While Genting’s Q3 was a disappointment, Singapore is off to a roof blowing start, even eclipsing Macau in some metrics.



Genting Singapore’s disappointing quarter notwithstanding, the overall market rose handily in Q3 as did the important productivity metrics.  Net gaming revenue increased from S$983 million in Q2 to S$1,164 million in Q3. 


As can be seen in the following charts, win per slot, revenue per VIP table, and revenue per Mass table all increased in Q3.  Not surprisingly, win per slot is much higher in Singapore than in Macau where mainland Chinese are not as enamored with machines as southeastern Asians are.  Singapore is pretty close to Macau in terms of Mass revenue per table but overtook Macau in VIP revenue per day in Q3.  No doubt, the favorable tax rates on Singapore VIP has been a boost.


In terms of Singapore market share, with a fully quarter under its belt, Marina Bay Sands (LVS) has moved ahead of Genting’s Resorts World.  As can be seen in the last chart, the market share war is close on all of the important metrics, although MBS is winning each battle.  We expect MBS to continue to grow its market share.










Out With The Rhetoric And In With The Facts On The Budget - Replay Podcast

On Wednesday afternoon, we held a conference call with Special Guest Peter Orszag, former Director of the OMB under President Barack Obama. On the call we analyzed in great detail the midterm elections results’ potential impact on fiscal and monetary policy in the United States, and the associated investment implications.


Our discussion included a look into key questions such as: 

  • What, if anything, can the government do to quickly narrow the deficit from both a revenue and expenditure perspective?
  • What will change from a budget and fiscal perspective with a change in the parties in Congress?
  • What do we need to do to create a more effective relationship between government and business?
  • How will ObamaCare get repealed, and what is its impact on business investment and healthcare costs as it currently stands?
  • General thoughts on QE and whether we should be pursuing it as monetary policy. 

With the midterm elections now in the rearview mirror highlighted by a dramatic 65+ seat gain in the House by the Republicans, what's next for fiscal and monetary policy?  Is it possible for Republicans to implement a dramatic shift in the fiscal direction of the country?


To hear an insider’s take on the above questions, copy & paste this link into the URL of your browser:


Best regards,


The Hedgeye Macro Team


TODAY’S S&P 500 SET-UP - November 12, 2010

As we look at today’s set up for the S&P 500, the range is 27 points or -0.29% downside to 1210 and 1.93% upside to 1237. 

  • California Pizza Kitchen (CPKI) forecast 4Q adj. EPS 5c-7c vs est. 15c
  • Caribou Coffee (CBOU) reported 3Q EPS 8c vs est. 5c (2 ests)
  • Cumberland Pharmaceuticals (CPIX) reported 3Q EPS 5c vs est. 1c
  • Dynavox (DVOX) cuts FY2011 adj EPS forecast to 21c-27c from 56c-62c, vs est. 47c
  • Essex Rental (ESSX) buys Coast Crane for $80m; sees deal adding to earnings, 2011 FCF
  • Finisar (FNSR) sees 2Q adj. EPS 41c-43c vs est. 36c
  • Jefferies (JEF) agrees to sell some ops to Bank of New York subsidiary Pershing; sees small gain on sale
  • Matthews International (MATW) reported 4Q adj. EPS 66c vs est. 64c (3 analysts)
  • Microsemi (MSCC) sees 1Q EPS 36c-39c vs est. 37c
  • Nvidia (NVDA) sees 4Q rev. up 3%-5%, implies $869.2m-$886.1m, vs est. $863.9m
  • Thomas & Betts Corp. (TNB US) says it will sell its Communications Products Business to Belden for $78m in cash
  • Walt Disney (DIS US) reported 4Q adj. EPS 45c vs est. 47c, sees 2011 capex increasing by $1b


  • One day: Dow (0.65%), S&P (0.42%), Nasdaq (0.90%), Russell 2000 (0.45%)
  • Month-to-date: Dow +1.48%, S&P +2.56%, Nasdaq +1.92%, Russell +4.01%.
  • Quarter-to-date: Dow +4.59%, S&P +6.34%, Nasdaq +7.76%, Russell +8.2%.
  • Year-to-date: Dow +8.20%, S&P +8.83%, Nasdaq +12.62%, Russell +16.97%
  • Sector Performance: Tech (1.54%), Financials (0.98%), Industrials (0.56%), Consumer Disc (0.14%), Utilities (0.06%), Consumer Spls (0.10%), Healthcare +0.29%, Materials +1.03%, Energy +1.10%
  • MARKET LEADING/LAGGING STOCKS YESTERDAY: Gamestop +4.77%, H&R Block +4.40% and Halliburton +4.19%/CISCO -16.03%, JABIL -4.64% and Linear -4.47%.


