• run with the bulls

    get your first month

    of hedgeye free


The Game Of Risk

A perfection of means, and confusion of aims, seems to be our main problem.”
-Albert Einstein
If that Einstein quote doesn’t summarize the failure of Obama and China to communicate this past week, I don’t know what does…
In my recent years of international travel, it has been fascinating to observe the diametrical shift in how the wizardry of American finance is perceived. Long gone are the days of giving America the benefit of the doubt. Foreign investors are rightly challenging the perceived wisdoms embedded in the US Financial System.
I am in Vancouver, British Columbia this morning. It’s early, but the coffee is good. The news hour at 3AM local time kicks off with Canadian hockey wonder, Sydney Crosby, carrying the Olympic torch in a pre-Olympic games event. For a small town hockey boy like me, these moments in Canadian hockey history are magical. The 2010 Winter Olympics will be too.
Then the news shifts to the not-so-magical. The New Reality bites – if you are American that is. President Obama ends his trip to Asia with a trip to South Korea and, by and large, his trip is being rightly depicted as a loss by the international media.
A loss of what? One more loss in The Game of Risk. This is a game of balance of global power shifting – shifting away from America, towards China in global finance.  We can wakeup pretending that this isn’t a New Reality, or we can look at this like foreign investors do, and understand that it is.
What is The Game of Risk? Well, it’s a very popular board game produced by Parker Brothers. However, the game was not an American invention. It was a French one. It was originally released in another time when Macro really mattered to global investors – 1957.
Per our friends at Wikipedia, The Game of Risk is “a turn-based game for two to six players. The standard version is played on a board depicting a stylized Napoleonic-era political map of the Earth, divided into forty-two territories, which are grouped into six continents. Players control armies with which they attempt to capture territories from other players. The primary object of the game is "world domination," or "to occupy every territory on the board and in so doing, eliminate all other players”…
This is either a really good or bad metaphor for China vs. USA, depending on where you live and/or how you get paid. As I said while in a meeting in Calgary, Alberta a few days ago, I’m definitely not Jerry McGuire, but if all you do in global macro is follow the money – you are probably going to end up finding the right answers. America is a “show me the money” economy, and the rest of the world likes playing that way too.
China is acquiring everything from African gold mining assets to Australian copper mines. They are doing deals all over the game-board of The Game of Risk. From Russia to Canada, they don’t really seem to care so much for anything other than moving toward their end game. All the while, America doesn’t seem to get where China is going with this.
China is doing less and less with Japan. These countries really don’t like each other, fyi. And now America’s myopic financial leadership is giving China every reason to be doing less and less with us. I am now “us.” My young family is American. For any American team in this game, this is plain embarrassing and sad all at once.
Consider the most recent marked-to-market price momentum of China versus Japan. For the month of November:
1.      Japan -4.8%

2.      China +10.9%

Last night the Nikkei in Japan dropped another -1.3% (we are short Japan via the EWJ), meanwhile China chugged forward by another +0.53%. The Shanghai Composite Index is +82.4% for 2009 to-date. At +6.8% for the YTD, Japan is the worst performing major equity market in the world.
Why does this matter? Because, for whatever reason, America’s financial thought leaders don’t know what they don’t know. They are so focused on the narrative fallacy of the Great Depressionistas that they can’t understand that every day we maintain a policy of ZERO rate of return for both our Creditor and Citizenry alike, we become more and more Japanese. Economically speaking, that’s not good.
At 0.74%, this morning you are seeing the lowest rate of return on 2-year US Treasury yields that we have seen since the US stock market crash of 2008. When we called that crash, we were very much focused on the US Government crushing the value of US currency. From a Burning Buck perspective, the only difference between this morning’s obvious correlation of US Dollar weakness to the short end of the US yield curve is this – Obama doesn’t know what he doesn’t know.
There has never been a winner in the global macro Game of Risk that sustained her economic power via a crashing currency. From Germany in the 1920’s to Japan in the 1990’s, this hasn’t been for a lack of effort! Top country players have definitely tried it. Newsflash for all you board game fans: it hasn’t worked.
As I wind up my morning missive (patiently awaiting the Canadian hotel staff to fire up some room service!), I will leave you with a thought about all of this from Tversky:
“It’s frightening to think that you might know something… but more frightening to think that, by and large, the world is run by people who have faith that they know exactly what’s going on.”
If you don’t travel internationally, get a satellite dish. Turn on the world.
My immediate term upside/downside levels for the SP500 are 1096 and 1020.
Best of luck out there today,




FXE – CurrencyShares Euro Trust
We 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 19th 2009.




