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September 15, 2010


Keep an eye on Skechers, which is now receiving some heat for producing a kids cartoon.  Unfortunately, the FCC doesn’t allow the use of children’s cartoons as vehicle to sell or promote products.  In other words, “Zevo-3” was looking a lot like a cartoon version of an infomercial.





- Best Buy noted that it expects to see promotional support increase over the back half of the year in an effort to spur demand in the TV category.  Management believes there is pent-up demand for the category, and vendor driven promotions may be key to reinvigorating sales growth.  Additionally, it was noted that home theater sales at the company’s Magnolia brand were improved, which could also be a leading indicator as prices drop on newer technologies.


- The future of the women’s business was a key topic of discussion for Under Armour yesterday. Highlighting the success of its partnership with Nordstrom, CEO Plank mentioned that it is in a testing phase at Bloomingdales and early indications are positive. Among the benefits of offering a more expansive assortment in women’s including more outerwear are the opportunities for distribution growth particularly at the higher-end, which is clearly underway.


- Despite concerns over a dilutive competitive environment in Texas over the last 12-18-months, Dick’s Sporting Goods confirmed that dynamics have indeed improved with the market now comping at a faster rate than the company on a consolidated basis.


- Fleet Feet, a 90 store chain of specialty running shops, reported a same store sales increase for the first half of the year of 11%.  Recall that the performance running category has been a key driver of both ASP’s and the strength in the athletic footwear sector.


- The ultimate UGG’s have arrived.  In a rare collaboration, the sheepskin bootmaker has teamed up with Jimmy Choo to offer a luxury version of the classic boot.  The boots which are studded and embroidered range in price from $595 to $795.  Expect to see these at Saks.





Ralph Lauren Takes Rugby International, Quietly - On Wednesday, the company opened its first Rugby boutique outside the United States: a 4,300-square-foot store in Tokyo that occupies a large corner of the sprawling Ralph Lauren flagship on Omotesando Ave.  The boutique, featuring mosaic floors and wood interiors, attracted a modest line of about 20 or so folks- some decked out in Ralph’s finest- before the doors swung open. Ralph Lauren feted the boutique with a party Tuesday night but the home office in New York turned down requests for photo previews and interviews to talk strategy. Rugby, a lower-priced brand than others in the Ralph Lauren stable, is moving into the Japanese market at a time when consumers are definitely trading down to fast fashion and diffusion collections. Hennes & Mauritz, Forever 21 and Topshop are all busy expanding in the country.  <wwd.com/business-news>

Hedgeye Retail’s Take:  Smart move to plant the seeds while the brand is still growing up.  Perhaps Abercrombie’s flagship opening in the same city gives Rugby a sneak peak at the Japanese consumer’s preference for all things preppy. 


Sears Holdings Launches UK Style by French Connection - Sears Holdings Corp. will launch UK Style by French Connection this spring, in a daring collaboration between two brands from different continents with little in common other than striving to lift their underperforming businesses. UK Style by French Connection will be sold exclusively at Sears stores starting in March for spring. It will offer contemporary clothing and accessories for women, men and children, and possibly eventually broaden into home goods and fragrance. The collection will be available on sears.com. LF USA’s Regatta division will source, develop and manufacture the collection. <wwd.com/retail-news>

Hedgeye Retail’s Take:  Yet another example of Sear’s playing catch up, this time with a brand that has dramatically reduced its U.S. presence over the past few years.  KSS, JCP, and TGT still have an edge here on fashion collaboration. 