  • ADVANCE/DECLINE LINE: 869 (-1566)  
  • VOLUME: NYSE - 949.51 (-15.00%)
  • VIX: 18.64 +0.92% - YTD PERFORMANCE: (-14.81%) - BEARISH TREND
  • SPX PUT/CALL RATIO: 1.64 from 1.61 +2.06%  


  • TED SPREAD: 16.49 0.406 (2.522%)
  • 3-MONTH T-BILL YIELD: 0.13%
  • YIELD CURVE: 2.21 from 2.21


  • CRB: 314.85 -0.71% -
  • Oil: 87.81 flat - BULLISH
  • COPPER: 402.95 +1.33% - BULLISH
  • GOLD: 1,405.75 +075% - BULLISH


  • EURO: 1.3654 -0.62% - BEARISH - Down 3.84% in the last 4 days
  • DOLLAR: 78.217 +0.75%  - BULLISH - Up 3.05% in the last 4 days



European markets:

  • FTSE 100: (0.84%); DAX: (0.61%); CAC 40: (1.81%)
  • European markets fell from the open before paring losses.
  • The decline is lead by lingering concerns over the Irish financial crisis and fears China may tighten policy weighed.
  • Regional economic data provided little support.
  • The G20 agreed to move towards market-determined exchange rates and shun competitive devaluation.
  • Peripheral debt spreads were mixed as worries lingered and ahead of supply in Italy.
  • EU statement that new rules concerning bond writedowns would only apply to future issues and German Chancellors comments that EU is ready to deal with any scenario in the Irish financial crisis provided support.
  • All sectors apart from travel & leisure trade lower led by oil & gas and mining sectors down over (2.5%).
  • France Q3 preliminary GDP +0.4% q/q vs consensus +0.5%
  • Germany Q3 preliminary GDP +0.7% q/q vs consensus +0.7%, +3.9% y/y vs consensus +3.7%

Asian markets:

  • Nikkei (1.39%); Hang Seng (1.93%); Shanghai Composite (5.16%)
  • Asian markets followed Wall Street down today, as the region waits for China to raise interest rates.
  • China dropped more than 5% on tightening fears. Property stocks went down on a report that the government is limiting real-estate investment by foreign companies.
  • Renewed worries about European sovereign debt also dampened the mood.
  • Energy stocks declined as oil prices fell.
  • South Korea retreated to flat after earlier being the only market to rise, rebounding from yesterday’s almost-3% fall that was said to be due to a single trade by Deutsche Bank in the last minute of trade on options expiry.
  • National Australia Bank fell 4% on becoming the third major bank to raise interest rates by more than the 25 bp that the country did in its most recent hike; Westpac, which finished flat, made it four of four later in the day.
  • Hi-tech shares fell in Japan on declines in US peers, and exporters went down on concerns about global growth rates. 

Howard Penney
Managing Director

Attention Students...

Get The Macro Show and the Early Look now for only $29.95/month – a savings of 57% – with the Hedgeye Student Discount! In addition to those daily macro insights, you'll receive exclusive content tailor-made to augment what you learn in the classroom. Must be a current college or university student to qualify.

On the Road

"Behind us lay the whole of America and everything Dean and I had previously known about life, and life on the road. We had finally found the magic land at the end of the road and we never dreamed the extent of the magic."

-Jack Kerouac, On the Road


Jean-Louis Kerouac, or Jack as he was more popularly known, was the leader of the beat generation and is one of the most well known American novelists of the last half decade.  I recently took a break from my weekend readings of the Economist, Barron’s, Grant Interest Rate Observer, and other similar publications that make my girlfriend go to sleep, to reread Kerouac’s classic, On the Road.


I think it is fair to say that most type “A” investor types operate in stark contrast to the beat generation, and in particular to the writing style of Mr. Kerouac.  In 1950, Kerouac outlined The Essentials of Spontaneous Prose, which was an overview of his style of writing - a style which emphasized the unplanned spewing forth of ideas, emotions, experiences and so forth.


Our CEO Keith McCullough wrote his own book, which came out earlier this year, titled, Diary of a Hedge Fund Manager.   Far from being the spontaneous prose of a beat, the book is a well thought-out overview of the last decade of Keith’s journey in the world of Hedge Funds.  As one reviewer wrote:


“In telling his story, McCullough may end up inspiring a whole new generation of Wall Street achievers and innovators. He may also succeed in tipping a few sacred cows and instilling new paradigms for investing before all is said and done.”


