MCD is expected to report February 2010 sales before market open on Monday, March 8th.  On a year-over-year basis, there should not be any significant calendar impact in the U.S. as February 2009 included the same number of weekend days, and total days, as February 2010.  However, February 2009 sales trends present easy compares because of the extra day in the prior February due to 2008 being a leap year.  As a result, there are easy comparisons across the board for MCD’s segments.  This is especially true in APMEA because of the Chinese New Year calendar shift.  I expect headline numbers to appear better than the underlying trends actually are.


As is customary, I wanted to provide my view on comparable sales ranges for each of MCD’s geographic segments as indicators of what I would rate as GOOD, NEUTRAL, or BAD results based significantly on 2-year average trends.



U.S. (facing an easy +2.8% compare which was negatively impacted by 400 bps by the extra day in February 2008 due to the leap year):


It is important to note that February marks the first full month with the breakfast dollar menu as MCD began national advertising on January 11th.  Easy comparisons in February will help to make this breakfast dollar menu look successful, but I have some concerns as I outlined on 2/24. 


Weather likely had an impact on trends in February as cited by CKR this morning relative to the sequentially weaker results at Hardee’s.


While any positive result might be perceived as encouraging in light of recent results, it would not necessarily be sufficient to result in acceleration in 2-year trends.


GOOD:  Roughly +2.5% or higher would be required to result in sequential growth in 2-year trends from January to February.  While MCD is accustomed to higher 2-year trends than the 2.4% seen in January, any pickup would be seen as a positive given the softening of trends over the past number of months.  While a +3% number would be well received, it would still not yield a 2-year average trend of 3% (a level usually surpassed by MCD’s U.S. business until recently). 


NEUTRAL: +1.5% to 2.5% implies 2-year average trends that are roughly in line with what we observed in January.  From a sentiment perspective, a print in this range could be viewed favorably in light of recent declines in comparable-store sales.  In fact, it would be the best U.S. comp since September’s +3.2%.   Appropriately, the compare for February is also the easiest since September.            


BAD: Below 1.5% would signal a deceleration in 2-year average trends from January, and would be nearing a new low for MCD 2-year average trends.  Again, this bad result would still be a significant improvement from what we have seen in recent months on a 1-year basis, but 2-year average trends must be considered to get a better read on underlying trends.



Europe (facing an easy -0.2% compare, 4.0% excluding the impact from lapping the 2008 leap year):


GOOD: Better than 13% would result in a sequential acceleration in 2-year average trends from January.  Softness in Germany continues to manifest itself in MCD’s Europe top-line results.  Our Hedgeye Macro research suggests that softness in Germany is likely to persist in the near-term.  For the last three reported months, 2-year average trends have been below “normal”, and it would take a +13% result to move away from 5% to 6% and into the 6% to 7% range. 


NEUTRAL: +11% to +13% would imply 2-year average trends that are roughly even with the last 3 months.  While these numbers are impressive on a 1-year basis relative to the +4.3% result in January, it is important to remember the easy -0.2% compare from February 2009 versus the +7.1% compare the company lapped in January.


BAD: Below 11% would signal a clear decline from January’s already unimpressive 2-year average trend of 5.7%.  Again a 10% print, for example, would be the highest comparable sales number MCD has released for Europe since October 2008, but I believe that any optimism would be misguided in this case.



APMEA (facing an easy +0.7% compare, or 4.1% excluding the impact from lapping the 2008 leap year):


It is important to remember that the February number will be helped by the calendar shift of the Chinese New Year from January last year to February this year.


GOOD: Better than 13% would result in a 2-year average trend of 7% or higher, which would be in line with the 7.3% 2-year trend seen in January.  Considering that November and December’s 2-year average trends were at 6.1% and 3.4%, respectively, a February print that would maintain 2-year average trends above 7% would be a positive result for MCD APMEA.


NEUTRAL: + 11% to 13% would imply that 2-year average trends slowed somewhat from January levels but still remain in the +6% to +7% range. 


BAD: Anything below 11% would be a bad result for MCD’s APMEA segment as it would point to a significant sequential decline from January’s 2-year average trends.   This range would also point to a sign of continued weakness in China.  The recent promotional activity being undertaken by MCD in China, which we wrote about on 2/26, began on February 24th. I expect some impact from this, but March will be affected more meaningfully. 

