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Taking Census of the Census

On our morning call today, one of our subscribers asked a very interesting question related to the upcoming U.S. census.  The question was as follows:


“When do you anticipate Census based hiring to hit the tape..how & when do you look to position ahead of what should be significant additions to payroll numbers?”


This was a very astute question as hiring from consensus will potentially eliminate some of the current economic overhang of unemployment.


Since 1790, the U.S. government has conducted a national census.  This census is conducted every 10-years, which the United Nations recommends for all nations, and in fact is mandated by the U.S. Constitution.  Interestingly, the term census finds its root from Latin and during the Roman Empire the census was a list that was used to keep track of males fit for military service.  In modern times, the census is used to allow governments, and society in general, to accurately plan for the future.  But taking a census is not without costs.  Some estimates have the cost of a census as much as $3 per enumerated person.


According to Wikipedia:


“The first U.S. Census was conducted in 1790 by Federal marshals. Census takers went door to door and recorded the name of the head of the household and the number of people in each household. Slaves were enumerated, but only three out of five were counted for apportionment. American Indians, being neither taxed nor considered during apportionment, were not counted in the census. The first census counted 3.9 million people, less than half the population of New York City in 2000; the 2000 census counted over 281 million people. In 1902, Congress established the Census Bureau as a federal agency.”


Not surprisingly, along with its becoming a federal agency, the census taking has become a big business.


The Commerce Department recently released a study that suggests census taking will add up to 635,000 temporary jobs by May.  In totally, the census bureau will add 1.2 million temporary workers this year with the vast majority, 800,000, coming in April and May.  Obviously given the high rate of unemployment in the U.S. currently, this influx of workers will have a disproportionate impact on the unemployment rate versus prior periods.  In aggregate, the census project, according to the Commerce Department will provide a $14.7 billion dollar boost.


Survey says . . .keep your eye on the census as it will be a positive catalyst for unemployment.


Daryl Jones

Managing Director

Charting China's Slowdown

This morning we were delivered another piece of Chinese economic data that supports our view that the Chinese Ox is in a Box for Q1 of 2010.


The concept of being in a box is not all that hard to grasp, particularly if you put yourself in one. That’s what the Chinese government has decided to do. We approve of it doing so. Real-time growth and inflation data supported the decision.


In the long run, active/objective monetary policy should be as active/explicit when tightening as it is when loosening. The only thing that interrupts this pattern of communication is politics. The Chinese have tightened lending rates multiple times and raised the reserve requirements on Chinese banks twice since the chart below started to roll-over.


The slowdown in both Chinese PMI (to 52 in February versus 55.8 in January) and Chinese stocks dropping (Shanghai Composite Index lost 10.5% of its value from January 1st to its February 2nd low), is a direct function of the Chinese Government putting themselves in a short term box.


This proactive decision by the Chinese government doesn’t come without risks. In fact, looking at the monthly moving-average in the chart that we have outlined below, a reading of 52 puts Chinese PMI on the cusp of a very bad breakdown.


That said, from a risk management perspective, it is critical to note that risk can work both ways. There is equally as probable an event that Chinese PMI recovers from this current reading of 52 as there is that it breaks down.


If it breaks down through this moving average (dotted white line), recent history (Q2 of 2008) doesn’t paint a pretty forward looking picture. If it holds this level of 52 and recovers, to some extent we shouldn’t be surprised – Chinese stocks have been recovering for the better part of the last week and may be the lead indicators there.


We were never calling for a Chinese stock market crash. Rather, we were calling for a correction. Today’s data supports the efficacy of distinguishing the difference between those two outcomes.


With Chinese stocks closing up +1.2% on this Chinese PMI “news”, Mr Macro Market is starting to smell recovery in China – remember, Mr. Macro Market looks forward…


In terms of positioning, we covered our short position in CAF during the week of the Lunar Year holiday. We have not yet moved to the long side of the equity market. We need more data.



