properties have holds as high as 21%
  • Where do they think Mass drop gets to? NO COMMENT, but they have seen a 35-40% increase in drop over last 4-5 months.  Believe that they will continue to see solid growth in drop and hold there
  • New Capex at CoD?
    • End of 3Q09 - have $150MM capex liabilities which they will cash settle $115MM in the 4Q09.  The remaining are retention payments and won't get settled until the 1H2010. Then there is another $40MM of capex associated with Dragone Theatre fit out which will occur in early 2010.  Then have another $40-50MM of capex maintenance to "spruce up amenity development"
  • Have 135 VIP tables, remaining Mass at CoD. 
  • CoD hold percentage was slightly above 3% and at Altira it was just below 2.7%
    • I don't understand why they are so coy with this number
  • Grand Hyatt full range of inventory handed over the next 4-6 weeks
    • Heard that is was as low as 50 available rooms in early Nov
  • Based on their commentary on Mass Drop in July - it doesn't look like August and September grew sequentially
    • Over the last 8-10 weeks they have seen some positive volume growth and some improvement in hold as a result of better marketing and Hyatt opening. They had a very good Oct which continued into Nov
    • We did see a pickup in Mass in Oct for CoD
  • What happened with AMA agreement?
    • They are neutral on hold under the AMA agreement so there is no make whole payment due to them
  • Cost structure is roughly $1.3MM per day for both properties including corporate and centralized costs.  Hyatt pushed that number to just shy of $1.4MM per day
  • Direct VIP business at CoD is about 17% right now
  • View on 5 & 6 - would be "delighted to see them finish the building"


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 80.51%
  • SHORT SIGNALS 78.32%


The first lesson I learned in this business was “don’t fight the Fed!”  Oh how quickly we forget some simple but important lessons about the market.  Don’t let the facts get in the way of a great bull run.  The bears are getting run over and it’s painful.   


Yesterday, the S&P 500 finished higher by 1.5% and closed at a new year to date high – that is bullish.  For the month the S&P 500 is up 7.1%.  Stocks moved higher on the back of the RECOVERY trade as the global stimulus flag is being carried around the world.  This current market dynamic is exacerbating the weakness in the dollar.  In addition, Fed Chairman Bernanke, who specifically addressed the dollar weakness yesterday in NYC, reiterated that “economic headwinds will dampen the pace of recovery and mandate an extended period of low interest rates.”


As you would expect, dollar weakness contributed to the outperformance of Energy (XLE), Materials (XLB) and Industrials (XLI); the three best performing sectors on the day.  On the MACRO front, the market benefitted from the headline retail sales number, while the Retail sales less Autos was 0.2% versus the consensus of 0.4%. 


The Dollar index (DXY) closed down 0.58% yesterday and the VIX declined by 2.0% on the day.


While every sector was up on the day, the three worst performing sectors were Financials (XLF), Healthcare (XLV) and Consumer staples (XLP). While the XLF lagged the overall market, the banking stocks snapped a two-day losing streak.  Citigroup rallied +3.2% on the news that John Paulson had taken a stake.   Credit-card stocks all rallied after reporting declines in net charge-offs in their October master trust data.  Despite the dampened risk aversion in the market, the bulk of the mortgage insurance names remained under pressure yesterday.


Consumer Discretionary (XLY) outperformed slightly, up 1.6% on the day. As I said above, October retail sales rose a better-than-expected 1.4%, though excluding autos, sales were up just 0.2% vs expectations for a 0.4% gain.  That said, the 0.2% ex-auto sales number represents three straight months of improvement, but down from the revised 0.8% (revised down from 1.1%) in August. 


Today, the set up for the S&P 500 is: TRADE (1,084) and TREND is positive (1,041).   The Research Edge quantitative models have 9 of 9 sectors in the S&P 500 positive on TREND and 8 of 9 sectors are positive from the TRADE duration.  The Financials (XLF) is the only sector broken on the TRADE duration. 


The Research Edge Quant models have 1% upside and 2% downside in the S&P 500.  At the time of writing the major market futures are poised to open down small.   


Howard Penney

Managing Director


US STRATEGY – OUCH! - sp11 17


US STRATEGY – OUCH! - svchart



“It is better to have less thunder in the mouth and more lightning in the hand.”
–Apache Proverb
Keith and Howard are flying to Western Canada this morning to meet me for meetings in Calgary and Vancouver, so I’ve been handed the duty of writing the Early Look this morning.  Over the course of the past week, I’ve spent a good deal of time in proximity to Native Americans. I’ve been down in Phoenix, Arizona, which is of course a bastion of Native arts and culture, and have visited my hometown of Bassano, Alberta, which borders the Siksika Nation, a Blackfoot Reservation in Southern Alberta.
The indigenous populations of North America are a proud and storied people.  Their traditions and culture have survived and thrived despite many hardships over the past few centuries.  Geronimo is perhaps one of the most well known Native Americans.  He was an Apache military leader, medicine man and the last Native to surrender to U.S. Army forces at Skeleton Canyon, Arizona on September 4th, 1886.