Greek Short Squeeze

On 2/23 we penned a note titled “Duration Mismatch: Greece” in which we said that the big moves “associated with a scenario in which Greece defaults on its sovereign debt are behind us, for now.”


While the data has changed since that note, it has changed in the direction we expected it to. Not only are we getting confirmation from trending lower-highs in Greek CDS and the 10-year Greek bond yields, and higher-lows in Greek stocks (see Athex Composite in chart below) but today’s decision by the government to approve spending cuts and revenue generating measures is bullish in relation to the “action” the EU was looking for ahead of PM Papandreou’s visit to Germany, France and the US beginning this Friday.


Today the Greek government announcement 4.8 Billion EUR of deficit cuts, including:


(1.)  ~2.4 Billion EUR in spending cuts

(2.)  2% gain in VAT to 21%

(3.)  Higher tax on alcohol and tobacco, in particular


The proposal above has been estimated to trim its current budget deficit of 12.7% of GDP by 2%, or about half of the 4% in cuts the government set for this year. 


While this action is a first step in Greece cleaning up its own “house”, we wouldn’t rule out the future intervention from states like Germany and France, or the larger European community, due to the significant bumps that remain in the road ahead, including some 20 Billion EUR of Greek bills and notes due in April and May of this year. 


While the Greek government has announced it will issue 5 Billion EUR of bonds “when conditions are right for Greece” to foot near-term obligations, demand for this issuance is still largely uncertain and serious volatility could be seen ahead.


Every macro risk has a time and a price. Beware of consensus leanings. Sometimes they are lagging indicators. AFTER a stiff 3-week short squeeze in European stock markets is the time to start asking yourself whether you should be making short sales, not AS the manic media clamors for attention.


Matthew Hedrick



Greek Short Squeeze - g1


Greek Short Squeeze - g2


Greek Short Squeeze - g3


He Who Sees No ISM?

This morning’s ISM Non-Manufacturing report delivers yet another blow to narrative fallacy of those forecasting a 2010 “double-dip” and the Fed remaining perpetually at zero.


In the chart below, depending whether you are a Washington fear-mongerer or not, you may (or may not) be surprised to note that this February ISM report was the best for the non-manufacturing side of the US economy since October of 2007.  At 53, this was also a big +250 basis point higher, sequentially, than the January’s reading of 50.5.


Now, we understand (but do not respect) that He Who Sees No Real-Time Data (Bernanke) may be willfully blind to this chart, GDP running +5.9%, and inflation running +3-5% year-over-year on his own conflicted CPI and PPI calculations… but that certainly doesn’t mean these economic facts cease to exist.


Last night, Kansas City Fed head, Thomas Hoenig joined fed hawk Charles Plosser in stating plainly that the Federal Reserve probably shouldn’t maintain language of “exceptionally low rates for an extended period of time” because, I assume, they see this economic data for what it is. Keeping interest rates at zero is now inflationary.


I’m personally rather annoyed to be underwriting the widest Piggy Banker Spread ever (the spread between short and long term rates is +282 bps today). Ever, by all mathematical counts, is a long time. The US government has chosen to pay levered up American lenders rather than disciplined savers.


Unfortunately I can now only hope that I get a rate of return on my hard earned American savings that’s more reflective of the economic data that’s on the tape. Hope, alas, is not an investment process. Neither is depending on Greenspan or Bernanke groupthink oriented forecasts.



Keith R. McCullough
Chief Executive Officer


He Who Sees No ISM? - ism


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Sports Apparel: End of Feb Callouts

Datapoints show that the month ended on a positive note, with Nike continuing to outperform meaningfully.