Keith R. McCullough
Chief Executive Officer


Charting China's Slowdown  - chpmi


R3: A Sentimental Update


March 1, 2010


We saw the general sentiment for apparel and retail companies improve throughout 2H ’09. Not surprisingly as earnings beats became the norm, the sell-side got incrementally positive on almost every company and short interest receded.  With all of this in the rear-view mirror, we are beginning to see the bifurcation trade developing in 2010. 





We saw the general sentiment for apparel and retail companies improve throughout 2H ’09. Not surprisingly as earnings beats became the norm, the sell-side got incrementally positive on almost every company and short interest receded.  With all of this in the rear-view mirror, we are beginning to see the bifurcation trade developing in 2010.  Our sentiment charts, which triangulate sell-side sentiment (ratings), buy-side (short interest), and insider (management buy/sell activity), illustrate a landscape that from a sentiment perspective is decidedly more mixed. Some notable callouts…


  • SHLD: A major decline in short interest since Jan 1 stands out as one of the most notable changes in the whole universe. Clearly it helps to beat earnings handily when the Street remains fixated on sales that are still struggling and market share that is walking out of the door. With that said, the sell-side appears to still be sitting on the sideline, unwilling to endorse financial engineering at the expense of having to capitulate on the fundamentals.
  • LIZ: Short-interest here has barely budged, although the recent share price performance suggests there is definitely a pain trade underway. There’s been a slight improvement here in sell-side sentiment, although there is still plenty of room to convince the naysayers. We still like the name, and believe the company’s additional disclosure and recent introduction of the Mexx CEO to the Street are making it tougher to keep debate going on whether or not the company will survive.
  • FL: We’re no longer the only ones warming up to the story, as evidenced by an increase in positive ratings on the name. With that said, it’s great to see the sell-side endorsing the story more and more, but the earnings revision opportunity is far greater than those starting to “do the work” on the name.
  • UA: The short interest here has moved higher (presumably on those betting against footwear), but surprisingly the Street is now more positive than it has been in a long-time. The chart reads this as a “slightly better than neutral” rating, but the move from a slightly negative consensus view is still noteworthy.


Additional Callouts:

High Short Interest: SKS, LIZ, PETS, TRLG, BKS

Negative Sentiment: SHLD, ZLC, KSWS, ZQK, BONT

Positive Sentiment: WMT, TGT, KSS DLTR, URBN, KR, COH, WRC, AEO, VFC




            Worse: GPS, M, TJX, CRI, HOTT, GIL, RL, TRLG


Noteworthy Insider Activity:

BKS and BBI are in the negative territory and have insider selling.

SHLD is the least loved stock and it has insider buying.

GME, LOW, DLTR, TGT, KR, VFC, and WMT all had insider selling while they sit at the positive sentiment and short interest side of the spectrum.


R3: A Sentimental Update  - Sentiment Retailers


R3: A Sentimental Update  - Sentiment Brands



Eric Levine & Zach Brown




  • In an effort to test the waters on international expansion and appeal, J Crew will be selling some women’s product through online luxury retailer Net-a-Porter. The website will begin selling select women’s product in May, and will allow the brand to be distributed to 170 countries. Given management’s risk aversion to over expansion and high risk real estate deals, we see this is a creative way to build the brand globally with very little capital or risk. 
  • Nielsen recently released some viewing statistics for the Olympics and the results are interestingly skewed towards females and older viewership. Females make up 56% of viewership. Viewing by those over the age of 55 are 82% above the national average. Teenagers appear to be much less interested in the Olympics, with their viewership registering 57% below the national average. On a separate note, only 55% of households are HD capable for the games. Looks like there is still plenty of opportunity ahead for those selling flat screens… 
  • With the possibility of a dangerous Tsunami reaching the shores of Hawaii on Saturday, many of the state’s retailers were among the many precautionary closures. Most notable was one of the world’s most productive malls, the Ala Moana Center, which was shut down for half a day on Saturday morning until the all-clear signals were made. 
  • In one of the more aggressive promotions we’ve seen in a while from the drugstore industry, Rite Aid ran a BOGO over the weekend on all Rite Aid Brand products. The promo was buy one, get on 50% off and included all private label goods without any restrictions. Talk about an opportunity to stock up… 




Gap plans to expand web sales abroad in 2010, after a solid 2009 - Having finished 2009 with decent growth online, Gap Inc. is making 2010 the year for international e-commerce expansion.