Sears and Target Move up In m-Commerce Site Performance Index - Sears rose seven spots and Target four on the weekly Keynote Mobile Commerce Performance Index, bursting into the top five performers on the index of 15 m-commerce players. For the week beginning Sept. 6, Sears came in third with an index score of 756 out of 1,000, its m-commerce site home page loading on average in 6.47 seconds and loading successfully 99.33% of the time. Target came in fourth with a score of 751, its mobile home page loading in 4.96 seconds with a success rate of 98.94%. Walmart.com came in first with a score of 865, and Barnes and Noble came in second at 811. <internetretailer.com>

Hedgeye Retail’s Take:  While somewhat complex to build, we remind investors and the industry that “m-Commerce” is nothing more than e-commerce on a smaller screen.  There are great opportunities to use location based services to better target customers, however we are still a couple of years away from mass adoption of such technologies. 


Costco.com Crashes for 3 Hours During Holiday Sale - Costco.com, the e-commerce site for warehouse club retailer Costco Wholesale Corp., crashed and went offline for approximately three hours on Labor Day, Sept. 6. The outage occurred from about 11 a.m. to 2 p.m. Eastern Time, according to web monitoring service Gomez. Ginnie Roeglin, senior vice president of e-commerce at Costco, confirmed the crash to Internet Retailer but declined to disclose the cause or its impact on sales. Costco.com was running a Labor Day sale when the outage occurred. <internetretailer.com>

Hedgeye Retail’s Take:  Interesting to see such a surge in traffic for Costco, which is not normally a promotionally driven, high-low retailer.  We suspect this was a vendor supported promo that was clearly a great deal. 


Columbia Sportswear Joins Grassroots Outdoor Alliance - Columbia Sportswear Co. has been named a vendor partner by the Grassroots Outdoor Alliance. <sportsonesource.com>

Hedgeye Retail’s Take:  The partnership here highlights the need to remain close with the independent outdoor shop community, despite the dominance of chain stores.  The Grassroots Alliance is a trade organization made up of independent outdoor retailers. 


LIZ's Kate Spade Makes Some Management Changes, Launches Apparel, Jewelry, Handbags, and Fragrances - Craig Leavitt, co-president and chief operating officer, has been named chief executive officer, a new post. Deborah Lloyd, co-president and creative director, has been tapped as president and chief creative officer. Both will continue reporting to William L. McComb, ceo of Liz Claiborne, which has owned Kate Spade since 2006. Leavitt and Lloyd have worked in tandem since 2008 to improve both the Kate Spade product and retail experience in an effort to create a global lifestyle brand. Kate Spade has begun a global push, including a new joint venture in Japan with partner Sanei, with plans to open stores in Japan, China and Korea. Kate Spade has 39 freestanding units and 29 outlets in the U.S. In addition, Kate Spade has launched apparel, jewelry and a fragrance, Kate Spade Swirl, as well as evolving the handbag collection and the Jack Spade label. <wwd.com/business-news>

Hedgeye Retail’s Take:  One of the few highlights in the LIZ portfolio, Kate Spade has done surprisingly well evolving away from its core canvas handbag roots.   


FCC Asked to Block Skechers' New Cartoon Series - An advocacy group is asking the Federal Communications Commission to block a TV cartoon show starring characters first created to market Skechers footwear to children. The Boston-based Campaign for a Commercial Free Childhood targeted the series called "Zevo-3" that's scheduled to premiere Oct. 11 on Nicktoons. <sportsonesource.com>

Hedgeye Retail’s Take:  More negative PR for the footwear brand, which recently announced it was producing its own cartoon series.  Unfortunately, it’s essentially illegal to turn a cartoon into an infomercial, which is why the series is being called into question.  After all, why would SKX produce a cartoon if it wasn’t trying to sell kids shoes?


AAFA Urges Members Not to Respond to Trucking Survey - The American Apparel & Footwear Association is instructing its members not to respond directly to a survey by the trucking industry, arguing it requests proprietary information and could be used to justify massive rate hikes for apparel shippers. Instead, the AAFA wants member companies to send responses to it so it can produce its own study to counter a possible rate hike. <sportsonesource.com>

Hedgeye Retail’s Take:  Recall that the initial survey was requested in response to an effort to reclassify clothing under the Commodity Classifications Standards Board.  Essentially, any change in classification would increase trucking rates, which is why the AAFA is trying to protect the sharing of proprietary member information.