  • Recent trends continue to show improvement on the margin in dollar sales for each channel at the same time ASP has been drifting down
  • Sporting Goods retailers continue to buoy the industry, despite absolute sales growth slowing wk/wk
    • Very bullish for SSS in that space, which are released tomorrow
    • On the flip side, February was a very negative month for the Discount/Mass retailers channel (an incremental negative for TJX and ROST)
  • Outdoor Outerwear continues to showcase positive divergence vs. other categories, up 23% YTD y/y
    • As a percentage of the total sports apparel industry, it’s still well below normal levels, despite the wintry weather and record snowfall we’ve been seeing of late
  • NKE and VFC continue to outperform the industry
    • NKE, which is far and away the industry leader in Sports Apparel sales has been steadily gaining 300-400bp market share each week since December, and this week’s numbers are no different
    • VFC is another positive callout. While only 1/3 the share gain as Nike, it is equally as meaningful given the relative size of the brand and smaller market position. 
Sports Apparel: End of Feb Callouts - 1
Sports Apparel: End of Feb Callouts - 2
Sports Apparel: End of Feb Callouts - 3

R3: Adidas – Two-Legged Barstool


March 3, 2010


When you cut costs out of your business for three years it’s like cutting off 2 legs of a 4-leg barstool. You can balance for a little while, and may even have some luck being propped up by the dude next to you. But ultimately you’re gonna fall.





Adidas’ results today were lacking any and all inspiration for the company – but I’d caution that this is not a read through for the space. Aside from the revenue and EPS miss, we’re looking at Adidas once again cutting back on its disclosure on business segments to the Street. First they stopped reporting futures (once they got bad) back in Q4 08. Now we’re not getting specific brand detail, but rather channel detail (no more Adidas, Reebok vs. TMaG – now we get Wholesale, Retail, and Other). In addition, the company cut its dividend and issued uninspiring revenue guidance despite this being a World Cup year. Perhaps they’re sandbagging, but I suspect that they’re not. When you cut costs out of your business for three years it’s like cutting off 2 legs of a 4-leg barstool. You can balance for a little while, and may even have some luck being propped up by the dude next to you. But ultimately you’re gonna fall.


The SIGMA below for Adidas v. Puma v. Nike speaks volumes. It might be a bit confusing , but there are two major callouts for me.

  1. Look at the sheer variability in the line for Adidas vs. Nike. That means that Adidas’ inventories are much more volatile relative to sales, and the company’s margins are literally 3x more volatile than Nike’s.
  2. Check out the 4-quarter run for Adidas. They’ve done a fine job in cutting inventories, but after 4 quarters, they can’t cut inventories to the same magnitude, and in order to maintain such a favorable spread they need real organic consumer demand. Yes, they actually need to sell stuff.


The bottom line is that we’re looking at peak free cash flow margins, and the widest gap in FCF margin and EBIT margins in over 5 years. If you’re the kind of investor that actually cares about cash flow, you might want to stay away.


R3: Adidas – Two-Legged Barstool - ADI PUMA NIKE SIGMA




  • With both PVH and WRC trading essentially flat on the day, it appears that the WWD story suggesting PVH could be a buyer of Tommy Hilfiger is being shrugged off. Clearly a Hilfiger deal would put a wrinkle in the longstanding courtship between PVH and WRC, although this is Banker Bonanza time. Anything is possible, although in this case the market is clearly sending a signal on current odds. 
  • Staples management continues to be cautious on economic recovery, despite delivering its first positive comp in North America retail in 10 quarters and it’s first positive sales growth in 6 quarters for Business Delivery. With modest topline expectations in 2010, management is banking on expense leverage and operational improvements. For example, its European warehouse network is undergoing consolidation, down from 37 facilities to about half as many. 
  • Despite a general belief that winter weather and perpetual snowstorms are good for sales of seasonal sporting goods, Big Five noted that difficult comparisons in most of its markets made for tough sales results. As such, sales of apparel were down mid single digits in 4Q. Since the quarter ended however, same store sales have picked up notably, led by improved sales of core winter product. The weather aided sales are now tracking up mid single digit, after a flat performance in 4Q. Footwear and hard goods were standouts over the holiday period. 




