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CCL YOUTUBE

In preparation for the CCL Q4 2010 earnings release tomorrow, we’ve put together the pertinent forward looking commentary from CCL’s Q3 earnings call.

 

 

YouTube from Q3

 

GENERAL

  • 13 week booking period—covering 4Q 2010, 1Q 2011, and 2Q 2011
    • “Bookings have been strong, running 8% ahead on a YoY  basis.”
    • “For our Europe brands, booking volumes for the last 13 weeks have been very strong on a YoY basis for cruises during the next three quarters with slightly higher local currency pricing. And booking volumes during the last six weeks for Europe brands have also shown significant improvement on a YoY basis.”
  • “Ticket prices, excluding prices for winter Caribbean cruises, are running higher YoY; winter Caribbean pricing is lower, largely as a result of significant increases in industry Caribbean capacity, which in the first quarter is approximately 15% higher, and our fleet capacity in the Caribbean winter is up 10% in the quarter.”
  • [Caribbean capacity for 2011] “The Caribbean is up 7% in the first quarter, 10% for our North American brands. The second quarter is flat, the third quarter is down 8%, and the fourth quarter is down 11%. And as we go throughout the year, the Caribbean is about 50% of our total capacity in the first quarter, stepping down to 36% in the second and 22% in the third and finishing the year at 27% in the fourth quarter.”
  • “Given the current booking and pricing momentum, taken together with the price increases from business already on our books, we are currently forecasting that fleet-wide local currency revenue yields in the first half of 2011 will be higher YoY. And this factors in the lower Caribbean pricing.”
  • “In terms of fleet expansion for 2011, we have four ships scheduled for delivery, the Aida Sol, at the end of March of 2011, the Carnival Magic, at the end of April 2011, the Seabourn Quest in late May and the Costa Favolosa in late June.”
  • “Our capacity increase in 2011 is estimated to be 5.4% for the full year. Breaking that down by quarters, it would be 6.7% in Q1, 4.9% in Q2, 5% in Q3, and 5.1% in Q4. With the delivery of the four ships in 2011, our European brand capacity will be close to 40% of our overall fleet capacity, which is a target we set out after the completion of our merger with P&O Princess in 2003.”
  • “With estimated CapEx of $2.5 billion in 2011, we are forecasting that 2011 will be the first year for driving significant free cash flow in our business, and as cash flow increases, and our CapEx slows in future years, free cash flow is expected to further increase.”
  • “For the full year 2010, the midpoint of our earnings guidance is now $2.50 per share, which is $0.30 higher than the midpoint guidance of $2.20 a share we established back in December of 2009 at the start of the year. The major factors causing the earnings increase in 2010, looking at it with some perspective right now, are higher ticket yields of approximately $0.23 a year, higher onboard yields of $0.05 a share, lower costs of $0.21 a share, and positive one-off items of $0.08 a share. Fuel and currency, on the other hand, affected earnings negatively by $0.27 a share. And this all nets out to a plus $0.30 over our original guidance.”
  • “We do expect 1 to 3% fuel consumption efficiencies per year over the next couple of years.”
  • “All-in costs [per berth] are 20-25% lower than they were at the peak.”
  • “I believe our 2012 deployment will have a little bit less as a % of capacity in the Caribbean, but it’s only on the margin that you can really do it.”
  • “The strategy is to stay in China and to continue to build it, but we will take a little bit of a blip downward in 2011 and then come back with a larger ship in 2012, with the view that it will then be a profitable business with us, with that larger ship.”
  • “I think we are very encouraged that 2011 will be a good Alaska season.”

4Q 2010

  • “For the fourth quarter of 2010, close-in pricing has been strong, especially for North American brand bookings. As a result, pricing has held up quite well and fourth quarter local currency yields continue to strengthen versus last year at the same time.”
  • “For 4Q, our capacity is up 5.8%. 1.4% in North America, and 10.7% in Europe on a fleet-wide basis. With very little inventory left to sell in the quarter, occupancies are in-line with a year ago with local currency pricing running nicely higher.”
  • “North American brands in the fourth quarter are 50% in the Caribbean, up from 45% last year, with all the other itineraries individually below 10%. Occupancies for North American brands in the fourth quarter are slightly ahead YoY with pricing also nicely higher.”
  • “Late fourth quarter bookings for North American brands continue to be strong and yields have shown gradual improvement week-on-week. By the time the quarter closes, we expect North American brand revenue yields to increase in 3-4% YoY.
  • “For European brands, they are 72% in Europe itineraries, down slightly from 78% last year for the fourth quarter, with all other itineraries individually under 10%. European local currency pricing is also higher YoY with occupancies at approximately the same levels. We are currently forecasting an increase in European brand local revenue yields in the fourth quarter by approximately 2%, which is a very positive result considering the 11% increase in capacity for the Europe brands during the quarter.”
  • “Fleetwide revenue yields to increase in the range of 2.5 to 3.5% on a local currency basis and lower by 1 to 2% on a current dollar basis as a result of the strengthening dollar during this period. Costs excluding fuel are expected to be down 1 to 2% on a local currency basis and on a current dollar basis, lower by 5 to 6%.”
  • “EPS expected to be $0.32-0.36. This includes the impact of unfavorable currency and fuel costs of $0.07 per share in 4Q, and compares to the $0.24 per share in 4Q 2009.”