Admittedly, I may be a little biased as I appear in the book via my nickname Jonesy a few times, but I would recommend you consider it as a stocking stuffer in the upcoming holiday season for that emerging fund manager in your family. ( )


Coincident to reading Kerouac’s book, I was literally on the road this week.  I flew out to Colorado Springs to participate in a bi-annual forum with a subscriber of ours, Huntley Thatcher Ellsworth Advisors ( Aside from being very innovative in the ETF field, twice a year the folks at HTE get up in front of their clients, put on the accountability pants, and talk about what they got right, what they got wrong, and what’s next.  At the forum, I gave a presentation titled, “Should U.S. Debt Be Rated Junk Status?” and then participated in Q&A. An interesting question that came up a number of times from the audience was: should we own gold?


As we think about gold, it is pretty simple.  If the dollar continues to get debased, gold will go higher.  So longer term, it is likely an asset you want to own if you believe the dollar is going lower.  That fact is, if there weren’t monetary value in gold stock, the U.S. Federal Reserve wouldn’t be sitting on over 8,000 tonnes of gold and not selling it.  In the short term, we aren’t long gold and have highlighted a key reason in the chart of the day below, which shows the dramatic increase in the price of gold over the past few months juxtaposed against a recent front page New York Times article, “In Anxious Times, Investors Seek Cover in Gold.” If newspaper and magazine covers aren’t the best contrarian indicators, they are close. 


Another topic we discussed was the implications of Quantitative Easing, the monetary policy more popularly known at Hedgeye as Quantitative Guessing.  Our view is that QE will lead to inflation, without the commensurate pickup in economic activity. While we can debate whether we are seeing inflation in the U.S., globally we are seeing it.  In fact, yesterday Chinese CPI accelerated dramatically.  As Darius Dale wrote to our subscribers yesterday:


“Chinese October inflation numbers came in white hot this morning.  CPI accelerated to a 25-month high of 4.4% Y/Y and PPI also quickened substantially to 5% Y/Y.”


Chinese inflation will lead to one thing, Chinese tightening. If you don’t think that has global growth implications, then you haven’t turned on your Bloomberg terminal yet this morning. In the anticipation of tightening, Chinese equities are down more than 5% and the commodity complex is getting taken behind the barn and shot. Copper is down 2%. Silver is down 2%. Cotton is down 3.6%. Sugar is down 3.4%. It seems we may not have to guess as to the implications of Quantitative Guessing much longer.


My last road trip to Colorado Springs was about 15-years ago when Keith and I were members of the Yale Hockey team.  (Keith was a little quicker and I had a little more hair back then.)  We were playing Air Force in a two game series.  As I recall, Keith was suspended for the weekend and we were swept by Air Force. (Keith would likely suggest there was something to that correlation.)  Ironically, the Yale hockey team is back in Colorado Springs this weekend taking on Air Force and Colorado College.  Much has changed in the last 15-years, including the fact that Yale is now ranked 3rd in the country.  Let’s hope the Bulldogs find the “magic land at the end of the road” this weekend.


Keep your head up and stick on the ice,


Daryl G. Jones

Managing Director


On the Road - 1


The Macau Metro Monitor, November 12th, 2010



The Macau Theme Park and Resort Ltd, led by Angela Leong On Kei, Stanley Ho Hung Sun's fourth wife and local businesswoman,  will build a MOP10.4BN Cotai theme park. Pending approval from the Land, Public Works and Transport Bureau, the resort project will consist of 3 phases, each taking around 2-3 years to complete.  The entire family resort will consist of one 5-star, four 4-star and one 3-star hotels with over 6,000 guest rooms, shopping malls, convention facilities, an indoor beach and wave pool, amusement rides, a 4D theatre, an equestrian centre, a horse carriage trail, and a water sports performance centre.


7,500 construction jobs are expected and once the theme park becomes fully operational, about 9,000 employment opportunities will be added to the job market.  Director Angela Leong disclosed that the project is for now only financed by Industrial and Commercial Bank of China (ICBC) and to date MOP 1BN has already been secured.  Of the MOP 10.4BN total investment, MOP 9.4BN is for the hotel development and MOP 1BN is for the theme park. The amount will be divided into MOP 4.4BN for the first phase construction, and then MOP 3BN each for the second and third phases.


CPI rose 4.4% YoY, beating estimates of 4%.  This has led to speculation of further tightening measures by the Chinese central bank.



According to the Securities Times, China plans to limit foreigners from investing in its real estate market.  The Ministry of Housing and Urban-Rural Development and the State Administration of Foreign Exchange have issued a notice to outline the rules, which will only allow individuals to purchase one housing unit for their personal use.  Foreign companies can only acquire non-residential office facilities in their registered cities, the newspaper said.

