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Foot Locker (FL): Black Book & Conf. Call Wednesday

Conference Call Wednesday March 3rd, 12 p.m. EST

We've been vocal about warming up to both Nike and Foot Locker as key ideas for 2010. We covered NKE on Friday's call, and now it's Foot Locker's turn.
Our Foot Locker Conference Call marks the publication of our Foot Locker Black Book. The call is open to institutional subscribers of Hedgeye's Retail vertical -- and for qualified prospective institutional clients.

The call will cover in detail why we think Foot Locker deserves a closer look, focusing on:

  • Historical underperformance in context of new leadership, with a new strategy
  • Store rationalization, brand realignment, product mix, private/exclusive branding, and reinvestment in marketing
  • Assets like e-commerce and international that have been overshadowed by lackluster U.S performance


Dial-in number:    (code: 668844#)


Have questions? Please send them to  either during, or at any point leading up to Wednesday's call. We will address every question either on the call, or in a personal response after its conclusion.



Contact to request access to the conference call, or to request access/pricing on the NKE Black Book and/or the FL Black Book. A replay of Friday's NKE call is also available to institutional subscribers of Hedgeye's Retail vertical -- and for qualified prospective institutional clients upon request.



Foot Locker (FL): Black Book & Conf. Call Wednesday - FL Cover


When Starbucks first opened they had traditional sizing of small, medium and large choices of beverage.  After raising prices for several years, the company looked to changing out the cups size as a way of raising prices and getting consumer to buy more, even though they may not want it. 


It appears that Starbucks is testing a new size in the Phoenix market: Trenta.


The old Starbucks…       

Small = 8 fl oz
Medium = 12 fl oz
Large = 16 fl oz


Today’s Starbucks…

Short = 8 fl oz (you have to ask for this and in many cases the store does not have it)
Tall = 12 fl oz
Grande = 16 fl oz
Venti = 20 fl oz

The word venti stands for 20 in Italian. 


Tomorrow’s Starbucks…

Tall = 12 fl oz
Grande = 16 fl oz
Venti = 20 fl oz 

Trenta = 30 fl oz


According to Wikipedia - Trenta is a town and comune of 2,616 inhabitants in the province of Cosenza in the Calabria region of southern Italy.  Trenta is situated high in the Crati Valley. The town's ancient name, Triginta, derives from the Latin number triginta or thirty.



March First (an action, not a date)

In the spirit of this morning’s Early Look note titled “The Joy of Winning”, here is a collection of thought leading quotes that we have posted over the course of our firm’s young history. There is responsibility in recommendation.

Best of luck out there today,



Keith R. McCullough
Chief Executive Officer




"Restlessness and discontent are the first necessities of progress.”
-Thomas Edison



“In questions of science, the authority of a thousand is not worth the humble reasoning of a single individual.”
-Galileo Galilei



“I’d rather be hated for who I am, than loved for who I am not.”
-Kurt Cobain



"Learn without thinking begets ignorance. Think without learning is dangerous.”



“I can fairly be called an amateur because I do what I do, in the original sense of the word - for love, because I love it.”
-David McCullough



“Problems cannot be solved by the level of awareness that created them”
-Albert Einstein



“The charm of history and its enigmatic lesson consist in the fact that, from age to age, nothing changes and yet everything is completely different.”

-Aldous Huxley



“I ask you to judge me by the enemies I have made.”
-Franklin D. Roosevelt



“We are entering upon waters for which I have no charts and in which I therefore feel myself an utterly incompetent pilot.”
-James Warburg



“When you combine ignorance and leverage, you get some pretty interesting results.”
-Warren Buffett



“It is what people actually did in the stock market that counted – not what they said they were going to do.”
-Jesse Livermore



“When you realize how perfect everything is you will tilt your head back and laugh at the sky.”



“My downfall raises me to infinite heights.”
-Napoleon Bonaparte



“Study the past if you would define the future.”



“Gravity is a contributing factor in nearly 73 percent of all accidents involving falling objects.”
-Dave Barry



“The bend in the road is not the end of the road unless you refuse to take the turn.”



“By three methods we may learn wisdom: First, by reflection, which is noblest; Second, by imitation, which is easiest; and third by experience, which is the bitterest.”