1Q 2011

  • “I think demand is more of a challenge [in Q1] than in the other quarters.”
  • “The impact of the lower Caribbean pricing will be felt more significantly in the first quarter when our Caribbean capacity is greatest, and to a lesser extent, in the second quarter when Caribbean capacity is reduced.”
  • “European yields will be stronger than North American yields in the first quarter, also as the result of the lower Caribbean prices.”
  • “On a fleet-wide basis, 1Q 2011 local currency pricing is higher YoY with occupancies running slightly behind a pattern similar to what we experienced in 4Q.”
  • “For North American brands, they are 66% in the Caribbean, up from 62% in the prior year and 11% in the Mexican Rivera, which is about the same as the prior year with the balance in various other itineraries. Winter Caribbean pricing is lower than a year ago on lower occupancies. Mexican Rivera pricing is nicely higher from the lower levels we experienced a year ago on higher occupancies; pricing across all other itineraries is higher on slightly lower occupancies. Taking all itineraries together, including the Caribbean, pricing is currently in-line with last year.”
  • “Looking at our European brands in 1Q, they’re 25% in Europe itineraries, 23% in the Caribbean, down from 29% the prior year and 18% in South America, which is about the same as in prior year, with the balance in various other itineraries.”
  • “Local currency pricing across all European itineraries is higher YoY on slightly higher overall occupancies.”
  • “Fleet-wide revenue yields for the first quarter of 2011 will be higher, in the 2% range, driven largely by strong forecasted increases in European brand pricing, net of a small decline in North American pricing, largely the result of the lower pricing environment in Q1 and the very competitive Caribbean winter market. Current dollar pricing at today’s exchange rate is forecast to be slightly down YoY.”

2Q 2011

  • “On a fleet-wide basis, second quarter 2011 local currency pricing is higher YoY with occupancies in-line with the previous year. For North American brands, they are 55% in the Caribbean, about the same as last year, but 11% lower than in the first quarter of 2011. The balance in various other itineraries all individually under 10%.”
  • “Currently, pricing for North American brands in the second quarter is higher than a year ago with occupancies currently in-line with last year.  Similar to the first quarter, Caribbean pricing is lower in the second quarter, but improved from the first quarter. And pricing across all other North American brands’ itineraries is higher YoY.”
  • “61% in Europe itineraries, up from 57% a year ago with the balance in various other itineraries. Similar to the first quarter, local currency pricing for European brand cruises is running nicely higher YoY. Occupancies are slightly down from the prior year levels which given the 8.5% capacity increase for Europe brands is quite acceptable, especially given the higher pricing currently being achieved.”
  • “Fleet-wide local currency revenue yields in the second quarter of 2011 will be higher for both North American and European brands.”


WEEKLY RISK MONITOR FOR FINANCIALS: NEUTRAL FOR THE SHORT-TERM

Financial Risk Monitor Summary (Across 3 Durations):

  • Short-term (WoW): Neutral / 3 of 10 improved / 3 out of 10 worsened / 4 of 10 unchanged
  • Intermediate-term (MoM): Negative / 1 of 10 improved / 7 of 10 worsened / 2 of 10 unchanged
  • Long-term (150 DMA): Negative / 1 of 10 improved / 5 of 10 worsened / 3 of 10 unchanged / 1 of 10 n/a

WEEKLY RISK MONITOR FOR FINANCIALS: NEUTRAL FOR THE SHORT-TERM - summary

 

1. US Financials CDS Monitor – Swaps were mixed across domestic financials last week, widening for just 9 of the 28 reference entities and tightening for the other 19.

Tightened the most vs last week: BAC, PRU, GNW

Widened the most vs last week: ALL, CB, TRV

Tightened the most vs last month: SLM, PRU, GNW

Widened the most vs last month: ALL, CB, TRV

 

WEEKLY RISK MONITOR FOR FINANCIALS: NEUTRAL FOR THE SHORT-TERM - US cds

 

2. European Financials CDS Monitor – In Europe, banks swaps were similarly mixed.  Swaps widened for 20 of the 39 reference entities.