The Chief Executive of Macau, Edmund Ho Hau Wah, said on Wednesday that accumulated budget surpluses and the Reserve Fund of the Special Administrative Region of Macau are expected to be over MOP 100 billion (US$12.5 billion) at the end of the year.  He stated the government’s intention to “continue to implement measures for exemption and reduction of taxes adopted over the last few years, with the aim of helping companies and citizens to face up to the pressures and difficulties resulting from the international financial crisis”.





Galaxy Entertainment Group is attempting to raise more than US$1 billion to complete the construction of its Cotai mega resort, according to sources cited by the South China Morning Post.  While details have yet to emerge, “people with direct knowledge of the plans” said that the financing package may include high-yield or convertible bonds, syndicated bank loans or a combination of bonds and bank debt. 


Galaxy is attempting to tap local markets to fund construction at the same time as Las Vegas Sands Corp who, in the past week, announced that it had secured commitments from banks for US$1.45 billion of a total US$1.75 billion in new loans it was seeking to restart works on Lots 5&6.


We recently learned more about Starbuck’s plans for VIA with CEO Howard Schultz calling it more than just a product introduction or promotion.  Instead, he said, “It is a significant new global growth platform within our core business with strong margins consistent with our other whole bean and ground coffees.”  According to Mr. Schultz, VIA performance had already exceeded test markets and was doing well in the initially introduced CPG channels, such as Costco and Target. 


Relative to future growth opportunities, SBUX announced the launch of VIA Decaf, which was to be debuted on November 17, plans to expand VIA internationally beyond Canada in 2010, including in the U.K. (where 80% of the coffee market is instant), and a domestic launch of the brand in the CPG channel in the middle of fiscal 2010 through a recently signed broker agreement. 


Starbucks had said it intended to spend significantly higher marketing dollars than any typical quarter to support the North America VIA launch in Q1.  Based on an article published today by MarketWatch, Starbucks is not the only company increasing its advertising spending behind the instant coffee category.  According to the article, “Nestlé marketers were recently spotted for the first time roaming the streets of downtown San Francisco, handing out samples to caffeine-savvy citizens. This month, Nestlé tweets have been urging people to find seek out their street marketers at specific corners or landmarks in Los Angeles, Philadelphia, and Washington, D.C…. In a Web commercial, Nestlé touts the fact that one cup of its Taster's Choice costs 17 cents, while Via costs four times that. It shows a Starbucks cup at the end.”



real-time alerts

real edge in real-time

This indispensable trading tool is based on a risk management signaling process Hedgeye CEO Keith McCullough developed during his years as a hedge fund manager and continues to refine. Nearly every trading day, you’ll receive Keith’s latest signals - buy, sell, short or cover.

Cuckoo For CoCos?

Below you’ll find an excerpt from our Chief Compliance Officer Moshe Silver’s weekly screed, “Slouching Towards Wall Street”. In it, he discusses CoCos, or contingent convertible bonds:


Cuckoo For CoCos?


The latest regulatory trial balloon being floated in the financial press is the CoCo – the contingent convertible bond.  This new-fangled instrument appeared at its coming-out party on the arms of no less a beau than Lloyds Bank.  The debutante was wearing a tattered dress, but smiling nonetheless.


Lloyds Banking Group has offered to exchange some $11 billion of debt into CoCos, a form of subordinated debt that morphs into common equity – generally at the worst possible time, and without the bondholder’s consent. 


What is this odd beast, and how does it work?  As described in the Financial Times (13 November, “A Staple Diet Of CoCos Is Not A Panacea To Bank Failures”) “What differentiates them from a normal convertible bond is that the trigger is a regulatory flashpoint, not an asset price swing.”  This allows banks to “strengthen their capital base in a crisis, without tapping taxpayer funds, or going to the markets.”


Simple English:  when a bank’s capital ratio goes down to the point that it can no longer sustain the total debt it has issued, your chunk of that debt automatically converts to equity.  Voila!  No more nasty debt clogging up the bank’s balance sheet, no fresh injection of capital needed, and no risk of default.


