The Macau Metro Monitor, February 17, 2011
LAS VEGAS SANDS EYES MORE SINGAPORE LAND, SPAIN CASINO Reuters, WSJ
CEO Adelson is seeking more land from the S'pore govt to expand MBS. "We are already running out of [convention and exhibition] space. I've told the government that we need some more land to expand the [convention] space because the demand that this property is going to create is rapidly bringing us to the point where we may even have to ration space," said Adelson. He added that MBS's convention and exhibition facilities are running at 87% capacity and that "within about 12-to-18 months" the complex will be "rationing space." Adelson said MBS has received 11MM visitors since it opened in April last year and expects to break even within four years of operations.
COO Leven said there is available land at various points around MBS. "Demand is going to be higher than supply shortly as the entire hospitality industry is running over 80% occupancy," Leven said. Leven also said a report on the search for a new MBS CEO is due Friday.
Adelson also remarked, "We are seriously looking at doing what we call a 'Strip', which is essentially a mini Las Vegas. We are looking to do that in Europe and we are sort of zeroing on Spain."
GROWTH OF 4-6% FOR 2011 WITH ECONOMIC DECLINES REVERSED Channel News Asia
S'pore's Trade and Industry Ministry (MTI) reported 14.5% GDP growth in 2010, with 4Q GDP expanding 12% YoY. It maintained its 4-6% GDP growth forecast for 2011 but raised the inflation forecast to 3-4% from 2-3%.
Inflation is also expected to rise to 5.0 to 6.0% in early 2011 before moderating in 2H 2011.
TAX CUT ON PROPERTY TAX APPROVED macaubusiness.com
The Legislative Assembly has passed a property tax cut bill. The new bill reduces the tax on unleased flats from 10% to 6% and the tax on leased flats from 16 to 10%. The bill also introduces a change allowing owners of unleased flats an automatic deduction of 10% on their taxable income.
FORMER GALAXY COO APPOINTED NON-EXECUTIVE DIRECTOR AT ARISTOCRAT macaubusiness.com
The board of Aristocrat Leisure Limited recently nominated David Banks as a non-executive director. Banks was COO of Galaxy until March 2009.
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This note was originally published at 8am on February 14, 2011. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.
“And therefore is winged Cupid painted blind.”
While the Greeks may disagree with Italians on this, Roman mythology tells the story of Cupid being the son of Venus, the goddess of love. In Latin, “cupido” means desire. And for America’s valentine this morning, this Hedgeye desires a strong US Dollar.
If you look at last week’s price action in Global Macro markets, strength in the US Dollar Index showered some love on some of the major global economic risks we’ve been pounding on for the last 3-6 months. While our call for Global Inflation Accelerating hasn’t adversely affected the US stock market, it’s hammered both bond and emerging markets since November.
Importantly, last week’s price action in the US Dollar Index was positive for the first time in the last 4 weeks. On a week-over-week basis the Burning Bone was up +0.54%, and while that’s not the type of long-term love you should get married to, in the immediate-term look what it did:
1. CRB Commodities Index – deflated inflation by -0.3% week-over-week, and while that may not be by a lot, short-term love needs somewhere to start. This was the first week since the 1st week of January that the 19 component CRB Index didn’t close at a new intermediate-term high.
2. Oil Prices – deflated big time with West Texas Intermediate crude oil losing -3.9% of its value on a week-over-week basis and breaking our intermediate-term TREND line of support at $86.98/barrel. While The Ber-nank’s driver probably didn’t talk this up on the way home Friday night, I can assure you this put some extra change in the hands of many American boys looking to buy roses after putting gas in their cars.
3. 2-year US Treasury Yields – inflated another +12% week-over-week to close out the week at 0.83%. This is good for the short-term rates of return on American savings accounts. Again, strong US Dollars find a funny way of empowering the gentleman in this country who is living on a fixed income to maybe buy an extra rose for his sweetheart today.
Albeit with a very short leash, even I found the love in my heart to invest some of the Cash in the Hedgeye Asset Allocation Model as the US Dollar rose throughout the week. On Wednesday February 9th, I hit my lowest Cash position of 2011 at 49%. C’mon little bulls out there, pucker up – I should get at least a little peck on the cheek for that…
While it’s sometimes hard for a US-centric stock market investor to hear anything from me other than I’m not levered-long everything US Equities here, I think we’ve been crystal clear that there are many ways to be Bullish On Inflation in your Global Macro portfolios.
Whether it’s leaning long in the S&P Sector exposures (last week we we’re long 2 of the 9 US stock market sectors and didn’t have anything on the short side) or leaning short in emerging market equities and US Treasury bonds, there’s plenty out there for we men and women of the risk management gridiron to fall in love with. In the Hedgeye Portfolio 14 of the last 15 positions I’ve closed have been gains.
That’s not to say you should love me. I have a hard enough time convincing my wife that that’s a good idea when my alarm clock blares in her room every weekday at 4AM. It’s just to say that being a risk manager means not losing money and, for those of us who still remember the wealth destruction of 2008, that’s the risk management face that more than just our mothers can love.
The bad news about Cupid’s Bone is that it can start burning again. Before we get too lovy-dovy with everything that benefits from a strengthening US Dollar, remember that President Obama is on deck to release his Burning Budget this afternoon. While we’d love to hope that our Big Government Interventionists will cut spending this Valentine’s Day, we are reminded that hope is not an investment process.
With the US Dollar Index’s rise to close out the week at $78.46, this is where it’s trading relative to our 3 core risk management durations:
Yes, tragically, love’s reach has its resistance levels too. And while we really want to believe that professional politicians in America will put the long-term health of this country and currency ahead of their short-term job security, that’s just a benefit of the doubt they don’t deserve.