 

WEEKLY RISK MONITOR FOR FINANCIALS: NEUTRAL FOR THE SHORT-TERM - euro cds

 

3. Sovereign CDS – Sovereign CDS rose less than one basis point on average last week.

 

WEEKLY RISK MONITOR FOR FINANCIALS: NEUTRAL FOR THE SHORT-TERM - sov CDS

 

4. High Yield (YTM) Monitor – High Yield rates rose very slightly last week, closing at 8.39 on Friday.  

 

WEEKLY RISK MONITOR FOR FINANCIALS: NEUTRAL FOR THE SHORT-TERM - high yield

 

5. Leveraged Loan Index Monitor – The Leveraged Loan Index hit a new high, rising 8 points to close at 1564.   

 

WEEKLY RISK MONITOR FOR FINANCIALS: NEUTRAL FOR THE SHORT-TERM - levered loan

 

6. TED Spread Monitor – The TED spread backed up late in the week to close at 20.2.

 

WEEKLY RISK MONITOR FOR FINANCIALS: NEUTRAL FOR THE SHORT-TERM - ted spread

 

7. Journal of Commerce Commodity Price Index – Last week, the index fell half a point, closing at 25.1 on Friday.

 

WEEKLY RISK MONITOR FOR FINANCIALS: NEUTRAL FOR THE SHORT-TERM - JOC

 

8. Greek Bond Yields Monitor – We chart the 10-year yield on Greek bonds.  Last week yields rose slightly, ending the week 22 bps above the prior week’s close.

 

WEEKLY RISK MONITOR FOR FINANCIALS: NEUTRAL FOR THE SHORT-TERM - greek bond yields

 

9. Markit MCDX Index Monitor – The Markit MCDX is a measure of municipal credit default swaps.  We believe this index is a useful indicator of pressure in state and local governments.  Markit publishes index values daily on four 5-year tenor baskets including 50 reference entities each. Each basket includes a diversified pool of revenue and GO bonds from a broad array of states. Our index is the average of their four indices.  Spreads increased sharply last week, closing at 195 bps, 13 bps lower than last week.     

 

WEEKLY RISK MONITOR FOR FINANCIALS: NEUTRAL FOR THE SHORT-TERM - MCDX

 

10. Baltic Dry Index – The Baltic Dry Index measures international shipping rates of dry bulk cargo, mostly commodities used for industrial production.  Higher demand for such goods, as manifested in higher shipping rates, indicates economic expansion.  Last week the index fell 10 points to close at 200.   

 

WEEKLY RISK MONITOR FOR FINANCIALS: NEUTRAL FOR THE SHORT-TERM - baltic dry index

 

11. XLF Macro Quantitative Setup – Our Macro team sees the setup in the XLF as follows: 1.9% upside to TRADE resistance, 2.4% downside to TRADE support. 

 

WEEKLY RISK MONITOR FOR FINANCIALS: NEUTRAL FOR THE SHORT-TERM - XLF

 

 

Joshua Steiner, CFA

 

Allison Kaptur


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

THE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP - December 20, 2010


As we look at today’s set up for the S&P 500, the range is 13 points or -0.64% downside to 1236 and 0.41% upside to 1249.  Equity futures are trading mixed to fair value as investors keep an eye on events on the Korean peninsula where tensions threaten to escalate after South Korea went ahead with its drill with live ammunition. Treasuries and the dollar are benefiting as investors apply safe haven trades. European markets are frozen amid some pretty awful weather which has shut much of the continent's transport systems, with the UK particularly badly hit. Elsewhere, news flow is thin in what looks like being a quiet run in to the festive break assuming the situation in Korea does not escalate beyond current tensions

  • Constellation Energy Group (CEG) said COO Michael J. Wallace plans to retire in April
  • Illinois Tool Works (ITW) may rise as it introduces new products and expands into Asia Barron’s said, citing analysts
  • Invesco (IVZ) may rise as much as 20% as one of the “best value” asset managers, Barron’s reported, citing analysts
  • SLM (SLM) may rise to the “high teens” during next 18 months and could attract a buyer, Barron’s says, without attribution
  • Sunstone Hotel Investors (SHO) said Arthur Buser has resigned as president and CEO