Pardon us, but this looks like a total win for the banks and the leading edge of significant regulatory caving-in.  The CoCo is essentially a bond which, instead of a covenant, is issued together with a put to the bondholders.  In the Lloyds case, the exchange is being offered at a discount of more than 50% of face value to holders of subordinated debt.  One might argue that, in the current climate, subordinated debt holders are lucky to be offered anything at all – the bonds in question are no longer paying.  Still, in the good old days bondholders were protected by covenants, and banks had to maintain capital, or go to court to prove why they should not pay out on their obligations.  The risk of bond defaults, with reputational damage and the looming threat of bankruptcy, were all seen as protections for those pieces of paper whose very name means “obligation”.


Enter the CoCo, which permits the bank to automatically convert its “obligation” into “equity”.  “Equity,” we should point out, means “what is fair,” which can be very good.  It can also be very, very bad.  If there is an obligation of the bank that it pay its bondholders, the shareholders will get what’s left over.  That is fair.  And if there’s nothing left over, well, that’s fair too.


The Basel-centered regulatory regime is considering promoting CoCos across Europe and the US.  New York Fed president William Dudley recently said (Financial Times, 12 November, “Wall Street And Fed In Discussions Over CoCos”) that “the worst aspects of the banking crisis might have been averted” through the use of “contingent capital buffers.” 


This looks to us like a stupendously dreadful idea and all sorts of words come to mind.  Slippery Slope – the looming regulatory change permitting banks to all but dispense with capital requirements.  Moral Hazard – the notion that an obligation will no longer be “really” an obligation, but only an obligation as long as the bank feels like it.


This further feeds the bifurcation of the marketplace, as strong participants, major financial institutions, will insist on, and receive, guaranteed obligations with actual capital reserves underpinning them.  Meanwhile weaker investors will increasingly be cashed out with the corporate equivalent of a Pay In Kind transaction.


All of this means that legislation to promote the use of CoCos will probably be implemented soon, as the world’s regulators are desperate to be seen as doing something.  And it looks set to create a splendid new government loophole that will allow banks to issue bonds without additional capital requirements.


In the case of the Lloyds bonds, they are already in trouble.  Swapping subordinated debt which will not be paid off anyway, with a junior-junior obligation on its way to converting to equity looks like prolonging the agony.  But investors and issuers alike are notoriously reluctant to switch off life support, especially if it means a capital impairment for the bank.  In the world of financial services, where everything comes down to convincing someone else to buy something, it is easier to sell a loser a new piece of paper that, one day, will convert to yet another piece of paper than to say “Ooops.  Guess that didn’t work out.”


Forgive our ignorance, but to us the CoCo looks like a pre-guaranteed default.  It gets the government off the hook for at least that piece of the bank’s capital, and it puts the bondholder well on notice.  “Don’t say we didn’t warn you.”  This looks like a regulatory cop-out of staggering proportion, which guarantees it will be implemented.  If the whole world agrees to undermine bank capital requirements, does that make it OK?


If a bond covenant is like a prenuptial agreement, the CoCo is like asking the bride to waive alimony and child support before ever she walks down the aisle.


Would you buy a used bank balance sheet from this regulator?



JACK is scheduled to report fiscal 4Q09 earnings after the close today.  Similar to its competitors, I am expecting margins to improve YOY despite the continued deceleration in same-store sales trends on both a 1-year and 2-year basis.  When JACK reported 3Q09 sales trends below its targeted range at Jack in the Box, management attributed the weakness to unemployment and significant industry discounting.  Those comments set the stage for Q4 results as those pressures remained throughout the quarter. 


We know that July comparable sales at Jack in the Box were running down about 3.5% and the street’s full quarter estimate of -4.2% implies further sequential declines from that level.  Management highlighted on its 3Q earnings call that it would be lapping the successful Smoothie rollout in August, but we also lapped the Hurricane Ike impact in September, which negatively impacted 4Q08’s same-store sales growth by 1%, so I am expecting same-store sales growth to hold steady with the July level and come in slightly better than the street’s expectations.  We will learn today whether the company’s newly offered bundled meal called the Big Deal, which was launched in mid-July continued to drive traffic throughout the quarter as it did help to improve same-store sales trends in July from -4.4% in June. 