“Information is the currency of democracy.”
-Thomas Jefferson



“Dream as if you’ll live forever. Live as if you’ll die today.”
-James Dean



“If stupidity got us into this mess, then why can’t it get us out?”
-Will Rogers



“Yes, we have to divide up our time like that, between our politics and our equations. But to me our equations are far more important, for politics are only a matter of present concern. A mathematical equation stands forever.”
-Albert Einstein



“A Dollar remains hidden behind every wasted moment.”

- Anonymous



“Well done is better than well said.”
-Benjamin Franklin


“Do not bite at the bait of pleasure, till you know there is no hook beneath it.”
-Thomas Jefferson



“Let me issue and control a nation’s money and I care not who writes the laws.”

-Mayer Rothschild



“In questions of science, the authority of a thousand is not worth the humble reasoning of a single individual.”
-Galileo Galilei



“Pressure is something you feel when you don't know what the hell you're doing.”
-Peyton Manning



“Any fool can make things bigger, more complex, and more violent. It takes a touch of genius - and a lot of courage - to move in the opposite direction.”

-Albert Einstein



“Whenever I felt happy about having discovered something, the first encounter, not only with the public, with other musicians, with specialists, etc, was that they rejected it.”
-Karlheinz Stockhausen



“So was I once myself a swinger of birches; And so I dream of going back to be”
-Robert Frost “Swinger of Birches”



“Tactics without strategy is the noise before defeat.”
-Sun Tzu



“Man has made some machines that can answer questions provided the facts are profusely stored in them, but we will never be able to make a machine that will ask questions. The ability to ask the right question is more than half the battle of finding the answer.”
-Thomas J Watson



“Everything should be made as simple as possible, but not simpler.”
-Albert Einstein



“The better part of valor is discretion”
– William Shakespeare



“It does not matter how slowly you go so long as you do not stop.”



The best way to appreciate your job is to imagine yourself without one.

-Oscar Wilde



“Circumstances rule men; men do not rule circumstances.”




“If a man takes no thought about what is distant, he will find sorrow near at hand.”




“Do not dwell in the past, do not dream of the future, concentrate the mind on the present moment.”




“I'm not concerned about all hell breaking loose, but that a PART of hell will break loose... it'll be much harder to detect.”

-George Carlin



“Truth is what stands the test of experience”

-Albert Einstein



“One of life’s most painful moments comes when we must admit that we didn’t do our homework, that we are not prepared.”

-Merlin Olson



“Only the wisest and stupidest of men never change.”



“Confine yourself to the present.”
-Marcus Aurelius



“A man’s feet should be planted in his country, but his eyes should survey the world.”
-George Santayana



“Sharp downward movements do that… they focus the mind, like a good hanging used to do in the Old West.”
-Judge Roy Bean



"In life, as in a football game, the principle is to hit the line hard.”
-Theodore Roosevelt



“People in Hollywood are not showmen, they’re maintenance men, pandering to what they think their audiences want.”
-Terry Gilliam



“Always bear in mind that your own resolution to succeed is more important than any one thing.”
-Abraham Lincoln



“Everything comes to him who hustles while he waits.”
-Thomas Edison



“I hear and I forget. I see and I remember. I do and I understand.”



"Not everything that is faced can be changed. But nothing can be changed until it is faced."
~ James Baldwin



“Offer them what they secretly want and they of course immediately become panic-stricken.”
-Jack Kerouac



“Charlie and I believe that when you find information that contradicts your existing beliefs, you’ve got a special obligation to look at it – and quickly”
-Warren Buffett



“It's easier to think outside the box if you don't draw one around yourself.”
-Jason Kravitz



"The pressure not to lose has been replaced by the pressure not to miss out."
-Seth Klarman (Founder of Baupost)



“Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency.”
-John Maynard Keynes



"Show me a hero and I will write you a tragedy."
-F. Scott Fitzgerald



"It is easy to dodge our responsibilities, but we cannot dodge the consequences of dodging our responsibilities."-  Sir Josiah Stamp



 "All the busy little creatures chasing out their destinies... living in their pools they soon forget about the sea..."
- Neil Peart



"Perceived perception, misguided conception."