PERFORMANCE

  • One day: Dow (0.06%), S&P +0.08%, Nasdaq +0.21%, Russell +0.38%
  • Last Week:  Dow +0.72%, S&P +0.28%, Nasdaq +0.21%, Russell +0.34%
  • Month-to-date: Dow +4.41%, S&P +5.37%, Nasdaq +5.79%, Russell +7.22%
  • Quarter-to-date: Dow +6.52%, S&P +9.00%, Nasdaq +11.58%, Russell +15.29%
  • Year-to-date: Dow +10.20%, S&P +11.55%, Nasdaq +16.47%, Russell +24.65%

 EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: 346 (-726)  
  • VOLUME: NYSE 2018.78 (+103.95%)
  • VIX:  16.1 -7.36% YTD PERFORMANCE: -25.69%
  • SPX PUT/CALL RATIO: 2.45 from 1.10 +123.09%

CREDIT/ECONOMIC MARKET LOOK:

  • TED SPREAD: 20.64 0.406 (2.005%)
  • 3-MONTH T-BILL YIELD: 0.13% -0.01%  
  • YIELD CURVE: 2.81 from 2.85

COMMODITY/GROWTH EXPECTATION:

  • CRB: 320.62 +1.03% (up 1.81% last week)
  • Oil: 88.02 +0.36% (up 0.26% last week)
  • COPPER: 415.90 +1.04% (up 1.14% last week, up three weeks in a row)
  • GOLD: 1,371.70 -0.02% (down 0.96% last week)

CURRENCIES:

  • EURO: 1.3188 -0.34% (down -0.29% last week)
  • DOLLAR: 80.373 +0.24% (up +0.38% last week)

OVERSEAS MARKETS:

 

EUROPEAN MARKETS:

  • European markets trade higher in thin trading with gains capped by worries over the EuroZones debt crisis and increased tension in the Korean peninsula as South Korea held a live fire drill.
  • There was little significant economic news, M&A remained a focus.
  • Greece a big mover to the downside -2.69%
  • Autos and basic resources lead advancing sectors, with retail and travel & leisure the leading decliners as pre-Christmas snow and ice disruption across Europe weighed.
  • Advancing sectors lead decliners 14-4.
  • Germany Nov PPI +4.4% y/y vs consensus +4.5% and prior +4.3%
  • CBI sees UK 2011 GDP +2.0%, 2012 +2.4%, expects slow start to 2011, cuts is Q1 q/q growth to +0.2%, says risk of double dip recession remains low. Expects 2011 inflation to be higher than prior forecast and the BOE will start to normalize monetary policy in the spring with interest rates gently rising through mid 2012

ASIAN MARKTES:

  • Asian markets were lower today on concerns about European debt sparked by Ireland’s rating’s being cut by Moody’s, and South Korea’s decision to go ahead with an artillery drill.
  • Hong Kong slipped -0.56%, weighed on by China’s performance down 1.41%.
  • Unsurprisingly, South Korea fell -0.30%on worries about exacerbated geopolitical tensions, but defense-related shares Victek and Speco climbed 2% and 8%, respectively.
  • Australia gave up early gains down -0.56%.  Perpetual tumbled 15% when KKR terminated takeover talks.
  • Japan fell -0.85% with some high-priced issues dumped in profit-taking, while small- and mid-caps were bought.  Toyota fell 1% after the Japan Automobile Manufacturers Association predicted lower demand in Japan for 2011, but Honda rose 1% after saying it is targeting sales growth of 12% y/y in China for 2011. Canon Electronics rose 3% on raising its FY outlook.
  • China fell on concerns that access to funds may shortly get more difficult, though it recovered half its losses from its intraday low.
  • Japan revised October composite index of economic indicators (1.3 points) m/m vs preliminary (1.4 points) m/m. November convenience store sales +1.1% y/y vs prior (5.9%). November department-store sales (0.5%) y/y. Tokyo November department-store sales +0.3% y/y.

Howard Penney

Managing Director

 

THE DAILY OUTLOOK - levels and trends 1220

 

THE DAILY OUTLOOK - S P 1220

 

THE DAILY OUTLOOK - vix 1220

 

THE DAILY OUTLOOK - usd 1220

 

THE DAILY OUTLOOK - oil 1220

 

THE DAILY OUTLOOK - gold 1220

 

THE DAILY OUTLOOK - copper 1220


Fashionable Consensus

“Nothing is more obstinate than a fashionable consensus.”

-Margaret Thatcher

 

You’d think that some of the sell side’s finest would have learned something from being unanimously bullish on the US stock market in December 2007. Think again. It’s December of 2010 and, after a few minor bailouts and major bonus seasons, the bulls are back.