Apparel and Textile Imports Post 3rd Straight Month of Double Digit Increases in July - Combined shipments of textiles and apparel rose 23.2% in July to 5.2 bn square meter equivalents. Apparel imports rose 14.3%, while textile shipments increased 31.3%. The majority of the top 10 textile and apparel suppliers continued to increase shipments to the U.S. in July, but at a slower pace than in June. Import volume in July was the second highest monthly level since 2005; the June mark was the highest. <wwd.com/business-news>

Hedgeye Retail’s Take:  Nothing like easy compares against what was likely one of the worst periods for imports in the prior year.  Overall, despite the surge, inventories appear to be in good shape at retail.  Demand remains unchanged.


The World Of Fast Fashion - Fashion on demand is here, from sped-up deliveries at Burberry to businesses in which the consumer acts as buyer, backer and even the designer, and can get the products to her door within weeks if not days. Driven by the Internet, new forms of retail combine urgency with mobile commerce, social media, gaming and crowdsourcing. The growing power of the consumer is stirring the potential of a tug-of-war with the brands themselves as shoppers demand exactly what they want and how they want it — and they want it right away. The balance of power between retailers, shoppers and brands began to shift long ago, but now consumers are no longer content to steer the fashion vehicle — they want to own it. There are brands like Burberry, which are fully embracing the rush to immediacy. Burberry this season not only will live-stream its show but will enable customers to order select pieces that will be delivered directly to them within seven weeks. <wwd.com/retail-news>

Hedgeye Retail’s Take:  What is most amazing here is that the consumer is essentially getting what they want, when they want it.  Seems so simple, yet it has taken so long for technology to facilitate this high level of customer satisfaction.


Sri Lanka: Garment Exports Expand Into New Markets to Reach $5 bn - Sri Lanka’s garment industry targets to generate $5 billion business in five years despite recent losses due to the withdrawal of GSP Plus duty free status to the EU. According to the former Secretary General of the Joint Apparel Association M.P. Tuly Cooray, the value addition of the garment industry has grown from 30-35% to 60-65%. Before the suspension of GSP Plus Scheme, garment exports to the EU increased up to $1.6 billion last year from $1,025 million in 2005.  <fashionnetasia.com>

Hedgeye Retail’s Take:  Yet another non-Asian country that is looking to gain share as prices rise in the traditional manufacturing basin.  Political stability will be key to the government’s efforts to more than triple current garment exports.


UK Retailer Next Doesn't See Meltdown in Consumer Spending - Next chief executive Lord Simon Wolfson has issued a cautiously optimistic outlook on trading prospects, forecasting that there would be no double dip recession or “meltdown in consumer spending” at the retailer’s half-year results today. <drapersonline.com>

Hedgeye Retail’s Take:  It would be more interesting if we actually heard a CEO express that they believe a meltdown IS on the horizon.  Not the words we will ever hear from a CEO however.


Gilt Goes Local and Male - The flash sale site has started to roll out local deals in six cities, along with a Facebook sweepstakes. And in another move designed to boost sales, Gilt launches a site where men can learn about fashion, grooming, manners, food and drink. <internetretailer.com>

Hedgeye Retail’s Take:  All of a sudden Gilt has become an online mall of sorts, mixing off-price, editorial, and local (think Groupon) promotions into one.  This is what happens when availability of high profile fashion apparel dries up.




TODAY’S S&P 500 SET-UP - September 15, 2010

As we look at today’s set up for the S&P 500, the range is 21 points or -1.26% (1,107) downside and 0.62% (1,128) upside.  Equity futures are trading lower flat-to-fair value as recent momentum appears to have run out of steam.  Today's macro highlight includes NY Fed's Empire State Manufacturing Survey for September and August Industrial Production.  Production in the U.S. is estimated to have slowed in August, increasing 0.2% after a 1% in July as automakers scaled back following a surge in output last month.