"I just made mistakes... And obviously you can't make mistakes and expect to not only make the cut but also try and win a championship."
-Tiger Woods



"Monkeys are superior to men in this: when a monkey looks into a mirror, he sees a monkey."
-Malcolm de Chazal



"Don't let the fear of striking out hold you back."
-Babe Ruth



"What lies behind us, and what lies before us are small matters compared to what lies within us."
- Ralph Waldo Emerson



"Victory is reserved for those who are willing to pay its price."
- Sun Tzu



"If you are out to describe the truth, leave elegance to the tailor"
-Albert Einstein



"You have to learn the rules of the game. And then you have to play better than anyone else."
-Albert Einstein



"Fail to prepare. Prepare to fail."
-Roy Keane



“No one can possibly achieve any real and lasting success, or get rich in business, by being a conformist.”
-J. Paul Getty



"The human body can take damn near anything. It's the mind that needs training."

- Instructor Reno




"It's not the will to win, but the will to prepare to win that makes the difference."
-Bear Bryant



"With enough courage, you can do without a reputation."
-Rhett Butler (Gone With The Wind)



"Tis a common proof... That lowliness is young ambitions ladder."
-William Shakespeare



"It's the broncs and the blood, it's the steers and the mud, and they call the thing rodeo." -Garth Brooks



"Thou art not listening to me. Be calm. As for me, am I not calm? I am altogether calm."
- Oscar Wilde, "Salome"




"To believe with certainty we must begin with doubting."
                Stanislaw Leszczynski



"Feel like a broke down engine, ain’t got no driving wheel"
 -Blind Willie McTell



"Dream as if you'll live forever.  Live as if you you'll die today."

- James Dean



"If you're not confused, you're not paying attention."
~ Tom Peters



"They say that time changes things, but you actually have to change them yourself"
-Andy Warhol



"Tension is who you think you should be.  Relaxation is who you are." 
~Chinese Proverb



"Confidence comes not from always being right but from not fearing to be wrong."
-Peter T. Mcintyre



"I did envisage being this successful as a player, but not all the hysteria around it off the golf course."
-Tiger Woods



"Fear keeps you from making as much money as you ought to."
-Jesse Livermore, Reminiscence of a Stock Operator



"I followed a golden rule, namely, that whenever a published fact, a new observation or thought came across me, which was opposed to my general results, to make memorandum of it without fail."
-Charles Darwin



"One dog barks because it sees something; a hundred dogs bark because they heard the first dog bark."
-Chinese Proverb



"He who will not economize will have to agonize."




"Because things are the way they are, things will not stay the way they are."
  -Bertolt Brecht



"I made my money by selling too soon."
-Bernard Baruch



"The strength of a nation derives from the integrity of the home."



"I'm trained in weapons, demolition, and unarmed combat. I'm a sniper, and I'm the platoon medic. But most of all, I'm an American."
-Marcus Lutrell, US Navy SEAL



"Success is no accident. It is hard work, perseverance, learning, studying, sacrifice and most of all, love of what you are doing or learning to do."



"To be trusted is a greater compliment than being loved."
-George MacDonald



"Here was neither peace, nor rest, nor a moment's safety. All was confusion and action, and every moment life and limb were in peril."
-Jack London, The Call of the Wild



"Do you know the terror of he who falls asleep? To the very toes he is terrified, because the ground gives way under him, and the dream begins."
-Friedrich Nietzsche



"Thinking well is wise; planning well, wiser; doing well wisest and best of all."- Persian Proverb



"Formula for success: rise early, work hard, strike oil."
-J. Paul Getty



"It's never too late to give up our prejudices."
-Henry David Thoreau



"All credibility, all good conscience, all evidence of truth come only from the senses."  -Friedrich Nietzsche



"In order to form an immaculate member of a flock of sheep one must, above all, be a sheep."
-Albert Einstein



"Faced with what is right, to leave it undone shows a lack of courage."