Margins should be up fairly significantly on a YOY basis as the company is lapping its lowest reported restaurant level margin in over 5 years; though management did say that margins would come down on a sequential basis from Q3 as a result of normal seasonal trends.  In 4Q08, JACK faced significant food cost inflation of +7% with beef costs up 18% YOY, and the hurricane hurt restaurant margins by about 50 bps as well.  To that end, commodity costs should prove favorable in 4Q09 with food costs expected to be down about 2%-3% (based on management’s full-year +2% guidance) after being down only 0.8% in Q3.  


From an earnings standpoint, my EPS estimate of $0.54 falls one penny short of the street’s estimate but based on recent restaurant earnings reports, over delivering on earnings despite continued sales misses would not be a surprise.


Even more important than reported Q4 sales and earnings results will be what management says about early fiscal 1Q10 sales trends and FY10 sales guidance.  Based on the comments and results we have gotten about October trends from SONC (“seen more challenging weather”), MCD (-0.1% or -1.1%, excluding the estimated benefit from the calendar shift), WEN (-4%), CKR (-7% at Carl’s Jr. and -3.4% at Hardee’s), JACK’s October trends will most likely not be good.  Management will provide full-year sales and earnings guidance based on recent trends so if October was not a good month, the guidance will most likely be extremely conservative.  For reference, a -3.5% to -4.0% Q4 comp at Jack in the Box implies that 2-year average growth declined -2.2% to -2.4%.  Assuming that level of 2-year average growth for all of 2010 yields a 3% to 3.5% decline on a 1-year basis, which I think is a reasonable range to expect.  


Going forward, I continue to think JACK is well positioned to outperform over the long term.  And, as I have said in the past, following what JACK does with its cash will generate the most incremental return for shareholders over the next 12 months.  I know that JACK is a California-centric concept with more premium offerings, but it has significantly underperformed its peers, down nearly 19% in the last 6 months relative to the QSR average performance of up 15.5%.  In that same timeframe, even CKR, which has seen its trends fall off more significantly than JACK, is up 4.4%.  It is only in the last 3 months that JACK has outperformed CKR, up 1.2% vs. -7.5%; though its peers on average still significantly outperformed, up 8.2%.



 November 18, 2009





We’ve been expecting a big quarter out of PSS (one of our favorite names all year), and the preannouncements out of DSW and now BWS (after the close yesterday) support our call. We still think estimates are too low, by a long shot.



After the close yesterday we had our latest positive preannouncement with BWS reporting earnings 30% above consensus. Recall that DSW kicked off the 3Q with a preannouncement back in mid-October. This leaves us with only two companies that have not preannounced in the small peer group that we track for PSS – Shoe Carnival and…PSS itself. The read through has obvious implications with trends improving on the margin at the same time that PSS is hitting an inflection point in earnings. Consistent with our call, the Street is still too low by at least 20%, 25% and 30% for the quarter, year, and 2010.


With more retailers starting to report positive same store sales in the absolute sense driven in part by improved traffic, we are seeing a significant acceleration of comp trajectory across footwear on both a 1Yr and 2Yr basis. Taking all the factors into consideration, including comps tracking +/- 1% on a 2-year basis for both DSW and BWS in the 3Q,  I am increasingly confident that PSS will print a positive absolute comp this quarter. With sourcing costs easing heading into the 2H and the DC transition complete, the leverage on higher sales is meaningful.


The bottom line is that we are coming out at $0.58 for the 3Q, meaningfully above Street expectations of $0.47, and closer to $2.00 for next year. With the stock trading at 10x our fiscal 2010 estimate, the earnings power is not reflected in shares at this level. For further detail on PSS and our multi-year thesis, please contact us for a copy of our PSS Black Book.