  • Cohen (COHN) plans to acquire privately held investment firm JVB Financial Holdings LLC for $16.6m in cash and stock
  • Morgan Stanley (MS) was sued by China Development Industrial Bank for fraud to recover losses from an investment tied to residential mortgage-backed securities
  • Neurocrine Biosciences Inc. (NBIX) said a Phase 2 trial of a treatment for major depressive disorder showed no ease of symptoms in patients.
  • NextEra Energy (NEE) said it plans to sell $350m equity units at $50-each.
  • Sonic (SONC) said 4Q same-store system sales fell 6.4%
  • Steel Dynamics (STLD) forecast 3Q EPS 5c-10c vs est. 21c


  • One day: Dow (0.17%), S&P (0.07%), Nasdaq +0.18%, Russell 2000 (0.47%)
  • Month-to-date: Dow +5.11%, S&P +6.84%, Nasdaq +8.31%, Russell +7.83%;
  • Quarter-to-date: Dow +7.70%, S&P +8.77%, Nasdaq +8.56%, Russell +6.52%
  • Year-to-date: Dow +0.94%, S&P +0.54%, Nasdaq +0.91%, Russell +7.44%


  • ADVANCE/DECLINE LINE: -226 (-1812)
  • VOLUME: NYSE - 923.76 (-1.22%)  
  • SECTOR PERFORMANCE: Mixed performance - 4 sectors rose and 5 declined - the RECOVERY trade under-performed yesterday.
  • MARKET LEADING/LAGGING STOCKS YESTERDAY: JC Penney +7.43%, Best Buy +6.00% and Corning +4.76%/Cliffs Natural -6.47%, SLM Corp -4.96% and EK -3.99%
  • VIX: 21.56 +1.65% - First up day in the last 4 - YTD PERFORMANCE: (-0.55%)         
  • SPX PUT/CALL RATIO: 1.58 from 0.92 +72%.26


  • TED SPREAD: 15.31 -0.391 (-2.489%)
  •  3-MONTH T-BILL YIELD .15% unchanged
  • YIELD CURVE: 2.18 from 2.21


  • CRB: 280.13 +0.93%
  • Oil: 76.80 -0.51% 
  • COPPER: 346.85 -0.30%
  • GOLD: 1,269 +1.83% - Will 2010 make it 10 years of annual gains?


  • EURO: 1.3010 +1.16% - a two day 2.60% surge in the Euro
  • DOLLAR: 81.080 -1.02% - a two day 1.97% decline in the Buck



  • Markets: FTSE 100: -0.24%; DAX -0.36%; CAC 40 -0.45%
  • Markets are lower ahead of today's macro releases.
  • Strength in Auto, Retail and Insurance names offset by slight weakness across Oil & Gas, Travel and Technology sectors.
  • Astrazeneca fell after the FDA extended its review of the New Drug Application for its anti blood clotting drug ticagrelor
  • UK Jul ILO unemployment rate 7.8% vs cons 7.8%, Jobless claims +2.3K vs cons (3.0K)
  • Eurozone Aug CPI 1.6% y/y vs cons +1.6%


  • Markets: Nikkei +2.34%; Shanghai Composite (1.34%)
  • Most Asian markets ended mixed.
  • Japan reversed early losses when the Ministry of Finance confirmed that it intervened in the foreign exchange market after the dollar fell below ¥83.
  • China closed weaker following press reports suggesting that China may introduce new measures to cool the property market. Mining stocks across the region were boosted by a record gold price.
  • China's banking regulator may require the nation's "systemically important" banks to boost their capital adequacy ratios to as high as 15 percent by 2012.
Howard Penney
Managing Director


“But their intervention makes our acts to serve ever less merely the immediate claims of our instincts.”

-Albert Einstein


I started intervening in the Hedgeye Portfolio yesterday, making my first sales (long or short) since September 3rd.