"Chasing Performance is like driving while looking into a rear view mirror."
-Andrew Barber



"If you want to succeed in the world, you don't have to be much cleverer than other people. You just have to be one day earlier."
-Leo Szilard



"No one can possibly achieve any real and lasting success by being a conformist."
-J. Paul Getty



"Expect more than others think possible."
-Howard Shultz, CEO Starbucks



"I've missed more than 9000 shots in my career. I've lost almost 300 games. 26 times, I've been trusted to take the game winning shot and missed. I've failed over and over and over again in my life. And that is why I succeed. "
-Michael Jordan



Whatever you fear most has no power - it is your fear that has the power.
Oprah Winfrey



"Fear grows in darkness; if you think there's a bogeyman around, turn on the light."
-Dorothy Thompson



"It is dangerous to be right in matters on which the established authorities are wrong."



"Learn to fail with pride - and do so fast and cleanly. Maximize trial and error - by mastering the error part."
-Nassim Taleb



"It gets late early out there."
-Yoggi Berra



"In addition to trying to determine how to make money one must also try to keep from losing money. It is almost as important to know what not to do as to know what should be done."
-Jesse Livermore



"Forget about style; worry about results"
-Bobby Orr



"Education is the movement from darkness to light."
-Allan Bloom



"Learning without thought is labor lost."



"I've got friends, of course, but my business has always been the same - a one-man affair.  That is why I have always played a lone hand."
-Jesse Livermore, Reminiscences of a Stock Operator



"Genius is nothing but a greater aptitude for patience."
-Benjamin Franklin



"Everyone is a prisoner of his own experiences. No one can eliminate prejudices - just recognize them."
-Edward Roscoe Murrow



"I followed a golden rule, namely, that whenever a published fact, a new observation, or thought came across me, which was opposed to my general results, to make a memorandum of it without fail, and at once."
-Charles Darwin



"We are what we repeatedly do."



"I think that only daring speculation can lead us further and not accumulation of facts."
-Albert Einstein



"The memories of men are too frail a thread to hang history from."  
~John Still, The Jungle Tide



"I am a member of a team, and I rely on the team, I defer to it and sacrifice for it, because the team, not the individual, is the ultimate champion. "
-Mia Hamm



"Let your performance do the thinking. "
-H. Jackson Brown



"Never mistake a clear view for a short distance"
~ Paul Saffo



"I'm aware if I'm playing at my best I'm tough to beat. And I enjoy that."
-Tiger Woods



"The object of this competition is not to be mean to the losers but to find a winner. The process makes you mean because you get frustrated."
-Simon Cowell




"One of the definitions of sanity is the ability to tell real from unreal. Soon we'll need a new definition."
-Alvin Toffler



"You cannot help men permanently by doing for them what they could and should do for themselves."
-Abraham Lincoln




"Success depends upon previous preparation, and without such preparation there is sure to be failure."



"I'm not known as a goal scorer, but I have found my role by doing other things. The nice thing about this team is that everyone contributes."
-Matt Nelson, Yale Hockey Captain 2009



"The evil of the world is made possible by nothing but the sanction you give it. "
Ayn Rand, Atlas Shrugged, 1957



"You don't need a weather man / to know which way the wind blows."
Bob Dylan



"I'm not going to waste my time arguing with a man who's lining up to be a hot lunch."
-Hooper to Quint in Jaws (1975)




"It is harder to crack a prejudice than an atom."
-Albert Einstein



"What's right isn't always popular. What's popular isn't always right."
-Howard Cosell



"The game taught me the game."
-Jesse Livermore



"May you live to be 100 and may the last voice you hear be mine."
-Frank Sinatra



"Gentlemen Prefer Bonds"
-Andrew Mellon



"Depression is rage spread thin."
-George Santayana



"Today is the tomorrow you worried about yesterday."
- Unknown



"It is a capital mistake to theorize before one has data. Insensibly, one begins to twist fact to suit theories, instead of theories to suit facts."
-Sherlock Holmes



"As long as I can see the puck, I don't think you can beat me."
-Alec Richards (Yale Hockey's Senior starting goaltender)



“Future shock is the shattering stress and disorientation that we induce in individuals by subjecting them to too much change in too short a time. ”
-Alvin Toffler



“A leader is a dealer in hope”
~ Napoleon Bonaparte



“Be not the slave of your own past.”
-Ralph Waldo Emerson



“Courage is being scared to death, but saddling up anyway”
-John Wayne



"How much can you know about yourself if you've never been in a fight?"
 -Brad Pitt, Fight Club



“Never give a sword to a man who can't dance.”