For the year ended Jan. 30, 2009, Gap reported:

  • An increase of 8.7% in web sales to $1.12 billion from $1.03 billion in 2008.
  • Total revenue declined 2.3% to $14.20 billion from $14.53 billion.
  • The web accounted for 7.9% of total sales compared with 7.1% in 2008.
  • Comparable-store sales decreased 3.0%.
  • Net income rose year over year 13.8% to $1.1 billion from $967 million.

In October, Gap announced plans to open new web stores in 2010 for its Gap, Old Navy and Banana Republic brands in Canada and e-commerce sites for Gap and Banana Republic in the United Kingdom. The retailer plans to begin filling orders by fall. Gap will pursue its international web expansion in markets where there are many fashion-conscious consumers, such as Canada, the U.K. and Italy, CEO Glenn Murphy told analysts on the chain retailer’s year-end earnings call Thursday.  <internetretailer.com>


Simon Undergoing FTC Inquiry in its bid for Prime Outlets - Gap Inc. was contacted by the Federal Trade Commission about Simon Property Group Inc.’s proposed acquisition of Prime Outlets Acquisition Co. “We are aware of the FTC’s inquiry into the proposed Simon acquisition of Prime Outlets and we are responding to its inquiries,” Louise Callagy, a spokeswoman for the San Francisco-based clothing retailer, said in a telephone interview yesterday. Gap has stores at outlets owned by both Simon and Prime. Simon agreed in December to buy Prime Outlets from Lightstone Group for $2.33 billion including debt. The deal would the largest U.S. mall owner an additional 22 retail outlet centers, increasing its total to more than 60. Simon also is trying to buy bankrupt General Growth Properties Inc., its biggest rival. General Growth rejected Simon’s unsolicited bid Feb. 16, saying the $10 billion offer was too low. Simon’s bid to buy General Growth out of Chapter 11 bankruptcy may also face regulatory hurdles, David Fick, an analyst with Stifel Nicolaus & Co. in Baltimore, said in a telephone interview. <bloomberg.com>


Wal-Mart to “Massively” CutGreenhouse Gas Emissions - Retail heavyweight Wal-Mart said on Thursday that it plans to massively cut greenhouse gas emissions from the life cycle of its products by the end of 2015, describing it as "an effort equivalent to taking more than 3.8 million cars off the road for a year". Wal-Mart plans to reach the goal by having its suppliers reduce "emissions involved in the sourcing, manufacturing, transportation, and disposal of the thousands of products it sells in its stores". The retail giant, which announced previously, that it would rely solely onrenewable energy to run all its operations, completed three solar installations in Southern California, last month. "We have the capacity to do more", Chief Executive Mike Duke said. "It's a very sizable goal, as we often do at Wal-Mart". "We do plan and want to continue to build stores. We want to add square footage. That's the reality of our business. Yet we know we need to get ready for a world in which energy will only be more expensive, and that there will only be a greater need to operate with less carbon in the supply chain", he added. <topnews.us>


VFG Said Shopping Proenza Schouler Stake, Possibly Valentino - After three years in the designer business, European private equity firm Permira is looking at cashing in on its investment in Proenza Schouler, and possibly Valentino, too, WWD has learned. Permira has started to put out feelers, and several investment funds are said to have looked at the two fashion properties. “Proenza Schouler is cool, and it would make sense to sell it while it’s so cool,” said one Milan source, cautioning, however, that it “may not be advantageous to sell Valentino now because of the economy and such a sluggish market.” Another well-placed source here said Permira is “definitely” interested in parting with Proenza Schouler, but that “it is all very agreeable, as they are trying to find a way out and working on a possible deal together with the designers [Jack McCollough and Lazaro Hernandez].” In addition, the source said the fund “is not really trying to make a gain from the sale. On the other hand, I believe the problem is that the brand is absorbing too much cash: It’s still a small business that requires a lot of investment to grow.”  <wwd.com>