Chinese Inflation Data Confirms What We Should Already Know: QE2 Will Slow Global Growth

Conclusion: The latest Chinese economic data suggest China may continue with its latest round of tightening measures, as inflation and speculation continue to be a concern. Further, we are starting to see confirmation that QE2 will incrementally slow global growth.


Position: Long Chinese Yuan (CYB); Long the U.S. Dollar (UUP); Short U.S. Equities (SPY); Short Emerging Market Equities (FFD)


Chinese October inflation data came in hot this morning. CPI accelerated to a 25-month high of +4.4% YoY and PPI also quickened substantially to +5% YoY. In line with our call since late-August, we’re seeing more confirmation of accelerating inflation globally as a result of the Fed’s weak-dollar policy (QE2). Moreover, we’re seeing central bankers across the globe lash out against Quantitative Guessing, and judging by this morning’s data release, it’s no surprise that China has been the leader in anti-QE rhetoric of late.


Chinese Inflation Data Confirms What We Should Already Know: QE2 Will Slow Global Growth - 1


While economists could spend hours debating whether China’s “artificial devaluing” of the yuan is perpetuating inflation within its borders, the real truth that matters to market practitioners is that inflation is accelerating globally, across a spectrum of currency policies. Don’t take our word for it, however; pull up a chart of Brazilian, Indian, or Korean CPI (just to name a few countries).


Turning back to China specifically, we are inclined to suspect further tightening may be on the horizon. China has been varied in its efforts to combat inflation and speculation YTD, including raising bank reserve requirements (as recently as yesterday) , restricting home loans, forcing banks to hold more FX, and raising interest rates (10/19). Despite these measures, we feel China may be running out of room for further “cuteness” and that additional interest rate hikes are on the way.


Looking at real 1-year deposit rates, we see that inflation is consuming Chinese savings at an accelerating rate. In October, Chinese savers effectively paid a 1.9% tax on their 1Y savings deposits - even with the recent 25bps rate hike factored in.


Chinese Inflation Data Confirms What We Should Already Know: QE2 Will Slow Global Growth - 2


Considering that inflation has been, on the margin, eroding China’s high household and corporate savings (a combined 42.2% of GDP), it’s no surprise to see that China continues to struggle to rein in property prices as those savers turn to real estate investment on the margin. National Property Prices (70 cities) continued to grow in October, climbing +0.2% MoM. While the pace of YoY growth has been slowing lately (+8.6% YoY in October vs. +9.1% in September), the absolute level of YoY growth and the continued MoM gains continue to defy China’s efforts to dampen speculation in its real estate market. Further resiliency of property prices will likely necessitate incremental rate hikes or the implementation of the oft bandied about national property tax trial.


Chinese Inflation Data Confirms What We Should Already Know: QE2 Will Slow Global Growth - 3


Further compounding China’s inflation woes is the rate at which new loans are accelerating, gaining 587.7B yuan in October vs. advancing 595.5B yuan in September. While the second-derivative slowdown is welcomed by Chinese officials, the rate of growth in October far exceeds the average monthly growth needed throughout 4Q10 to achieve China’s official loan growth target of +7.5 trillion yuan ($1.1 trillion) for full-year 2010 (+402B yuan). On a positive note, new loans do show a bit of seasonality and typically slow into year-end, so the +309B yuan average needed in November and December to meet the target is not as big of a stretch as the headlines make it appear to be.


Chinese Inflation Data Confirms What We Should Already Know: QE2 Will Slow Global Growth - 4


Nevertheless, we feel the confluence of inflation eroding savings (which causes Chinese savers to speculate with their assets on the margin) and robust loan demand will continue to put upward pressure on Chinese inflation data, absent any meaningful policy changes. Layer on the global commodity reflation brought on by Quantitative Guessing and it’s evident to us that further rate hikes may be on the horizon in China.


It’s important to keep in mind that China is not alone in its bout with inflation. As Bernanke and the Fed continue to pursue a weak-dollar policy via QE2, there’s no reason to expect commodity prices to come down meaningfully in the near term, which will put upward pressure on both core and headline CPI readings globally (COGS inflation will likely get passed through to citizens, lest firms suffer margin compression). In turn, that will continue to lead to further tightening globally, which will weigh on global growth going forward. Keep the equation below in mind as you ponder the real effects of QE2 vs. what the Fed would have you believe:


QG = inflation [globally] = monetary policy tightening [globally] = slower growth [globally]


No wonder Bernanke is playing one vs. nineteen at the G20 Summit.


Darius Dale


the macro show

what smart investors watch to win

Hosted by Hedgeye CEO Keith McCullough at 9:00am ET, this special online broadcast offers smart investors and traders of all stripes the sharpest insights and clearest market analysis available on Wall Street.