"Neither shall you allege the example of the many as an excuse for doing wrong."
-Exodus 23:2



“She take my money when I'm in need… Yea she's a triflin' friend indeed…Oh she's a gold digger way over town… That digs on me”
-Kanye West



“Never do anything against conscience even if the state demands it.”
-Albert Einstein



“What counts for most people in investing is not how much they know, but how realistically they define what they don’t know.”
-Warren Buffett



“I like to see a man proud of the place in which he lives. I like to see a man live so that his place will be proud of him.”
-Abraham Lincoln



“When you strip away a country’s or an individual’s right to fail, you take away their ability to succeed. Let the natural forces of accountability work for all.”
-Stuart Witt (Mohave Air & Space Port, 2009)



“What is defeat? Nothing but education; nothing but the first steps to something better.”
-Wendell Phillips



“What is a committee? A group of the unwilling, picked from the unfit, to do the unnecessary.”
-Richard Harkness



"The Ox is the sign of prosperity through fortitude and hard work. This powerful sign is a born leader, being quite dependable and possessing an innate ability to achieve great things. As one might guess, such people are dependable, calm, and modest. Like their animal namesake, the Ox is unswervingly patient, tireless in their work, and capable of enduring any amount of hardship without complaint."
-Attributes Of The Ox (Wikipedia)


“Iron rusts from disuse, stagnate water loses its purity and in cold weather becomes frozen, even so does inaction sap the vigor of the mind”
-Leonardo da Vinci



“Silence is a true friend who never betrays”



“If an idiot were to tell you the same story for a year, you would end by believing it.”
-Horace Mann



“Few people are capable of expressing with equanimity opinions which differ from the prejudices of their social environment.”
-Albert Einstein



“There’s been a breakdown between the conduct of politics and the people”
-Yoshimi Watanabe, last night…



“If it's a good idea, go ahead and do it. It is much easier to apologize than it is to get permission”
~ Admiral Grace Hopper



“The magic lies in orchestrating the extremes…”
-Mick Malisic, 2008



“The most beautiful experience we can have is the mysterious. It is the fundamental emotion that stands at the cradle of true art and true science...”
-Albert Einstein



“Nearly all men can stand adversity, but if you want to test a man's character, give him power.”
~ Abraham Lincoln



"As the facts change, I change... what do you do, Sir?"
-John Maynard Keynes




“All men can see these tactics whereby I conquer, but what no one can see is the strategy out of which victory is evolved.”
-The Art of War, Sun Tzu



“The illiterate of the 21st century will not be those who cannot read or write… but those who cannot learn, unlearn, and relearn.”
-Alvin Toffler



“We think it’s a mistake for managers to use gates and other tools to limit investor access to their funds”
-John Paulson (December 2008 Paulson & Co. letter to investors)




"To be wronged is nothing unless you continue to remember it."



"The only blind person at Christmas time is he who has not Christmas in his heart."
-Hellen Keller



"The winters of my childhood were long, long seasons. We lived in three places - the school, the church and the skating rink - but our real life was on the skating rink." - Rich Carrier ("The Hockey Sweater")



“The key to successful leadership today is influence, not authority”
 ~ Kenneth Blanchard



“Darkness is cheap, and Scrooge liked it.”
-Charles Dickens



“So get ready.  I mean, get ready.”
-Hank Williams Jr.



The Depression came to be as a function of “the lack of honor of men in high places.”
-Franklin D. Roosevelt, at the DNC in 1932



“One measure of leadership is the caliber of people who choose to follow you.”
~ Dennis Peer



“Those times when I’ve been down, when I’ve been kicked around, I hold onto those. In a way, those are the best times I’ve ever had, because that’s when I’ve found out who I am. And what I want to be.”
-Brett Favre



“The quality of a leader is reflected in the standards they set for themselves”.
~ Ray Kroc, Founder of McDonald’s



“There is nothing new except what is forgotten.”