Target Testing In-House New Payment Card Strategy - Target has decided that its in-house payment cards are a priority, so it's trialing a program in Kansas City that offers customers who use the card "5 percent off on every item, every transaction, everyday," Target CFO Doug Scovanner told analysts in a Tuesday (Feb. 23) conference call discussing the chain's earnings. The card incentive is one of two payment trials Target is running, Scovanner said, adding that the tests "could shape the future of this business segment. In one test, we're exploring the idea of returning to issuing cards solely for use in our stores. In another, we're testing a totally different reward structure in two markets, offering guests who use our card in Kansas City, for example, 5 percent off on every item, every transaction, everyday." The results thus far? "Sharply higher penetration" and "sharply higher credit quality of the guests asking for cards, sharply higher pace of guests asking for the cards. The whole question in Kansas City is whether all of those benefits are sufficient to (justify) the incremental markdowns." There's nothing surprising in those results. We're talking about an installed base, so these are already customers you've won. They're already in the store, and they have chosen products based on the prices marked on the shelf. At this point, why not use the store card? Incentives like a one-time $50 store credit deliver a very short-term boost and then the numbers on those cards plummet.   <>


Simon Objects to GGP's Bid for Extension - The clash of the real estate investment trust titans continues. Simon Property Group Inc. Tuesday filed documents in Manhattan bankruptcy court in support of the unsecured creditors’ committee’s objection to General Growth Properties Inc.’s request for an extension to its period of exclusivity to file a plan of reorganization. A hearing on the request is expected to be held in Manhattan today. An extension would be the second granted by the judge and would give GGP more time to file its own plan of reorganization and obtain the requisite votes from the various creditor classes. GGP filed for bankruptcy protection in April. Simon on Feb. 8 made a bid for GGP valued at $10 billion. GGP, which Simon said in court papers had rebuffed attempts at negotiation dating back to August, fired back with its own announcement on Feb. 24 that it and Brookfield Asset Management had agreed to a recapitalization of GGP that would split the troubled mall operator into two parts. Simon said in court documents that the GGP proposal with Brookfield is “markedly inferior” to its plan. One bone of contention is that Simon’s offer is “firm and fully financed,” whereas the GGP plan has a contingency requiring that up to $5.8 billion be raised on top of the $2.63 billion contributed by Brookfield, among other differences.  <>


Wal-Mart to Pay $12M in Gender Suit Settlement - Wal-Mart Stores Inc. will pay close to $12 million to settle a lawsuit that accused it of systematically denying jobs to women at a Kentucky distribution center. The Equal Employment Opportunity Commission filed the class action suit in 2001 in U.S. District Court in London, Ky. The federal agency alleged that between 1998 and 2005, the retailer hired male applicants for entry-level jobs at its warehouse there while ignoring equally qualified female candidates. According to the EEOC, Wal-Mart officials told interviewees that such order-filling positions were not suitable for women, a violation of the 1964 Civil Rights Act. Wal-Mart signed off on an order settling the case on Monday. Under the settlement, the company will pay $11.7 million in back wages and compensatory damages. The retailer also agreed to place female class members in its first 50 available order-filler jobs, place a female class member in every second job for the subsequent 50 openings and then hire one class member for every third open position. The company will also put up $250,000 toward the cost of a claims administrator who will oversee the settlement.  <>


Columbia Sportswear Launches m-Commerce Site - Columbia Sportswear Company said it launched, a new mobile portal to designed to help consumers learn about Columbia's outdoor products, experience the brand, or shop -- using a mobile device. "The launch of Columbia's mobile portal is another way Columbia is bringing innovation to outdoor consumers," said Paul Zaengle, senior director, Ecommerce, Columbia Sportswear Company. "The use of mobile devices to access the Internet is growing dramatically and branded websites are the No. 1 way that consumers research products. We are thrilled to offer a rich, mobile experience for consumers to access our brand, whether they're shopping at one of our retail partner's stores, at our company-owned stores, at home or on the go." The mobile portal -- accessible at -- is a small-screen version of the site that works on nearly all web-enabled phones and includes the following features:

  •  Store locator - find a store near you that carries Columbia
  • Product assortment - a wide assortment of Columbia product, searchable  and categorized for easy navigation
  • Product ratings & reviews - hear what the community has to say about Columbia products
  • Shopping - browse and buy Columbia product from anywhere, anytime