We’re still long Gold (GLD) and we didn’t sell any of that 6% position in the Hedgeye Asset Allocation Model as we saw yesterday’s melt-up in the World’s Replacement Currency a direct function of the fear trade – the fear of US Congress being back in session. We remain short the US Dollar (UUP).


Today’s market headlines are going to be dominated by the bad kind of intervention – government intervention. Particularly when it comes to the Fiat Republics of Japan and America, you have professional politicians who fundamentally believe that this is the only way out. It’s sad to watch losing teams repeat their mistakes.


Japan is intervening in its currency market this morning (bearish for the Yen - we are short FXY) and America is going to host another Groupthink Conference in Washington, DC where Timmy Geithner leads the unaware in pointing fingers at the Chinese for not intervening.


On Japan’s intervention, I found an interesting quote from Geithner who believes “deeply” in the Monetary and Fiscal Policy Manipulation model of the United States of America:


“They’re working through some difficult problems… My view is they should be focusing like we are on how to make sure they’re reinforcing recovery in Japan and doing things that are going to help.”


God help us all.


I’ve ended a few of my morning missives with this thought over the course of the last few days and it’s worth repeating in order to explain why I started making sales yesterday. The biggest risk to NOT selling US Equities here is US Congress and the “economists” that lead their decision making (Geithner says he’s “not an economist” by the way, so we’ll give him a hall pass as he’s only responsible for advising the President on economic matters).


Back to taking matters into my own hands via the Hedgeye intervention strategy…


Here are the moves we made intraday in the Hedgeye Portfolio yesterday. As opposed to Washington’s broken lip-service model, we are big believers in the modern day transparency/accountability model. We think the biggest opportunity in finance is showing the world what it is exactly you do when you make risk management decisions and why. Opacity is dying on the political vines of perceived wisdom.


1.  09/14/2010 10:22 AM


We're looking forward to seeing what happens to the Yen when the Chinese start blowing out of their short term JGBs. Japanese Yen intervention imminent - thats what Fiat Republics like this do.


2.  09/14/2010 10:42 AM


I haven't made a sale (long or short) since September 3rd. It's time to book a gain and I'll let a Financial out the door first. Steiner remains bullish on CIT's intermediate term TREND.


3.  09/14/2010 12:49 PM


See Tom Tobin's bearish note on Zimmer today for details. The stock is up today but is broken from an intermediate term TREND perspective. Shorting green. KM


4.  09/14/2010 03:20 PM


Keeping a mean reversion TRADE a trade. We don't have to buy-and-hold cocoa. KM


These are just the headlines for research reports we put out on these positions. They are punchy because we like punching some of the hedgies out there whose business model is bullying the sell-side. Everyone knows the sell-side’s horse and buggy whip model is stale. This market needs new blood – and we’re happy to be hated by those we can beat.


On the same day that we bought Chinese equities (CAF) we also published a research note titled “Japan - The World's Easiest LayuP” that outlines why we were shorting the Japanese Yen as it approached 83 versus the US Dollar. Rather than listen to a revisionist sell-side bull tell you today is a “buying opportunity” in the Yen, please email  if you’d like the view of the interventionist firm that called this before the “risk on” day.


Our immediate term TRADE lines of support and resistance for the SP500 are now 1107 and 1128, respectively. That’s the first time I’ve issued a lower-high of immediate term TRADE resistance for the SP500 since September 3rd. That’s a marginally bearish signal and the SP500 not being able to eclipse 1144 on a closing basis to the upside is an explicitly bearish one.


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Intervention - FXY

Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.51%
  • SHORT SIGNALS 78.32%

VIDEO: China's Re-accelerating Growth

6:14am ET, September 14,2010


Hedgeye CEO and Bloomberg Television contributing editor Keith McCullough discusses China's re-accelerating growth and his decision to go long Chinese equities after a bearish outlook in Q1.