Geronimo was known for his bravery and fought both American and Mexico troops for over 26 years until his capture.  He lived until 1909 when, at the age of 80, he died after being bucked off a horse. Since his death, Geronimo has been given many honors, including having three towns named after him. Most notably though was the attribution of the slogan and motto of the 501st Parachute Infantry Regiment, the first airborne unit in the United States military, after him, hence the use of “Geronimo!” when leaping from high heights.  An expression that could also be used to describe a chart of the U.S. dollar . . . Geronimo!
The global macro news event of the day yesterday was, of course, Chairman Bernanke’s comments at the Economic Club of New York. The Chairman’s prepared remarks were somewhat predictable and defended the need for an emergency level of interest rates well into 2010, but one comment from the Q&A session in particular caught our eyes.  When asked whether he saw any misalignments developing in the U.S. economy (i.e. bubbles), Chairman Bernanke stated:
"It's extraordinarily difficult to tell, but it's not obvious to me ... that there are any large misalignments currently in the U.S. financial system."

The good Chairman likely has a different process than us lowly hockey heads at Research Edge, but one simple thing we do every morning is review market prices across asset classes and geographies.  Thinking about Bernanke’s comment above had me wondering if the asset class moves below could, perhaps, be classified as “misalignments”.

  1. The year-to-date performance of oil is +73%
  2. The year-to-date performance in copper is +124%
  3. The year-to-date performance of gold is +29%

These commodities have one thing in common, they are priced in U.S. dollars. On the margin, fundamentals may have improved for gold, copper, and oil year-to-date, although some would debate that point, but fundamentals certainly haven’t improved in line with the price performances.  While we smell a bubble, Chairman Bernanke sees no “misalignments”.  In honor of our difference of opinion, and as a tribute to our Native American friends, we have given the Chairman a Native nickname, “He Who Sees No Bubbles.”
From an investment perspective, the fact that Bernanke sees no “misalignments”, despite the massive move in some of the commodity markets outlined above, is supportive of an investment thesis that continues to see these global commodities priced in U.S. dollars inflate.  If I were able to read Chief Bernanke’s totem, he seems to be signaling that a continued weak and weakening dollar is not a bad thing, nor leading to any bubbles. So invest accordingly!
A couple of other quotes from "He Who See No Bubble’s" speech that provide a juxtaposition of what is happening economically in the United States are outlined below:
1. “In particular, borrowers with access to public equity and bond markets, including most large firms, now generally are able to obtain credit without great difficulty.”
2. “However, access to credit remains strained for borrowers who are particularly dependent on banks, such as households and small businesses.”
In the longer term, credit will have to start flowing again for households and small businesses for GDP growth to sustain.  While the Bankers, Debtors and Politicians are getting paid, the facts remain.  Small businesses comprise almost 50% of American GDP. A sustainable stimulus will have to reach households and small businesses and not just with “thunder in the mouth”, but also “lightning in the hand.”
Keep your head up and stick on the ice,
Daryl G. Jones
Managing Director


FXE – CurrencyShares Euro TrustWe bought the Euro on 11/12 on a down move against our short position in the British Pound. A bullish formation in the Euro remains and we think the ECB could hike before the Fed does.

XLU – SPDR Utilities We bought low beta Utilities on discount on 10/20. TRADE and TREND bullish.

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.   

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.

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.

EWY – iShares South Korea South Korea has joined Japan in the ominous position of broken TREND and TRADE. This is not China or Taiwan. This is an early cycle economy that we want to be short against China/Taiwan.

XLI – SPDR Industrials We shorted Industrials again on 11/9 on the up move as the US market made a lower-high.  This is the best way for us to be short the hope of a V-shaped recovery.   

EWU – iShares UK Despite areas of improvement, broader fundamentals remain shaky in the UK: government debt continues to expand, leadership in critical positions lacks, and the country’s leverage to the banking sector remains glaringly negative.  Q3 saw its GDP contract by -0.4%. Further bank stimulus and the BOE’s increase in its bond purchasing program suggest that this will not end well.

XLY – SPDR Consumer Discretionary We shorted Howard Penney’s view on Consumer Discretionary stocks on 10/30. TRADE and TREND bullish.  

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 and 11/16.

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.


The Macau Metro Monitor.  November 17th, 2009.



A document filed Monday with the SEC revealed that LVS has agreed to make an initial payment to the Macau government of MOP 700 million, or about US$90 million, for the land on which it is developing its new megaresort on the Cotai strip.   Construction on Lots 5&6 was halted last year but, under the terms of the new deal, the company now has 48 months to complete development of the site. 

Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.