Labelux Seaching for Acquisitions - The new chief executive officer of Labelux Group said the Vienna-based holding company was looking to snap up brands to add to its burgeoning luxury stable. Reinhard Mieck, who took his post in January, said the group’s first priority was to grow its existing labels — Bally, Derek Lam, Solange Azagury-Partridge and Zagliani — following a tough year for the luxury sector. “Apart from this, we are also clearly looking around for further candidates to join the portfolio,” Mieck told WWD on the sidelines of a Labelux presentation during Milan Fashion Week. “We are looking at companies here and there once in a while,” said Mieck. “If we find something that fits, we might do it this year or next year.” The executive said the acquisition could be in the apparel or accessories fields. Mieck said sales for the group’s four brands had improved in the last four months, though it was still too early to call a recovery. At Derek Lam, sales fell 30 percent last year as a whole, though 2009 also marked the opening of the brand’s first store, located in New York City, and the launch of its first advertising campaign, ceo Jan-Hendrik Schlottmann said. <wwd.com>


Spending on social media increases, but companies struggle with ROI - Even though 81% of companies say they plan to increase spending on social media over the next year, most of those companies are still struggling to figure out how to measure their return on investment, according to a new study from web marketing consultants E-consultancy. 61% of companies say their organizations are either poor or very poor at measuring ROI from social media, according to “The Value of Social Media Report.” The report, which based its findings on a survey of 400 U.S. companies and agencies (19% of them retailers) in December and January, found that among the reasons companies are pursuing social media are to:

  • Drive traffic to the company’s web site, 74%
  • Raise brand recognition, 64%
  • Improve the brand’s reputation, 62%
  • Increase sales, 56%
  • Improve customer retention, 51%
  • Bolster customer satisfaction scores, such as NetPromoter, 52%

Despite the difficulty of finding a direct relationship between the social media efforts and those goals, companies are growing their social media efforts, in part, because those efforts are relatively inexpensive, says the report. 32% of companies do not spend anything on their efforts (aside from their employees’ time), 36% spend less than $5,000 and 12% spend $10,000 or less. Facebook is the most commonly used social media site, with 85% of companies using it, followed by Twitter (77%), LinkedIn (58%) and YouTube (49%). <internetretailer.com>


Scanbuy app enables shoppers to scan bar codes and retrieve data - Typical smartphone cameras are too dumb to read conventional, one-dimensional bar codes—they just can’t quite take a sharp enough image for a bar code information system to decipher. Smartphones at the head of their class, though, have auto-focus features that enable much crisper images—and consequently the ability to read bar codes. Scanbuy Inc., a mobile marketing technology provider, is leveraging the auto-focus feature on select Android, BlackBerry and iPhone smartphones to break down the barrier between mobile bar code scanning and conventional bar codes, enabling users of these devices to use its ScanLife mobile app to snap pictures of the codes and, in return, instantly receive product and pricing information. M-commerce studies across the board show that the most common task conducted by mobile shoppers today is comparison shopping. Enabling consumers to read 1-D bar codes, the most common codes in the U.S. by far, will make mobile comparison shopping a snap, says Scanbuy CEO Jonathan Bulkeley. Scanbuy has for some time enabled consumers to read less common two-dimensional bar codes, which provide data both horizontally and vertically; but most checkout counter scanners don’t read 2-D bar codes, and thus they are not generally used on consumer goods. <internetretailer.com>