-Rose Bertin



“The great danger for most of us lies in not setting our aim too high and falling short; but in setting our aim too low, and achieving our mark.”




“Who can be wise, amazed, temperate and furious, loyal and neutral, in a moment? – No man.”

-William Shakespeare



“The ability to learn faster than your competitors may be only sustainable competitive advantage.”
-Arie de Geus



“The successful warrior is the average man, with laser-like focus.”

-Bruce Lee



“He is mad past recovery, but yet he has lucid intervals.”

-Miguel de Cervantes



“The tighter you squeeze, the less you have.”

-Thomas Merton



"Whether you think you can or think you can't - you are right. "

-Henry Ford



“Never hold discussions with the monkey when the organ grinder is in the room.”

-Winston Churchill



“Fear has its use but cowardice has none.”

-Mahatma Ghandi



“Never ascribe to malice that which can adequately be explained by incompetence.”

-Napoleon Bonaparte



“The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt.”

-Cicero, 55 BC



“The superior man, when resting in safety, does not forget that danger may come. When in a state of security he does not forget the possibility of ruin. When all is orderly, he does not forget that disorder may come. Thus his person is not endangered, and his States and all their clans are preserved."



“I may not be alive to see the crisis, but my soul will come back to haunt you.”
-Paul Volcker (February 2nd, 2010)



“If we knew what we were doing, it wouldn’t be called research, would it?”

-Albert Einstein



“Wide acceptance of an idea is not proof of its validity.”
-Dan Brown (The Lost Symbol)



“When one door closes, another opens; but we often look so long and so regretfully upon the closed door that we do not see the one which has opened for us.”   
-Alexander Graham Bell



“The most important quality in a leader is that of being acknowledged as such.”

~ Andre Maurois



“At the same time I realize that the best of all tipsters, the most persuasive of all salesmen, is the tape.”

-Jesse Livermore



“Desperation is sometimes as powerful an inspirer as genius.”

-Benjamin Disraeli



“We have two classes of forecasters: those who don’t know – and those who don’t know what they don’t know.”

-John Kenneth Galbraith



"The Constitution does not just protect those whose views we share; it also protects those with whose views we disagree."
-Edward Kennedy



“A perfection of means, and confusion of aims, seems to be our main problem.”
-Albert Einstein



"That's not a bad thing. I'd take a bleeding nose for a win, wouldn't you?"
-Dave Tippett



“A true friendship develops on the basis of genuine human affection, not money or power. Of course, due to your power or wealth, more people may approach you with big smiles or gifts. But deep down these are not real friends of yours; these are friends of your wealth or power.”
- Dalai Lama



“Learn all you can from the mistakes of others.  You won't have time to make them all yourself.”  
-Alfred Sheinwold


"In the mountains, the shortest way is from peak to peak: but for that you must have long legs.”
-Friedrich Nietzsche



“Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected.”

-George Soros



“It's not just a rock.  It's forty-two pounds of polished granite, with a beveled underbelly and a handle a human being can hold.  Okay, so in and of itself it looks like it has no practical purpose, but it's a repository of possibility.”

-Paul Gross



As far as the laws of mathematics refer to reality, they are not certain; and as far as they are certain, they do not refer to reality.                               

-Albert Einstein



There is nothing more deceptive than an obvious fact...

-Sherlock Holmes


“If you establish a democracy, you must in due time reap the fruits of a democracy. You will in due season have great impatience of the public burdens, combined in due season with great increase of the public expenditure. You will in due season have wars entered into from passion and not from reason; and you will in due season submit to peace ignominiously sought and ignominiously obtained, which will diminish your authority and perhaps endanger your independence. You will in due season find your property is less valuable, and your freedom less complete.”
–Benjamin Disraeli


"If you don't have time to do it right, when will you have time to do it over?"

 - John Wooden



"One reason why mathematics enjoys special esteem, above all other sciences, is that its laws are absolutely certain and indisputable... while those of other sciences are to some extent debatable and in constant danger of being overthrown by newly discovered facts." -Albert Einstein



``I believe in substance... I don't believe that you get things done just by getting together and having a drink or laughing, or interacting personally. While that's never a negative, you need to bring value.'' -Hank Paulson



"A man's feet should be planted in his country, but his eyes should survey the world."