On Friday I did a lot of selling in the Hedgeye Asset Allocation Model and some of it was in Fixed Income where we fortuitously covered our shorts on the lows and capitalized on a nice bounce on the long side for a trade. Versus last Monday’s Cash allocation of 52%, this morning we’re back up to 61% and here’s the complexion of the mix:
As a reminder, my view of asset allocation is what I would be doing with my entire net wealth, not what someone with an institutional mandate to be fully invested is doing. Stylistically, we understand the differences. If you look back at what Hedgeye was doing 2 years ago, we were investing our cash position as Wall Street was cutting theirs. Now we’re in harvest mode, picking our spots.
My immediate term support and resistance levels for the SP500 are now 1316 and 1332, respectively. If the US Dollar Index were to hold its bid and look more American rather than Cupid’s Bone, I’ll definitely get more constructive on a lot of things.
Happy Valentine’s Day to my Laura, Jack, and Callie and best of luck out there today,
Keith R. McCullough
Chief Executive Officer
“We are firmly convinced that monetary and fiscal policy will continue to debase the dollar.”
-Ted Kelly (CEO of Liberty Mutual)
Liberty Mutual is an American insurance company that was founded in 1912 and currently sits at #71 on the Fortune 500 list. It has over 45,000 employees servicing global insurance products worldwide and has over $100B in consolidated assets. Their CEO made the aforementioned comment in a Bloomberg article yesterday by Noah Buhayar. No, Liberty didn’t pay me an advertising dollar for this paragraph.
Unlike The Ber-nank attempting to trade US Treasury bonds, this isn’t Ted Kelly’s first rodeo. He’s been CEO of Liberty Mutual since 1998 and his job is to manage bond market and duration risk. On the topic of real-time risk management, he went on to add that, “we are positioning our portfolio and our business to respond if inflation emerges.”
Notice Kelly didn’t say “when inflation emerges.” He said “IF” - and that’s a critical differentiator between a proactive risk manager (a portfolio manager) and a reactive one (a professional politician). Kelly isn’t alone in this line of thinking. Almost every world class risk manager in the world understands that governments that debauch their fiat currencies will impose an inflation tax on their citizenry.
The US Dollar Index backed off hard right where it should have yesterday. It closed down another -0.54%, keeping it below its intermediate-term TREND line of $78.98. Call me lucky or call me right in understanding how to manage risk around the price of the world’s reserve currency. Since starting the Hedgeye Portfolio 3 years ago, I’ve gone 18 for 18 in making profitable long/short calls on the US Dollar (UUP).
I’m not calling this out to pump my own tires. I’m calling this out so that the pundits who are out there cheering on Bernanke’s stock market inflation policy pay attention. Making calls on US Dollar declines helped predict bubbles in both US stocks (2008) and US bonds (2010). Sadly, unless President Obama starts listening to the likes of Ted Kelly, Bill Gross, and Jim Grant, it may very well take another US Dollar currency crisis to stop these Big Keynesian Central Planners in their tracks.
As a reminder, we first made our call on Global Inflation Accelerating in October of 2010, and from here on in we’ll be acutely monitoring the slope of inflation accelerating or decelerating with the following assumptions:
That’s it. That’s the deep simplicity we’ve found in our multi-factor, multi-duration model. Remember, in principle Chaos Theory is grounded in uncertainty – so every risk management exercise starts with IF and every decision follows the THEN that’s driving correlation risk.
On our most immediate-term duration, some of the correlation risk associated with US Dollar Debauchery has burned off in the last 2 weeks. That’s primarily because the US Dollar was UP for the first week out of the last four. IF we debauch it from here, THEN that will change. Correlation risk gets fired up when the Buck Burns.
On the heels of yesterday’s US Dollar decline, here were some important Global Macro reactions to consider:
Again, this isn’t complicated. Debauched Dollar is bullish for inflation (Commodities) and bearish for Bonds and Emerging Markets…
As you can see in the Hedgeye Portfolio (attached), alongside re-shorting the US Dollar this week, we re-shorted the following Macro positions:
Now as sure as the sun rises in the East, you can bet your Madoff that The Ber-nank won’t be talking about the interconnectedness that his Central Planning Policies and a Debauched Dollar have on Asian and Emerging Market currencies and/or their exports.
Let me illustrate this point (generally) with the example of how the USD is affecting South Korea:
South Korea’s stock market isn’t what we’d call an “emerging market.” Per capita GDP is 10x that of China and it’s an economy levered to both US Tech and Industrial demand (bearish leading indicators?). Since it’s the world’s 12th largest economy, the KOSPI recently moving to bearish TRADE and TREND in our risk management model is something worth paying attention to as you watch Bernanke and Geithner continue to erode the credibility of America’s currency today.
My immediate term support and resistance lines for the SP500 are now 1324 and 1339, respectively.
Best of luck out there today,
Keith R. McCullough
Chief Executive Officer
TODAY’S S&P 500 SET-UP - February 17, 2011
Equity futures are trading just below fair value following Wednesday's bounce following positive earnings from DELL and perceived MACRO trends. Political unrest in Bahrain and Lybia are center stage. As we look at today’s set up for the S&P 500, the range is 15 points or -0.92% downside to 1324 and 0.20% upside to 1339.
MACRO DATA POINTS:
EARNINGS/WHAT TO WATCH:
We have 8 of 9 sectors positive on TRADE and 9 of 9 sectors positive on TREND.
CREDIT/ECONOMIC MARKET LOOK:
Treasuries were weaker today with some of the adverse takeaways from the economic calendar offsetting continued geopolitical concerns in the Middle East.
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