A Tough Time Seen Ahead for Europe - Despite tentative signs of a turnaround at the beginning of the year, European retailers are bracing for a see-saw recovery at best, and at worst a double-dip recession. Fears that Greece could default on its public debt have roiled financial markets in recent weeks, raising the specter that European economies, which borrowed heavily to sustain spending during the recession, could now raise taxes on their wealthiest citizens to help foot the bill. “We are not out of the woods yet,” summed up Guy-Noël Chatelin, a partner at OC&C Strategy in Paris. Indeed, luxury firms are maintaining a cautious stance, despite the fact many reported an improvement in the fourth quarter of 2009 — although admittedly against very weak year-ago levels. Ralph Toledano, chairman and chief executive officer at Chloé, said business started to pick up from September, with stronger sell-throughs prompting even Russian buyers, which had retreated during the economic crisis, to return to the showrooms. He noted, however, that Italian specialty stores now seem to be suffering.  <wwd.com

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PNK kitchen -sinked the Q4 (can you say stock options?) and while Louisiana is still under a lot of pressure, there are indications that margins will improve. A CEO announcement could be a catalyst.



PNK is starting to look interesting again.  Investor sentiment surrounding the regional gamers is finally very negative.  After giving PNK credit for a full year of Sugarcane Bay, the EV/EBITDA multiple on 2011 is a reasonable 6x.  Could it get cheaper?  Sure.  The regional gaming performance has been significantly lagging other consumer discretionary sectors.  Louisiana, where PNK has significant exposure, has been under pressure due to the energy economy there and extremely difficult comparisons.  However, there a few company specific catalysts.


Q4 was awful, but it may have been an anomaly.  We suspect there was a little kitchen-sinking going on.  It may or may not be a coincidence that the new management team’s options were priced after the quarter.  Margins should look better going forward.  PNK will save $2 million annually from jettisoning the corporate jet and Las Vegas consolidation will save $500k.  Insurance expenses will be brought down.  Importantly, marketing expenses are going lower, particularly in Louisiana.


In addition to better margins and potentially better than expected near-term earnings, a new CEO announcement could be a positive catalyst.  While nothing is imminent, the sale of the Atlantic City land parcel would be huge given the large carrying cost and deleveraging aspects of a sale.  A sale of the Argentina assets would likewise be a positive.


Many analysts are at PNK’s new River City in South St. Louis County today for an analyst tour and meetings.  We believe the meetings will be positive on the margin (relative to low expectations following the Q4 earnings release) due in part to the items discussed above. 

US STRATEGY – Fears Persist

On Friday, the S&P 500 US equities finished slightly higher, capping off a down week for the Dow -0.7%, S&P -0.4%, NASDAQ -0.23% and Russell -0.5%.  From a MACRO perspective, issues surrounding the momentum behind the global RECOVERY trade remain in place, with a continued focus on weaker-than-expected economic data out of both the US and the Eurozone.  Despite this, the dollar index was slightly lower last week declining 0.35%.  Today’s set up based on Hedgeye Risk Management models have levels for the Dollar Index (DXY):  buy Trade (79.69) and sell Trade (81.20).


The RISK trade unwound last week with the VIX declining 2.6% and declined 20.8% for the month of February.  Today’s setup for the volatility Index (VIX) is buy Trade (18.89) and sell Trade (22.50).  As we posted on Friday, on March 9th, Greece’s Prime Minister will be visiting the USA.  In addition to meeting with Merkel in Germany on March 5th this, on the margin, is another bullish catalyst for Greek stocks (bearish for Greek CDS and bond yields) which look poised to make a series of higher-lows in the coming weeks.  “Fashionable Fears” are now locked in with Friday’s fears associated with a Moody’s downgrade (see our Early Look note from 2/26/10 for a more detailed analysis of the same).


As we wrote about last week there are some MACRO headwinds that can’t be ignored; a pickup in bank failures, continued excess inventories in the semi-conductor space, jobs, state budget pressures and reports of additional efforts to curb lending growth in China.  The mitigating factors are the free money Fed policy, a continued pickup in M&A, well-received Q4 earnings, and 2010 guidance out of the retail space. 