-George Santayana



 "I'll study and get ready, and then...the chance will come"

-Abraham Lincoln



"Rule #1: Do not lose money. Rule #2: Do not lose money. Rule #3: Never forget rules 1 and 2."

-Roy Neuberger



"One of life's most painful moments comes when we must admit that we didn't do our homework, that we are not prepared."

-Merlin Olson



An invasion of armies can be resisted, but not an idea whose time has come."

-Victor Hugo



Look at the means which a man employs, consider his motives, observe his pleasures. A man simply cannot conceal himself!




"There is no squabbling so violent as that between people who accepted an idea yesterday and those who will accept the same idea tomorrow."

- C. Morley



"You got to know when to hold em, know when to fold em, Know when to walk away and know when to run. You never count your money when you're sittin' at the table. There'll be time enough for countin' when the dealins done."

-Kenny Rogers', The Gambler



No problem can be solved from the same consciousness that created it.

-Albert Einstein



"Whoever controls the volume of money in our country is absolute master of all industry and commerce... and when you realize that the entire system is very easily controlled one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate."                                                              

                                                         - James A. Garfield, assassinated President of the U.S.



"The nine most terrifying words in the English language are: I'm the government and I'm here to help"

-Ronald Reagan



The Definition of Insanity: "Doing the same thing over and over again, and expecting different results"

-Albert Einstein



"Be the change that you want to see in the world"




To put up with distortions... and to stick to one's guns come what may - this is the gift of leadership.

~ Mohandas Gandhi



"If you can't explain it simply, you don't understand it well enough"

-Albert Einstein



"If you have an important point to make, don't try to be subtle or clever... Use a pile driver. Hit the point once. Then come back and hit it again. Then hit it a third time - a tremendous whack."

-Winston Churchill



Don't tell people how to do things, tell them what to do and let them surprise you with their results.

~ George S. Patton



"It is important to foster individuality, for only the individual can produce new ideas"

-Albert Einstein



Lead, follow or get out of the way!

-George S. Patton



"You'll miss 100% of the shots you don't take"

-Wayne Gretzky



"It's like there's a bunch of guys that are making it up as they go along... They talk about transparency and what they present is opacity, programs that don't make sense, or are not yet fully laid out. This only increases the already high level of uncertainty and anxiety."

-Anna Schwartz (co-author with Milton Friedman of "A Monetary History of the United States")



"Invest at the point of maximum pessimism."

-John Templeton



"Insanity in the individual is something rare... but in groups, parties, nations, and epochs, it is the rule."




"You been hearing about how bad I am since you were a little kid with mess in your pants! Tonight, I'm gonna whip you till you cry like a baby."

-Muhammad Ali (1974, to George Foreman prior to the "Rumble In the Jungle" fight)



"I don't like Bull Riders..... They're little men with big egos. Besides, he's got one of them skinny butts like the rest of em'."

-Kellie Frost



“What counts for most people in investing is not how much they know, but rather how realistically they define what they don’t know.”
-Warren Buffett

“And remember, no matter where you go, there you are…”

“A man may die, nations may rise and fall, but an idea lives forever.”
-John F. Kennedy

“By three methods we may learn wisdom: First, by reflection, which is noblest; Second, by imitation, which is easiest; and Third, by experience, which is the bitterest.”

Whoever is careless with the truth in small matters cannot be trusted with the important matters.
~ Albert Einstein

“Nearly all men can stand adversity, but if you want to test a man’s character, give him power.”
-Abraham Lincoln

“Rules are not necessarily sacred, principles are”
-Franklin D. Roosevelt

“Study the past if you would define the future.”


“Sharp downward movements do that… they focus the mind… like a good hanging used to in the old West.”
-Judge Roy Bean


“I have to believe that when things are bad I can change them.”
-Jimmy Braddock (Cinderella Man, 2005)


“Move your hands, move your feet!”
-Tim Taylor

“No matter how busy you may think you are, you must find time for reading, or surrender yourself to self-chosen ignorance.”

“Success depends upon previous preparation, and without such preparation there is sure to be failure.”