Footwear Etc. boosts sales by using site search data to personalize e-mails - Consumers today receive myriad marketing messages in their e-mail inboxes, which poses a challenge for e-retailers: how to stand out in the crowd. The key, marketing experts say, is relevance. Make an e-mail message as relevant to the individual consumer as possible and he is more likely to click through to the e-commerce site. In the quest for relevance, some merchants are trying innovative new techniques. A major area of innovation is tying e-mail to other systems, such as site search and order management, to make e-mails more personalized and valuable for the customer. For instance, many retailers send e-mails promoting popular products. But Footwear Etc. has found a way to select products that are almost certainly of interest to the individual consumer receiving the e-mail. The retailer’s site search vendor, SLI Systems Inc., created an automated system that populates e-mails with items that the individual consumer recently searched for as well as related items, such as shoes from the same brand or style. <>


H&M Board Proposes 2:1 Stock Split - The board of Hennes & Mauritz AB will propose a two-for-one stock split at its annual general meeting on April 29, whereby each of its existing shares will be divided into two new shares in a move designed to make it more appealing to investors. Stock splits traditionally occur when a company’s share price has been steadily rising. Shares in H&M are up 41 percent since the beginning of the year on the Swedish stock exchange, and were up 0.3 percent at 440.20 Swedish krona, or $61.18 at current exchange rates, in morning trading. The move would increase the number of A-shares in the company from   97,200,000 to 194,400,000 A-shares, and the number of B-shares from 730,336,000 to 1,460,672,000, the company said in a statement. The board said that pending approval from the general meeting, the split would take effect between May 20 and June 18. <>


Uniqlo's Feb. Comps Advance 1.8% - Fast Retailing Co. Ltd. said Tuesday that Uniqlo’s same-store sale rose 1.8 percent in February. The Japanese retailer said the successful launch of spring items buoyed sales growth. Uniqlo's same-store sales slid 7.2 percent in January on depleted stocks of popular fall and winter items. The monthly sales data excludes Uniqlo’s international operations. Uniqlo currently operates a network of 773 stores across Japan, plus an increasing number of international outlets in locations such as New York, London, Paris and Singapore.  <>


EU and Vietnam to Enter Free Trade Talks - The European Union and Vietnam will launch bilateral talks for a free trade pact. The European Commission Directorate General for Trade said Tuesday the countries will initiate formal negotiations and establish a framework for the talks, a move that “reflects the deepening trade relations between the EU and Vietnam.” Bilateral trade between the EU and Vietnam was almost 12 billion euros, or $16.3 billion, in 2008, according to the European Commission. Trade between the EU and Vietnam increased 12 percent annually between 2004 and 2008. Vietnam is the EU’s fifth-largest trading partner. Vietnam was the first stop of new EU Trade Commissioner Karel De Gucht on a trip to Asia this week. Next he will visit Singapore and India. The EU previously said it also will be launching negotiations for a free trade agreement with Singapore. The Obama administration has identified Asia-Pacific as a high-priority area in its trade agenda and is set to begin formal negotiations to join the Trans-Pacific Partnership, which would include both Vietnam and Singapore, later this month. The U.S. has a free trade agreement with Singapore. <>


Study: Tax Refund Spending Stays Practical - Taxpayers receiving refunds will focus on using the money to pay down debt or save, a National Retail Federation survey disclosed Tuesday. There will be a slight increase in those who plan to use the cash to make major purchases. But the public’s spending mood is likely to remain restrained after the government checks are spent, said Phil Rist, executive vice president of strategic initiatives at BIGresearch, which polled 8,560 consumers, Feb. 2 to 9, for NRF’s 2010 Tax Returns Consumer Intentions and Actions report. “We’re not back at the impulse buying stage yet,” Rist said. “People will still be approaching spending with practicality. That practicality is going to be with us for a while.” Among those polled about their tax refunds, 40 percent will save them; 29 percent will devote them to everyday expenses, and 44 percent will pay down debt. Last year, 48 percent looked to pay down debt with their refunds. In addition, 12.5 percent will treat themselves to a major purchase, up from 11 percent last year. Some people may plan multiple uses for the found money, like paying down debt and saving a part of it.  <

Bewildered by The Present

“We’ve left our future largely in the hands of people whose single greatest characteristic is that they are bewildered by the present.”