Last week, Europe dominated the MACRO headlines.  The global recovery theme was called into question after Germany's Ifo business climate index unexpectedly fell in February for the first time in 11 months.  In addition, Greek downgrade warnings from both S&P and Moody's made lots of headlines, but is a lagging indicator. 


In the US, news on the consumer and housing were an addition headwind for the market.  Our bearish stance on housing is expressed through our short in TOL which declined 1.72% last week and 5.2% over the past two weeks.  Other builders such as LEN (5.2%), PHM (5.3%), RYL (4.7%) and DHI (4.6%) were also very weak.  New home sales plunged 11.2% month-to-month in January to a record low 309,000 unit annualized pace, while existing home sales fell 7.2% last month following a 16.2% decline in December.  It also should be noted that, mortgage applications fell 8.9% for the week ended February 19th, the third straight decline.  Purchase applications fell 7.3% following declines of 7% and 4% in the prior two weeks, pushing the purchase applications index down to levels not seen since 1997.


Last week there were only two sectors with positive performance, Consumer Discretionary (XLY) and Financials (XLF).  The XLY benefitted as Retail had a very strong relative outperformed last week, with the S&P Retail Index +1.9%.  Better-than-expected Q4 earnings and increasingly upbeat outlook for 2010 helped to underpin the group last week.   This outperformance came despite some continued headwinds facing the US consumer, as February consumer confidence plunged 10.5 points to 46, the lowest level since April. Expectations fell to a seven-month low, while the current conditions index hit its lowest level since early 1983.


As we wake up today, Asian and European markets rose this morning as worries about Greece subsided. Resources stocks went up as copper prices surged after the earthquake in Chile.  Chile is the world’s largest country producing copper.   US Equity futures are trading above fair value but well below the highs as European markets pare earlier gains.


On the MACRO calendar today we will see January personal Income/Spending, PCE Deflator, February ISM and January Construction Spending.  As we look at today’s set up the range for the S&P 500 is 21 points or 1% (1,092) downside and 0.8% (1,113) upside. 


Copper jumped to the highest price in five weeks in London after a magnitude-8.8 earthquake disrupted supplies from Chile, the world’s largest producer.  The Hedgeye Risk Management Quant models have the following levels for COPPER – Buy Trade (3.18) and Sell Trade (3.38).


Gold declined in London as the dollar extended gains against the euro.  The Hedgeye Risk Management models have the following levels for GOLD – Buy Trade (1,097) and Sell Trade (1,124).


Crude oil rose for a second day on expectations that economic growth in the U.S. will boost fuel demand.   The Hedgeye Risk Management models have the following levels for OIL – Buy Trade (77.10) and Sell Trade (81.09).


Howard Penney

Managing Director


US STRATEGY – Fears Persist - sp1


US STRATEGY – Fears Persist - usd2


US STRATEGY – Fears Persist - vix3


US STRATEGY – Fears Persist - oil4


US STRATEGY – Fears Persist - gold5


US STRATEGY – Fears Persist - copper6


The Joy of Winning

“I'm trying to learn as much as I can out there, but I'm confident in what I can do.”

-Sidney Crosby


Sidney Crosby is a 22 year-old from Cole Harbour, Nova Scotia. Sometimes it’s hard to contextualize how young some of these national leaders are, but youth is ambition’s ladder and it’s important to take the time to embrace.


The Vancouver Olympics inspired us to live with passion and pride. Between Americans and Canadians, new Olympic records for total medals (USA’s 37) and gold medals (Canada’s 14) were set, and the leadership infused into all of our living rooms for the past few weeks goes well beyond one man’s goal.


Immediately after the hockey game, Sidney Crosby said “there's nothing really that goes through your mind besides the joy of winning and to be able to share that with the guys and all of Canada.” I’ll take that one step further Sidney – I think all of Olympic sport shared it with all of the world. We needed that. To all of the champions of Vancouver 2010, from all of us, thank you.