 

Don’t wince. Without a Fashionable Consensus, how else would we generate long term absolute returns? This weekend’s edition of Barron’s “Outlook For 2011” may be one of the finest gifts of Groupthink that we’ve been offered in years.

 

As Barron’s themselves reminds risk managers (not in the cover story article), the SP500 has only seen double-digit gains for 3 consecutive years twice since World War II (1951 and 1994). Looking at the bullish 2011 predictions for US stocks that way, maybe consensus is contrarian!

 

Will 2011 mark a 3rd year in a row of double-digit gains?

 

Well, let’s go through that…

 

Let’s start with a level. My immediate term TRADE zone of resistance for the SP500 into year-end is 1. Giving year-end bonus and mark-up season the bullish benefit of the doubt, let’s use the top end of that range and round the number up to 1256.

 

Since a +10% or better gain in the SP500 for 2011 (versus 1256) = 1382, let’s take a gander at who is more bullish than that:

  1. Deutsche Bank = 1550
  2. Goldman Sachs = 1450
  3. JP Morgan (formerly known as partly Bear Stearns) = 1425
  4. Barclays (formerly known as Lehman) = 1420
  5. Bank of America (formerly known as partly Merrill) = 1400

Now, to be fair, we’ll need to provide some disclosures (it’s a sell side thing)

*the aforementioned 2011 targets are from last week’s Bloomberg survey and subject to revision

**some of these estimates are the mid-point of Big Broker’s internal range (that’s a CYA thing)

***some estimates are from economists and bond strategists (yes, on Wall Street, cops are sometimes firefighters for commission)

 

The only person we can find who is more bullish than Binky Chada at Deutsche Bank isn’t a sell-sider, but he was equally as Bullish As Binky back in 2008. Don Luskin called for a +30% move in US stocks when I debated him on Kudlow on Friday night. Luskin’s made for YouTubing estimate implies a +377 point move in the SP500 to all-time highs in 2011 to 1633.

 

Now let’s not get caught up in what’s going on in the rest of the world this morning (Global Growth Slowing, Inflation Accelerating, and Interconnected Risk Compounding). Chinese stocks closed down for the 4th straight session to -13% for 2010 YTD and the CRB Commodities Index level of 320 is +25.5% inflated since the beginning of July.

 

Per the US stock market centric bulls, these interconnected global economic realities don’t matter, until they do.

 

Let’s get back to the US stock market’s 2011 Fashionable Consensus and dig a little deeper into its tapestry.

  1. Everyone loves Tech
  2. Everyone (except Doug Cliggott at CS) hates Healthcare
  3. Everyone has no short ideas

Most risk managers realize that doing what everyone else is doing isn’t a great idea (especially if you want to charge your clients 2 and 20). That’s why I’m short Tech (XLK) and Industrials (XLI) going into year-end. Both are reaching extreme levels of being intermediate-term TREND overbought.

 

I’m bearish on US Equities (SPY) and US Bonds (SHY). I’m bullish on the US Dollar (UUP).  As a result, I’m bullish on building up a large cash position as we head into what I think is going to be at least a 7% correction in the next 3-6 months (SP500 downside target = 1168).

 

No, I’m not reckless enough to give you my “year-end target” for the SP500 (that’s what unaccountable Big Brokers do). But I will tell you what I think every day between now and then. I’ll tell you what my upside/downside probabilities are across my 3 investment durations (TRADE, TREND, and TAIL), and I’ll take a long or short position that I’m accountable to.

 

If I’m wrong on US Equities in the next 3-6 months, I think some combination of the scenario laid out by Jeff Knight at Putnam (buy side PM) and Doug Cliggott (ex buy-sider at Credit Suisse) has the highest probability. Upside in the SP500 to the 1 range with the two sectors that I think auger best to an environment of US style Jobless Stagflation (Energy and Healthcare) outperforming.

 

My immediate term TRADE lines of support and resistance lines for the SP500 are now 1236 and 1249, respectively.

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Fashionable Consensus - thatcher


MACAU SLOWS SLIGHTLY

With table revenues at HK$8.0 billion through the 15th we are now projecting HK$17.0-17.5 billion in total revs for the full month of December. 

 

 

Our new projection range represents YoY growth of 55-60% - still strong but a slight slowdown from the first 10 days of the month.  Our projection takes into account slot revenue and the number of weekend days and weekdays.  Market shares are shown in the table below.  We continue to highlight Wynn’s impressive bounce back in market share and MGM's elevated share.  We think both will continue.

 

MACAU SLOWS SLIGHTLY - macau34


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 80.28%
  • SHORT SIGNALS 78.51%
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