RETAIL FIRST LOOK: IT'S A FOOT RACE - FootwearCatTable 11 09











  • Despite some initial confusion surrounding commentary about the promotional environment, Target’s management was quick to point out that they always anticipate a “highly promotional fourth quarter” and this year should not be any different. They further elaborated that planned promotional activity is not likely to be more aggressive than in the past (including Black Friday) and clearance promotions should in fact be less this year given the tight inventory control across the entire retail landscape heading into the holidays.
  • On its very bullish conference call, TJX management suggested that the company’s success in 2009 has not really benefitted much from other retail bankruptcies, inventory liquidations, and the recession. While the company’s results have been exceptional, it’s hard to believe these external factors haven’t had a meaningful impact. Otherwise, it’s hard to explain why almost all other off-pricers ranging from Ross Stores to Gilt Groupe are also experiencing similar positive trends.
  • While most apparel retailers are now complaining about the warm weather and the abrupt shift in momentum from October in the sale of seasonal apparel, Home Depot is seeing the opposite. Management noted that same stores sales in November are tracking ahead of October’s -5.2% trend, due in part to seasonally warm weather. Outdoor categories, such as roofing, are seeing positive benefits from the warm trends.
  • In an effort to reach younger customers and broaden its customer base, Burberry is embracing the world of digital media. The company is planning to spend 40% of its European Fall/Winter campaign budget online. The spend is notable as the overall industry statistics suggest that in five years, only 20% of global ad spend will be digital (clearly it is much less today). Burberry’s digital leadership position is highlighted with its recent online broadcast of the company’s London Runway show and its launch of artofthetrench.com.





Consumer Prices Suggest Core Inflation Low - Builders in October probably broke ground on U.S. houses at the fastest pace in 11 months, and consumer prices held below the Federal Reserve’s long-range goal, economists said reports today may show. A report from the Labor Department may show the cost of living climbed 0.2 percent for a second month. The Commerce Department’s housing report is due at 8:30 a.m. in Washington. Estimates in the survey ranged from 570,000 to 630,000, after 590,000 in September. Also at 8:30 a.m., the Labor Department will release the consumer price gauge. Compared with the same time last year, prices were probably down for the eighth consecutive month. Excluding food and energy costs, the so-called core index rose 0.1 percent after climbing 0.2 percent in September, according to the Bloomberg survey median. The gauge was probably up 1.6 percent in the 12 months to October, according to the survey median. Fed policy makers’ long-term forecast for their preferred measure of inflation, the Commerce Department index tied to consumer spending and excluding food and fuel, calls for gains in a range of 1.7 percent to 2 percent. It was up 1.3 percent in the 12 months to September.  <bloomberg.com>


Obama, Hu Vow Cooperation Amid Divisions Over Trade - President Barack Obama and Chinese President Hu Jintao concluded their formal meetings in Beijing yesterday with promises of increased cooperation amid lingering friction over currency, trade and human rights. Obama said the world’s most populous nation played a vital role in helping end a global recession and will be a key partner in dealing with challenges from curbing the nuclear ambitions of Iran and North Korea to combating climate change. “The relationship between the United States and China has never been more important to our collective future,” Obama said in an appearance with Hu at the Great Hall of the People.  <bloomberg.com>


Goldman Sachs, Buffett Said to Plan Aid for Small Businesses - Goldman Sachs Group Inc., under fire in Washington for setting aside billions of dollars for bonuses a year after getting a taxpayer bailout, is preparing to team up with Warren Buffett to provide assistance to small businesses, said people familiar with the matter. The charitable effort, which may be announced as soon as today, coincides with one of the Obama administration’s top economic priorities: spurring hiring at small companies. The initiative would aim to provide assistance -- ranging from counseling to obtaining funding -- to 10,000 U.S. businesses, according to the people, who declined to be identified before the program is announced. Buffett’s Berkshire Hathaway Inc. is the largest shareholder in New York-based Goldman Sachs. <bloomberg.com>


EU VAT: No longer a threat - The European Union plans to impose value added tax on non-European companies that provide services in the European Union. But Indian IT companies are not worried, reports CNBC-TV18's Kritika Saxena. It was a proposal that, when first announced, had Indian IT companies sweating at the brow. The EU plans to impose value added tax on non-European companies operating inside the EU starting the first of January. Indian firms were worried that this would scale up costs by 25%, making their pricing uncompetitive. But now, this panic has subsided. <moneycontrol.com>