The chart below was extracted from a in-depth note dubbed "Chinese Growth: Sequential Slowdown Moderating?".  The note and additional charts in their entirety are available to Risk Manager subscribers in real-time.



VIDEO: China's Re-accelerating Growth - China New chart


INSIDE THE HEDGEYE NOTEBOOK: Sept. 14, 2010 - Notebook Image Hedgeye




Feedback on the last grind was good. Here it is again – global macro/risk management PRICE and DATA points in my notebook from the last 48 hours:
1.      Chinese economic data for august = re-acceleration in growth (IP and Retail Sales) + expansion of money supply to +19.2% (AUG) vs +17.6% (JUL)

2.      Chinese equities have been up for 3 straight days, confirming bullish TRADE and TREND lines of support in the Shanghai Composite

3.      Indian Equities powered to higher-highs again last night = bullish TRADE and TREND confirming the same in Hong Kong, Indonesia and Singapore

4.      European equities continue to flash more bullish than US Equities as does the Euro vs the US Dollar

5.      Petrodollar stock markets (Russia, Norway, UAE, etc.) are now trading as bullish from a TREND perspective as the price of oil is

6.      Oil is holding its TREND line breakout from last week with TREND line support = $75.77/barrel

7.      Gold continues to flash higher-lows and higher highs; there isn’t a bullish line of price momentum that’s been challenged as suport

8.      US Budget Deficit spending line dropped 100bps sequentially (month over month) to +9.4% y/y growth (AUG) vs +10.4% in July.

9.      Brazil buying US Dollars to the tune of +$18.6B (net) YTD vs $7.3B in all of last year

10.  China introducing a CDS market by year end with allegedly tight control parameters

11.  Turkey’s PM Erdogan wins an important vote (58% to 42%) giving him increasing power over secular courts and army

12.  Basel3 timing pushes out the blowup case for banks out on the duration curve (9 years is to comply is a long time)

13.  Boehner falls in line with Obama’s middle class tax cut idea; give and takes = more, not less, tax cutting

14.  Frank Quattrone is back (selling Go-Daddy) and reminding us that bankers are back from holidays doing M&A

15.  SP500 continues to flash immediate term TRADE bullish (support = 1107) with upside to its intermediate term TREND range (1129-1144)


1.      Chinese inflation (CPI) pushed higher sequentially (month over month) to +3.5% (AUG) vs +3.3% (JUL) and September looks higher to me too

2.      Japanese Equities (Nikkei225) continue to flash very negative divergences vs both rest of Asia and the Fiat Republic nations

3.      UK CPI (AUG) sticky at +3.1% y/y vs the same in July

4.      German ZEW (confidence) drops to a 19 month low (-4 vs +14 last month)

5.      Greek equities and bond yields continue to flash the nasty; a breakdown for the Athex Index below 1575 will be very bearish for worlds worst mkt YTD

6.      US Treasury yields are dancing on coals on the short end of the curve with immediate term TRADE line of support for 2s at 0.52%

7.      Back to a compression day today in Treasury Yield Spread (bearish leading indicator) with yield spread contracting 8bps day over day

8.      US Dollar continues to act like the dog of the Fiat Republic – down over 1% yesterday and down 13 of the last 16 weeks

In summary, this chaos theorist still sees more bullish than bearish PRICE and DATA in the immediate term. That’s why the Hedgeye has more longs than shorts (14 longs, 7 shorts) as of this morning’s open. That can, and will, change as PRICE and DATA does.

