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Eye on Putin Power: "Putin accuses U.S. of orchestrating Georgian war"

SOCHI, Russia (CNN) -- "Russian Prime Minister Vladimir Putin has accused the United States of orchestrating the conflict in Georgia to benefit one of its presidential election candidates."

CNN's Matthew Chance has himself quite the story here intraday. Although CNBC and Bloomberg seem more interested in how many buildings Lehman can sell or how many buildings hurricane Gustav can knock down.

This is the global geopolitical canary in the coal mine. Pay attention to it.
KM


http://www.cnn.com/2008/WORLD/europe/08/28/russia.georgia.cold.war/index.html

Philippino Free Money Days Ending

Below, we have attached a 10 year cycle chart that overlays the Philippine stock market with their equivalent of a Fed funds rate. Sometimes one picture like this makes everything crystal clear. This is the Asian easy money policy picture that created today’s runaway Asian inflation.

Look at how Philippine stocks act when access to capital is cheap and flowing versus when it's tightening. That last melt up in stocks coincides directly with the last round of easy money overnight rate cuts.

This morning the central bank raised rates another 25 basis points in order to "tame inflation". Remember, inflation can be imported to a country whose currency is crashing. Inflation in the Philippines was recently reported at +13% y/y.

The titanic is turning here. If you have to be invested, wade into those waters of "emerging Asia" equities with extreme caution.
KM

Bristol Myers Squibb (BMY): We Bought It In the Hedgeye Portfolio Yesterday

On its lows yesterday morning, my Partner, Tom Tobin, thought BMY was oversold relative to the impact of the news (see his portal posting on it this morning).

This is one of these "Large Marge" big cap pharma names that fits within the construct of our Healthcare Sector and Global Macro views, and buying things when they are on sale is what we do.

Intraday here, "DealReporter" was cited by FT mergerarket today citing "industry sources following the situation" that BMY could offer as much as $70/share for IMCL. This is not edge; this has been a price that has been thrown around for some time now.

What has not been thrown around is that I think Carl Icahn is as incentivized as he will ever be to get his IMCL trade booked. For the levered activists facing potential liquidity problems, this is a time to sell what you can, not what you should.

We like the Bristol/Imclone combo. The sooner this deal gets done, even if it's for $70/share, the better for BMY.
KM

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Listen to Alibaba

In case you missed it, Alibaba.com, one of the world’s largest B2B marketplaces, issued a profit warning last night despite 158% profit growth in the quarter. The reason?

Per the CEO,

1) "The economic winter is making it difficult for some of our customers to conduct business and, as a result, we have seen a slowdown in the addition of Gold Supplier members (61% of revs), which may continue until next year.

2) “We see difficulties in four out of the 40 sectors we have: textile, metal, garment and construction services," said Mr Wei.

3) "It will be even worse in the second half."

I couldn’t have said it better myself. Margin expectations in apparel remain too high for the next 12 months.

Footwear Back-To-School Update

Clean inventories and higher price points more than offsetting flat unit sales for back-to-school. But mix shift will be the topic long after school begins. Still positive on FL and negative on SKX.
  • There’s no question that the athletic footwear industry is starting back-to-school in a better place this year versus last. As I noted on multiple occasions over the past few weeks, inventories are very clean, discounting is down, and margins are up for retailers across the board.
  • As a kicker we’re seeing a shift in mix towards higher-price point product, which is the part of this call that I think will sustain itself for at least the next 12 months.
  • Check out Exhibit #2, which shows the average price point by brand for back-to-school periods vs. non-bts for the past 2 years. Under Armour is the clear standout due to its trainer launch. But Puma, Adidas, Nike and Converse are all looking solid. Reebok can’t quite say the same. That’s because of its high reliance on classics, which are incrementally discounted in the market right now to clear out for fall.
BTS Starting Off Just Fine
This Will Be Driven More By Mix Shift Than YY Discounting Levels Over Next 12 Months

Lock The Barn Doors! The Karachi Crunch Continues

After getting hammered for a 6 day -18% down move, Pakistan's government decided to play their Keynesian cards again and stop trading!

No, this is not the Jim Cramer "stop trading" call... this is an old fashioned socialist government intervention. This is the 2nd time in 2008 that Pakistan has opted to plug trading curbs into their free falling stock market. Free market capitalism allows people to fail. They don't get it.
  • Next support for the Karachi 100 Index is 9,013.
    KM
chart courtesy of stockcharts.com

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