“The Joy of Winning” is something we can all can sign up for. Enough of the fear-mongering and threats of the “alternative” that this world’s politicians use as a backboard for their losing strategies. Enough of Selling Fear to our marketplace. Enough is enough. Winners don’t whine. Winners win.


Stock markets across the world opened strong this morning, and I have to believe there is a much greater power in all of this than what the Prime Minister of Greece had to say. His conflicted and compromised stock market has lost 1/3 of its value already. He is yesterday’s losing news.


From China to India, whose stock markets were up +1.2% and +1.1%, respectively, to the rally we are seeing from Turkey (+2.2%) to Germany (1.6%) this morning, is there time for us to celebrate that we don’t have to live in the fear that our politicians create?


China’s February PMI (Producer Manufacturing Index) hit a one-year low last night, coming in at 52 versus 55.8 reported in January. This was proactively predictable (we predicted it on slide 1 of our Chinese Ox in a Box presentation 2 months ago), and the Chinese stock market has obviously been discounting this slowdown for the better part of 2010. Thankfully, markets look forward, like winners do.


Are the lows for the Chinese, Spanish, and Greek stock markets for 2010 locked into the rear-view mirror? For the immediate to intermediate term, the answer to that question seems to be very likely.


Here’s what history tells us about recent stock market bottoms and how people Selling Fear see them after the fact:

  1. China’s Shanghai Composite saw its YTD low established on February 2nd at 2934 (-5.2% lower)
  2. Spain’s IBEX 35 Index saw its YTD low established on February 5th at 10,103 (-3.2% lower)
  3. Greece’s ATHEX Index saw its YTD low established on February 8th at 1806 (-8.0% lower)

Today is March the 1st, and those who sold the aforementioned fear-mongered lows may very well be feeling shame, as they should. Forward me another You Tube video of an empty Chinese city. I doubt I’ll be shorting Chinese stocks on that tomorrow. Consensus is what consensus does. It’s often a loser’s game.


Managing risk doesn’t happen in the vacuum that the manic media creates. Managing risk doesn’t happen when living in fear. Managing risk doesn’t only happen on the way down.


Managing risk happens when the proactively prepared have the “confidence in what they can do”, but at the same time maintain an attitude to “try and learn as much as they can out there.” Thank you again and again, Mr. Crosby, for teaching us all that.


My immediate term risk/reward levels of support and resistance for the SP500 are now 1092 and 1113, respectively.


Best of luck out there today,





FXC – CurrencyShares Canadian Dollar — Canada's currency was on sale on 2/25/10 and we are bullish on the Loonie's long term TAIL, at a price. Look for rate hikes in Canada in the coming 6-9 months.


TUR – iShares Turkey — Turkey has been pounded in the last week and fears were delivered upon with the inside information of 40 retired military officers arrested on 2/24/10. We'll buy the fear for a trade. The long term TAIL for Turkey is bullish, from a price.


XLF – SPDR Financials — With sentiment negative and a Piggy Banker Spread hitting a record wide spread on 2/23/10, we bought red.


XLK – SPDR Technology — Technology is underperforming the SP500 YTD; a down day on 2/22/10 prompted us to buy more. We expect to see some positive mean reversion for Technology as M&A picks up.


UUP – PowerShares US Dollar Index Fund — We bought the USD Fund on 1/4/10 as an explicit way to represent our Q1 2010 Macro Theme that we have labeled Buck Breakout (we were bearish on the USD in ’09).

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 mispriced and that TIPS are a efficient way to own yield on an inflation protected basis.



GLD – SPDR Gold We re-shorted Gold on this dead cat bounce on 2/11/10. We remain bullish on a Buck Breakout and bearish on Gold for Q1 of 2010, as a result.


XLP – SPDR Consumer StaplesGiven how many investors own Consumer Staples stocks because it was a "way to play the weak US Dollar" last year, we have ourselves another way to profit from a Buck Breakout with this short position.


IEF – iShares 7-10 Year TreasuryOne of our Macro Themes for Q1 of 2010 is "Rate Run-up". Our bearish view on US Treasuries is implied.

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