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October was above trend and that got people excited. November looks flat on the surface but sequential trends definitely slowed.  What now?



Regional gaming markets declined 0.6% YoY in November.  That’s not so bad relative to the year to date decline of 1.9%.  However, given the volatility, the usefulness of one and even two year comp analysis is compromised.  Our approach to monitor sequential trends is to incorporate historical seasonality factors and compare each month to the weighted average of the previous three months.  This methodology allows us to analyze sequential revenue levels. Here are the results, graphically depicted:




Based on the results for August through October, November should have increased 3.5% YoY to maintain the same seasonally adjusted level of revenue.  The calendar was even YoY so we cannot use that as an excuse.  Rather, it appears October was an anomaly and business levels, at best, are not improving. 


Overall, the numbers are disappointing.  The clear bull thesis on US gaming operators is the tremendous fixed cost leverage of the business (and financial leverage) in an economic recovery.  Unfortunately, we’re just not seeing it yet.


Regionals Must-Know News



  • West Virginia
    • Charles Town Races table revs soared to $11MM, a new high. Charles Town maintained around a 70% market share.  Slot revs fell 3.28% YoY; however, December 2010 has a favorable comp since December 2009 revs tumbled 24% YoY.
  • Pennsylvania
    • Slot revs were flat at Penn National as higher hold offset lower coin-in. Meanwhile, the state revs grew 8.4% YoY.
    • Since August, table revs have stabilized around $2.5-2.75MM per month
  • Illinois
    • Argosy, Joliet, and Aurora continue to report steep declines; the state revs overall fell 6.3%--continuing its streak of YoY declines since April


  • Missouri
    • Lumiere + River City reported $26.30MM
    • Compared with last year, PNK’s St. Louis properties generated 47% growth, similar to October
    • River City made $13.51MM aided by record high slot and table hold
  • Louisiana
    • Helped by easy comps and stronger win per admission, L’Auberge revs gained 13.2% YoY
    • Boomtown Bossier broke its 8-month losing streak of YoY declines even though admissions were weak


  • Illinois
    • Par-A-Dice continues to buck the trend in a weak market, rising 0.6% YoY
  • Louisiana
    • Treasure Chest rose over 15% YoY for the 2nd consecutive month. It has two more months of easy comps.
  • New Jersey
    • Borgata declined 6.41% YoY, but this is considerably better than the market’s slump of 12.5% YoY. Borgata’s slot drop only lost -2.7% YoY compared with the market average of -11% YoY.


  • Indiana
    • East Chicago continues to improve, posting its 1st YoY growth since Oct 2009. East Chicago will have a lower bar to beat since December will be the first month that it is compared against its performance when the Cline Avenue bridge was closed for repairs.
  • Colorado
    • Black Hawk market declined 7% YoY, a sharp reversal from its 5% rise in October
  • Iowa
    • The largest casino in Iowa had a healthy 5.2% gain. High coin-in offset flat admissions.


  • Florida
    • Pompano’s slot rev growth slowed down to 7.74% from 14.69% in Oct but still a strong performance.
  • Louisiana
    • Continuing to lose market share, Lake Charles fell 5.67% YoY to $9.82MM, its lowest monthly win since Sept 2008.


We are now projecting HK$18.2-18.7 billion in total revs for December.



Macau table revenues exploded over this past weekend.  Daily run rate was HK$738.3 million per day over the past 5 days, up from HK$533.9 for the first 15 days.  It is unclear but likely that high hold played a part in the surge.  The recent strength pulls up our full month estimate (including slots) to a range of HK$18.2-18.7 billion, up 65-70% YoY.


Interesting market share shift with MPEL and SJM taking share from LVS.  LVS is now back down below its already depressed 3 month average of 17.4%.  In contrast, Q4 2009 LVS market share was almost 23%.  We will have more market share analysis in an upcoming post.  Wynn continues to outperform and hold the 17% level.  If it holds, December will be only the 3rd month of the year above 17%.  The good news is that one of the others was November which bodes well for a blow out Q4 for the company.


Here are the table revenues through the 20th:



The BOE Sees Inflation?

Hedgeye Positions in Europe: Long Germany (EWG); Short Italy (EWI), Euro (FXE)


The answer to the question, Does the Bank of England see inflation?, appears to be a qualified ‘yes’.  Today the Bank of England published the minutes from its December 8-9 meeting and one sentence stood out:


“Most of the members considered that the accumulation of news over recent months had probably shifted the balance of risks to inflation in the medium term upwards.”


We’ve highlighted inflation risk in the UK over the last months as the Bank has reported CPI above or at its target of 3% for most of the year. With CPI currently at 3.3% in November year-over-year, we’re likely to see further upside pressure on CPI in the coming quarters due to an increase in VAT to 20% (versus the current rate of 17.5%) in January 2011, a weaker Sterling versus major currencies in the 1H 2010 on the comp (see chart), and inflationary global commodities that we’re calling for next year.


The BOE Sees Inflation? - currency chart


The Bank, despite two dissenting members, maintained that the Bank Rate should remain unchanged at 0.5% and its asset purchase plan unchanged at £200 Billion. Again, we see the Bank largely handcuffed on monetary policy: the Bank can neither raise rates to quell inflation for fear of further chocking off the economy nor buy more paper (to potentially spur growth) for fear of stoking further inflation.