Ahold Aims to Cut Costs by 350 Million Euros, Step Up Expansion - Royal Ahold NV, the owner of the U.S. Stop & Shop grocery chain, pledged to cut costs by 350 million euros ($521 million) and pursue expansion amid speculation that the company may become a takeover target. Ahold plans the expense reduction by the end of 2012, Chief Executive Officer John Rishton said today, adding there is “not an area in the business we’re not looking at.” The Amsterdam- based retailer today reported a 22 percent gain in third-quarter net income to 238 million euros, beating the 179 million-euro average estimate of eight analysts in a Bloomberg survey. Ahold, the owner of Dutch market leader Albert Heijn, should use excess cash of about 2 billion euros to make acquisitions or buy back stock to avoid becoming a bid target, analysts including Petercam’s Fernand de Boer have said.  <bloomberg.com>


TSA Will Sell Wii Game Consoles - The Sports Authority will begin selling Nintendo products, including videogaming consoles and the Wii Fit and Wii Fit Plus games. TSA has been in talks with Nintendo for the past six months and decide dto carry the game console, "to shift the paradigm and shake up the treadmill and sporting-goods business.” Select TSA stores will begin publicizing the tagline “We know fit. We know fun” and will sell Wii products and feature the games in dedicated areas. Fitness trainers will be on hand to help customers try them out. <sportsonesource.com>


India IPO funding seen hit by unsecured lending curb - A popular tactic used by Indian brokerages to raise money for rich clients is likely to be banned by the central bank's move to curb unregulated lending, potentially crimping funding for a long pipeline of planned IPOs. India's central bank this month proposed to stop borrowers from issuing non-convertible debt with a maturity of less than 90 days, part of a broader effort to remove excess liquidity as overseas funds pour into its markets. Brokerages have made such borrowings mostly from mutual funds, typically at twice the commercial paper market rate, and then turned around and loaned the funds to rich clients. The wealthy investors, in turn, used the cash to invest in a recent slew of IPOs, fuelling aggressive valuations. <reuters.com>


UPS expects a slight increase in holiday season shipments this year - From Thanksgiving to Christmas, United Parcel Service of America Inc. expects to deliver about 400 million packages worldwide, with most of them in North America, representing a slight increase over last year’s holiday shopping season, a spokeswoman says. UPS expects its busiest day of the year will be the Monday before Christmas, Dec. 21, when it expects to deliver 22 million packages, an increase of about 40% over normal daily delivery volumes. To handle the peak volumes, UPS will hire about 50,000 seasonal workers, many of them delivery drivers’ helpers.  <internetretailer.com>


The Sharper Image returns - The Sharper Image, the former multichannel retailer which closed its nearly 200 stores last year shortly after filing for bankruptcy, is back with a new e-commerce site at www.sharperimage.com. The site, which Camelot Venture Group designed, developed and launched, features the retailers’ trademark gadgets, such as sound-soothing alarm clocks and adjustable-temperature wine chillers.  <internetretailer.com>


Lanvin Finds Minority Investor - WWD has learned the French fashion house has sold a minority stake to an investor in exchange for a capital injection estimated in the tens of millions of euros. The identity of the investor could not immediately be learned, but it is understood to be a European family holding company with a long-term horizon and no exit strategy. It acquired a 12.5 percent stake in Arpège SAS, the holding company for Lanvin. He declined to name the investor, while characterizing it as in sync with Lanvin’s “human scale” organization and familial management style. The proceeds will be used to help Lanvin expand its retail network and deepen its commercial footprint, leveraging the design prowess and buzz of its acclaimed creative director Alber Elbaz, Andretta said. <wwd.com>


Web sales up 12.6%, but where are those sales coming from  - When it comes to online sales, it looks like things may be bouncing back a bit. In October, e-commerce sales increased 12.6% over October 2008, according to a new monthly study of 150 e-retailer clients of MyBuys Inc. that the firm conducted exclusively for Internet Retailer. So in October, even though total sales were up by 12.6% year over year, the industry’s health was little changed from a year ago because total sales owed so much to discounted items, sales of which were up 112%, and because the depth of discounts increased from an average of 24.6% in October 2008 to 28% this October. Online retailers saw sales drop 2.6% on non-discounted goods from the same period last year <internetretailer.com>


New Domestic Focus for China, Hong Kong - China’s economy and manufacturing sector are picking up steam again, posting impressive new growth numbers that point to a strong recovery from the global financial crisis. Not far behind, textile and apparel trade fairs in Hong Kong and Mainland China are approaching the next six months with renewed vigor and hope for a revitalization in customers and purchases. “In general, Asian economies are recovering from the global crisis more quickly than elsewhere,” said Michael Duck, director of Hong Kong’s Asia Pacific Leather Fair. “This region has the world’s largest populations and its citizens are fast improving their standard of living and level of disposable income. These economies, once regarded as the low-cost production platforms for an affluent West, are now turning attention to their domestic markets.” <wwd.com>