-Joshua Cooper Ramo


I’m in the midst of reading Cooper Ramo’s, “The Age of The Unthinkable.” I’m halfway done, but ready to add it to the required reading list for anyone looking for an alternative solution to the Glaring Groupthink we have been witnessing on Wall Street and in Washington. We need our own alternative to what they try fear-mongering us into believing is the “alternative.”


While the Olympics inspired us to live with passion and pride, the challenge at hand for Americans will be to keep that fire of entrepreneurial spirit in our bellies. CNBC’s live Olympic coverage has been replaced with the backward looking anchors who didn’t see much of the crashes or the recoveries coming to begin with.


“Being bewildered by the present” is a great way to summarize what you think you are seeing in today’s financial and political leadership. Despite the SP500 moving back to positive for the year-to-date yesterday, we are waking up to another horrendous weekly consumer confidence reading of minus -49 from the ABC/Washington Post report this morning.


Politicians and reactive market strategists alike wake up Selling Fear. When I listen to some of these people and do a quick You Tube study of what they were saying at the levered-up highs of 2007 and the Great Depressionista lows of early 2009, I don’t blame them. They should fear whatever it is that gives birth to their bewilderment. These people don’t have a proactive analytical process. They never did.


So let’s lock arms and stop complaining about this. Last night veteran journalist Charlie Reese asked Americans to forward a well documented report card on our Congress titled “545 People.” While complaining is becoming consensus, it was one of the better vents I have read in a while.


Let’s stop letting those with Perceived Wisdom tell us what to think. In the spirit of Cooper Ramo’s conclusion – in ‘The Age of the Unthinkable’, it’s time to think for ourselves.


Now whether you sold the hope associated with the SP500 making its YTD high on January 19th (1150) or bought the Fashionable Fears associated with the February 8th YTD closing low (1057), you get the point. Let’s keep using those opinions who are “bewildered by the present” to our advantage. That’s a capitalism I can believe in.


Since the first week of February Freakout Lows, here’s what’s bewildered the group-thinkers:

  1. SP500 closed up for the 3rd straight day yesterday, taking it to its highest-high since January 21st = +5.8% return since 2/8
  2. Russell 2000 closing at 648 last night made the rally in small caps since February 8th = +10.6% return
  3. Chinese stocks are up +5.6% since February 2nd
  4. Greece’s stock market is up +11.3% since its February 8th low
  5. Greece’s credit default swaps (CDS) have dropped -26% since February 4th (from 428 at the peak of fear to 315 today)
  6. VIX (Volatility Index) is down -28% since February 8th

Now, I could go on and on here, but you get the point. I am not waking up this morning trying to “go after” people. To the contrary, my wife and I are expecting our 2nd child in the coming days and I am simply trying to do my part in making this America a better place.


I, like a lot of people now, am realizing that I have my own brain. I am not the problem. To the contrary, albeit I am one very small part of 300 million, I am part of the solution.


That’s right. This is exactly Charlie Reese’s point. It’s the same point that rings in the ears of these nasty American Consumer confidence readings. And I didn’t need to go to Yale to figure out the math. Collectively, 300 million Americans are definitely smarter than the 545 people running this place.


It’s time we rid ourselves of those who are bewildered by the present that they created. It’s time for America to take this as a tremendous opportunity to evolve. It’s time I stop this rant and get on with my day.


Before I do that, I’ll leave you with another thought from one of 300 million people out there who is thinking:


“Einstein’s theory of relativity showed that Newton’s laws had to be modified for object moving at higher speed; the same might be said of our international system. The old laws of power, confronted with a faster-moving and more intricately ordered system, are now in need of modification.”


And remember, that bewildered look on Hank Paulson’s face isn’t Newton’s…


At 1122, the SP500 is overbought. Please don’t chase the group-thinkers and buy them up here. They’ll give you plenty of opportunity to buy them lower. I have immediate term support down at 1107.


Best of luck out there today and God Bless America,





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.


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.



IWM – iShares Russell 2000With the Russell 2000 finally overbought from an immediate term TRADE perspective on 3/1/10 and added to it on 3/2; we got the entry price that the risk manager makes a sale on strength.


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 Staples Another capitulation squeeze is in full motion for the short sellers of everything "consumer". Shorting green as inflation starts to creep into the system again.


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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