Keith R. McCullough
Chief Executive Officer

EARLY LOOK: Match Point




“I don’t have good luck in the match points.”
-Rafael Nadal


Shakespeare considered youth ambition’s ladder – I love that thought and I love watching winners play with confidence. If the younger players on my team don’t end up being better than me, it is I who has failed. Our congratulations to Spain’s Rafael Nadal for becoming the youngest player in the modern history of professional tennis to complete the Grand Slam.
The US stock market is all of a sudden starting to hit a few Grand Slams of its own. Yesterday the SP500 closed up for the 4th consecutive day and its 8th out of the last 9. At 1121, the SP500 has carried itself on the back of the Pain Trade (volume +25% day-over-day concentrated in 112 stocks) all the way back to the plus column for 2010 year-to-date.
To be clear, a YTD SP500 return of +0.5% isn’t even in the area code of challenging the 2010 global equity market leader-board (Sri Lanka leads with a +78% YTD gain, followed by Bangladesh and Latvia at +50% and +45% YTD, respectively), but it’s making the turn in the loser’s bracket that we call the Fiat Republic.

The structural impediment to long-term US economic growth isn’t very difficult to understand. It starts and ends with debt-financed-deficit spending that professional politicians call “stimulus.” We’ve beaten this Match Point into your inbox hard throughout the last few years. There is no such thing as luck when we unearth a Perceived Wisdom coming out of Washington, DC and take the other side. It’s called math.
The math in markets doesn’t lie; politicians do. As repetitive as that go-to baseline shot from the Hedgeye backhand is going to sound is as verbose as Paul Krugman is starting to sound trying to return it in bounds. There really is no refutation to the economic experience of the Fiat Republic of Japan – and the Big Government Spending fans of a former colony of “smart people” know it.
As a reminder, we have attached the most important global macro chart in Hedgeye’s current risk management slide deck this morning. This is the backhand that we want to see Krugman’s Kryptonite of piling-debt-upon-debt-upon-debt return. We call this chart “Crossing the Rubicon of Sovereign Debt” and overlay the growth of Japanese General Government Debt as a percentage of GDP with the Average Annual GDP growth of Japan by decade.
Here are the mathematical conclusions about growth in a losing country that saturates itself with debt:
1.      Japan Average y/y GDP growth: 1981-1989 = 4.6%

2.      Japan Average y/y GDP growth: 1990-1999 = 1.5%

3.      Japan Average y/y GDP growth: 2000-2009 = 0.8%

These last two decades have been pretty pathetic when you consider growth and innovation in this world like say, China and the Internet. In the moment however, how could Japanese bureaucrats being advised by Krugman in 1997 have known not to “PRINT LOTS OF MONEY”?
Our best answer to why is pretty straightforward – ambition’s ladder provided emerging global economies to take share from the world’s oldest and aging economy because it made itself most vulnerable to creative destruction. Capital chases yield – not zero growth, zero coupon, complacency.
Back to the Pain Trade that I mentioned earlier on but need to expand upon. When you read a missive like this, it’s pretty easy to get all beared up about America and its failed economic policy of printing moneys. That’s exactly the problem though. When something becomes this obvious, and it is, market participants tend to lean too far and too fast to the bearish side of the TRADE.
Since bear market bounces are usually more vicious than bull market ones, you need modern day risk management tools to defend against the machine like Nadals that are constantly going to grind you during every market minute of every market day. This isn’t to say managing money in modern days of an American Roman Republic that’s under siege is easy. This is just to say that this is the game that’s in front of you – so play it.
The Pain Trade is what’s carrying the US stock market higher, not some rah-rah speech from the Oracle of Government’s Got My Book. The America he built Berkshire out of didn’t have this debt. He has his own conflicts of interest. Don’t get upset about them – understand them, and take advantage of every market point you can get.
Understand the US stock market’s intermediate term bearish TREND has every opportunity to see smashing winners of bullish immediate term TRADEs. The TRADE (3 weeks or less) and the TREND (3 months or more) are two different Hedgeye durations and the real match points being made out there in the market every day have nothing to do with luck. They have everything to do with understanding Duration Mismatch.
Our intermediate term TREND line of resistance for the SP500 remains 1144, but a very convincing line of bullish immediate term TRADE support has asserted itself at 1085. Watch both of these lines very closely and play like a winner out there today.
Keith R. McCullough
Chief Executive Officer




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