Japan Looks for a Jumpstart - As Japan inches its way out of a recession, trade show organizers are seeking strategies to entice retailers and give the market here a boost. “Neither buyers nor exhibitors can figure out what suits the market,” said Takashi Yoshioka, who represents the casual apparel show Frontier. “[Buyers’] budgets are smaller than before, and they don’t know what to sell and buy.” Naoya Jita of JFW International Fashion Fair, Japan’s biggest fashion trade event, also recognized the challenges in the current market.  “Buyers are interested in the goods that sell well now, but more than that, they are looking for something that creates [future] excitement on the retail scene,” Jita said. <wwd.com>


New Balance isn't just sensible shoes anymore - New Balance for Nine West is unveiling its seasonal lineup of fashionable sneakers and shoes for women. Earlier this year, New Balance Athletic Shoe Inc., the Boston-based company known for athletic footwear, teamed up with shoe retailer Nine West to launch their first joint collection of footwear; the footwear aimed to combine New Balance performance technology with Nine West's sense of fashion and style. <boston.com>


Powdr Corp. Agrees to Buy Copper Mountain - Intrawest and Powdr Corp announced they have entered into a definitive purchase agreement to sell Intrawest’s interests in Copper Mountain to Powdr Corp. The transaction is anticipated to close in December 2009 and the agreement is subject to regulatory approvals including the issuance of a U.S. Forest Service special-use permit to Powdr Corp. This winter season it is business as usual at Copper Mountain. Once the transaction is finalized Intrawest and Powdr Corp have committed to work together to ensure that all of the multi-mountain season pass products, vacation reservations and joint marketing initiatives will be honored for the 2009-2010 winter season.  <sportsonesource.com>


Deckers Wins Ugg Counterfeit Lawsuit - Deckers Outdoor Corp. has won a copyright infringement lawsuit against a Melbourne, Australia firm over the sale of counterfeit Ugg boots. According to Smart Company in Australia, a court has ordered the company, Hepbourne, to pay Australian $7.5m (U.S. $6.9 mm) to Deckers. Deckers has pursued Melbourne company Hepbourne for over five years over the sale of counterfeit boots and has obtained court orders on a number of occasions preventing Hepbourne from selling the boots. But according to court documents, Hepbourne continued to sell the boots at markets and on eBay, even after legal action was launched and the homes of some of its selling agents were searched. A Federal Court judge in Australia awarded Deckers A$3 million (U.S. $2.8 mm) in damages for lost profits and a further A$3.5 million (U.S. $3.3 mm) for the flagrancy of the copyright breach. The defendants were also ordered to pay A$1 million (U.S. $0.9 mm) in costs. <sportsonesource.com>


Orenstein Launches Consulting Business - Joel Clark Orenstein, who has held executive posts at companies such as Halston, Oscar de la Renta outerwear, J. G. Hook, Fashion Ribbon, Federated Department Stores and Lord & Taylor, has started his own consulting firm. Orenstein Fashion Business Planning & Merchandising Service will offer services such as business planning, financial analysis, merchandising, sales management, evaluation of channels of distribution, sourcing and marketing. Based in Southport, Conn., Orenstein is working with a team of merchants and business analysts on a freelance basis. <wwd.com>


Barclays Head of Global Retail Warns Upstart Supermarket Banks - The new boss of global retail banking at Barclays has hit out at supermarkets and other companies setting up their own banking offers. Antony Jenkins, who recently moved to the role, believes supermarkets may be underestimating the difficulties of running a banking operation and questioned whether they had the right skills to run it, according to the Financial Times. Tesco and Sainsbury’s have both been taking advantage of the loss of confidence in traditional banks by ramping up thier financial services offers. “The series of disruptions in the global financial system has created opportunities for other players to enter the market and it’s going to make it an interesting landscape,” he said. <retail-week.com>

Early Look

daily macro intelligence

Relied upon by big institutional and individual investors across the world, this granular morning newsletter distills the latest and most vital market developments and insures that you are always in the know.