A sticking point remains the country’s fiscal policies, namely its austerity measures, that should threaten growth through increased taxes, job cuts, and dampen business and consumer confidence. Today, the final reading of Q3 GDP in the UK showed downward revisions. Year-over-year Q3 GDP was revised to +2.7% (versus +2.8%) and quarter-over-quarter GDP was revised down 10bps to +0.7%. 


We don’t have an investment position in the UK, but clearly we’re worried about inflationary pressures over the coming quarters given the country’s weak growth prospects next year.


Matthew Hedrick


Early Look

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The Macau Metro Monitor, December 22nd, 2010


Visitor arrivals to Singapore grew 15.8% YoY to reach 978,000 in October 2010, the highest number of arrivals recorded for the month of October.  Indonesia contributed the largest number of visitors with 179,000.




TODAY’S S&P 500 SET-UP - December 22, 2010


As we look at today’s set up for the S&P 500, the range is 14 points or -1.00% downside to 1242 and 0.11% upside to 1256.  Equity futures are trading mixed to fair value following Tuesday's largely uneventful session, which saw the Dow close above the 11,500 level as December's rally continues to free wheel into year end.


A heady mixture of fiscal stimuli, M&A, solid corporate earnings and year end window dressing appear to be behind the continued support for the market, although volumes remain very low.


After the close, Nike (NKE) reported Q2 earnings that broadly met analysts’ forecasts but the shares fell in after hours trading after it guided to roughly 150 bps of margin pressure over the next 2 quarters due to cost inflation. Today's macro highlights include; Q3 GDP (second revision) and Nov Existing Home Sales

  • Aeropostale (ARO) appointed Marc D. Miller as CFO
  • Humana (HUM) sees 2011 consolidated EPS $5.45-$5.65, says rev. should increase $800m from Concentra deal
  • Nike (NKE) sees 2Q brand futures orders up 11% ex-FX, vs est. up 11.6%
  • Progress Software (PRGS) sees 1Q EPS 40c-45c vs est. 36c
  • Red Hat (RHT) reported 3Q adj. EPS 20c vs est. 20c
  • Scientific Games (SGMS) got a contract to supply tickets and services to De Lotto, in the Netherlands
  • Tibco Software (TIBX) reported 4Q adj. EPS 31c vs est. 28c
  • Walter Energy (WLT) bought the assets of Mobile River Terminal; terms not disclosed
  • Xilinx (XLNX) cut Dec. Q rev. forecast to down 7%-9% Q/q, implies $563.9m-$576.3m vs est. $606.9m


  • One day: Dow +0.48%, S&P +0.60%, Nasdaq +0.68%, Russell 2000 +1.05%
  • Month-to-date: Dow +4.79%, S&P +6.27%, Nasdaq +6.78%, Russell +8.74%
  • Quarter-to-date: Dow +6.91%, S&P +9.94%, Nasdaq +12.62%, Russell +16.92%
  • Year-to-date: Dow +10.60%, S&P +12.51%, Nasdaq +17.56%, Russell +26.4%
  • Sector Performance: Financials +1.6%, Materials +1%, Energy +0.9%, Industrials +0.7%. Tech +0.6%, Consumer Disc +0.5%, Utilities (0.05%), Healthcare (0.2%), Consumer Spls (0.4%)            


  • ADVANCE/DECLINE LINE: 1156 (+1201)  
  • VOLUME: NYSE 810.52 (-2.32%)
  • VIX:  16.49 +0.49% YTD PERFORMANCE: -23.94%
  • SPX PUT/CALL RATIO: 1.54 from 1.92 (-19.67%)


  • TED SPREAD: 17.50 -0.101 (-0.576%)
  • 3-MONTH T-BILL YIELD: 0.14%  
  • YIELD CURVE: 2.72 from 2.74


  • CRB: 326.80 +0.78%
  • Oil: 89.82 +0.50%
  • COPPER: 427.60 +1.66%
  • GOLD: 1,387.97.50 +0.11%


  • EURO: 1.3120 -0.02%
  • DOLLAR: 80.718 +0.11%




  • European markets fluctuated either side of unchanged in thin trading, struggling to find any direction with limited significant news flow and ahead of US GDP.
  • In the periphery, a Portuguese newspaper reported that China is ready to buy as much as €5B in Portuguese sovereign debt and Fitch late yesterday placed Greece's BBB- sovereign debt rating on watch negative.
  • Bank of England Minutes MPC voted 7-1-1 for unchanged policy in Dec, Posen voted for £50B more QE, Sentance voted for a 25 bps rise
  • UK Q3 final GDP +0.7% q/q vs consensus +0.8%, +2.7% y/y vs consensus +2.8%


  • Most Asian markets rose slightly today.
  • South Korea’s announcement of three days of naval firing exercises to begin today did not affect the region.
  • Oil refiners rose in Hong Kong after China raised wholesale gasoline and diesel prices 4%. Property shares rose, following yesterday’s 5% jump in China.
  • In trading that only reached 60% of the average, Australia was flat, with miners up on record copper prices, and profit-taking moving banks down.
  • Japan declined slightly on profit-taking following yesterday’s gain; sentiment was also dampened when November exports increased by less than expected.
  • China fell on a liquidity crunch after yesterday’s gain. Oil issues did not react to the country’s fuel-price rise, which had been expected and therefore priced in. Bank stocks fell on continued worries that more tightening measures may be in store.
  • Japan November trade surplus ¥162.8B vs consensus ¥452.8B. November supermarket comps (0.5%) y/y. 


Howard Penney

Managing Director



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 80.46%
  • SHORT SIGNALS 78.35%