“He who thinketh he leadeth and hath no one following him is only taking a walk.”
~ Anonymous

“What counts for most people in investing is not how much they know, but rather how realistically they define what they don’t know.”
-Warren Buffett


"Every organization must be prepared to abandon everything it does to survive in the future."
~ Peter Drucker


“Question every premise, challenge conventional wisdom, and never accept the truth of something merely because everyone else views it as obvious.”
-Albert Einstein

“The policies of the developed nations on these institutions are not clear. Until they are clear, I don’t dare to invest in them. What if they go bust? I will lose everything.”
-Lou Jiwei (Chairman Of China Investment Corp.)

“You're looking for players whose name on the front of the sweater is more important than the one on the back”
-Herb Brooks



“You wanna settle old scores, you're on the wrong team. We move forward starting right now.”
-Herb Brooks (Miracle)



“To go beyond is as wrong as to fall short.”




"Doing what you like is freedom. Liking what you do is happiness."

-Frank Tyger 



“It’s frightening to think that you might not 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.”

-Amos Tversky



“Don’t look back. Something might be gaining on you.”

-Leroy Satchel Paige



“The United States needs to move very fast to even standstill.”
-John F. Kennedy



"Can you imagine what I would do if I could do all I can?"
-Sun Tzu



“Success is how high you bounce when you hit the bottom.”

-General George S. Patton



“If I had lived through the Depression, I would have been in a better position to understand events.”
-John Meriwether



“I never met anybody who said when they were a kid, ‘I wanna grow up and be a critic’”
-Richard Pryor



“It's impossible to work under conditions where they confused negativity with objectivity. You can't fool the fans.”
-Marv Albert



“When your work speaks for itself, don’t interrupt.”
-Henry Kaiser



“An expert is one who knows more and more about less and less.”
-Nicholas Murray



A guy walks up to me and asks 'What's Punk?'. So I kick over a garbage can and say 'That's punk!'. So he kicks over a garbage can and says 'That's Punk', and I say 'No that's trendy!”
–Billie Joe Armstrong, Singer, Green Day



“If ignorant both of your enemy and yourself, you are certain to be in peril.”
-Sun Tzu



“This nation will remain the land of the free only so long as it is the home of the brave.”
-Elmer Davis



“As we express our gratitude, we must never forget that the highest appreciation is not to utter words, but to live by them.”
–John F. Kennedy



“There are whole fields, like the financial world, where scientific thinking hasn’t greatly penetrated. It is mainly about assertion, personality, and salesmanship.”
-David Harding



“Of course not, but the authorities decided it that way, and they are the ones that rule.”



“We have two classes of forecasters: Those who don’t know – and those who don’t know what they don’t know.”
-John Kenneth Galbraith


“The future belongs to people who see possibilities before they become obvious.”
-Ted Levitt



“It is better to have less thunder in the mouth and more lightning in the hand.”
–Apache Proverb



“The best way to find out if you can trust somebody is to trust them.”
-Ernest Hemingway



“It ain’t what you don’t know that gets you into trouble.  It’s what you know for sure that just ain’t so.”
-Mark Twain



“It was the sittin’ and the waitin’ that made me all the money.”
-Jesse Livermore



“I will never quit. I persevere and thrive on adversity. My Nation expects me to be physically harder and mentally stronger than my enemies. If knocked down, I will get back up, every time. I will draw on every remaining ounce of strength to protect my teammates and accomplish our mission. I am never out of the fight.”
-US Navy SEALs



“Just because nobody complains doesn’t mean all parachutes are perfect.”
-Benny Hill



“You have a nasty habit of surviving.”
-Kamal Kahn



“Nothing is more obstinate than a fashionable consensus.”
-Margaret Thatcher



“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
-Warren Buffett



"A little knowledge is dangerous. So is a lot.”
-Albert Einstein



“Two extremes: to exclude reason, to admit reason only.”



“By trying often the monkey learns to jump from the tree.”
-African Proverb



“The key to change is to let go of fear.”
-Rosanne Cash



"A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty."
- Sir Winston Churchill



“The most incomprehensible thing about the world is that it is comprehensible.”
-Albert Einstein

investing ideas

Risk Managed Long Term Investing for Pros

Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.

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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