prev

INITIAL JOBLESS CLAIMS RISE 29K (26K AFTER REVISION) TO 397K

Initial Claims

The headline initial claims number rose 29k to 397k (26k after a 3k upward revision to last week’s data).  Rolling claims rose 3k to 392.25k. On a non-seasonally-adjusted basis, reported claims rose 55k WoW.  This is only the second WoW increase in NSA claims in 2011.  While seasonally adjusted claims have been volatile, the NSA series, until this week, was steadily falling. 

 

We have been looking for claims in the 375-400k range as the level that can begin to bring unemployment down.  If this level is held, we expect to see unemployment improve.  That said, it is worth highlighting an important caveat. This recession has been different in that it has pushed the labor force participation rate down by ~200 bps, which has had a correspondingly positive improvement on the unemployment rate. In other words, the unemployment rate isn't really 8.9%, it's 10.9%. So when we say that claims of 375-400k will bring down the unemployment rate, we are actually referring to the 10.9% actual rate as opposed to the 8.9% reported rate.

 

 INITIAL JOBLESS CLAIMS RISE 29K (26K AFTER REVISION) TO 397K - rolling

 

INITIAL JOBLESS CLAIMS RISE 29K (26K AFTER REVISION) TO 397K - raw

 

INITIAL JOBLESS CLAIMS RISE 29K (26K AFTER REVISION) TO 397K - NSA

 

One of our astute clients pointed out the relationship between the S&P and initial claims shown below.  We show the two series in the following chart, with initial claims inverted on the left axis.

 

INITIAL JOBLESS CLAIMS RISE 29K (26K AFTER REVISION) TO 397K - s p

 

Yield Curve Remains Wide

We chart the 2-10 spread as a proxy for NIM. Thus far the spread in 1Q is tracking 42 bps wider than 4Q.  The current level of 278 bps is unchanged vs last week.

 

INITIAL JOBLESS CLAIMS RISE 29K (26K AFTER REVISION) TO 397K - spreads

 

INITIAL JOBLESS CLAIMS RISE 29K (26K AFTER REVISION) TO 397K - spreads QoQ

 

Financial Subsector Performance

The table below shows the stock performance of each Financial subsector over four durations. 

 

INITIAL JOBLESS CLAIMS RISE 29K (26K AFTER REVISION) TO 397K - subsector perf

 

 

 

Joshua Steiner, CFA

 

Allison Kaptur



MPEL: MAY OPENING FOR GALAXY MACAU

Galaxy Macau’s opening in mid-May should force the sell side to raise Q2 estimates. Oh, and they're low for Q1 as well. 

 

 

The sell side models are still projecting an April opening for Galaxy Macau (GM).  In fact, one sell side research team put out a report yesterday that mentioned late March as a possibility.  Galaxy announced last night a May 15 opening date for GM, which is an auspicious date in the Chinese calendar.  This is a positive for MPEL as it relates to the sell side models.  It is consensus among the sell siders that MPEL's City of Dreams will be hit the hardest by Galaxy Macau. 

 

We are already way above the Street for 1Q and 2Q, approximately 16% higher for EBITDA in both quarters.


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.

THE M3: GALAXY MACAU GRAND OPENING; CHINA FEB LENDING; BORDER CHECKPOINT; MORE ILLEGAL WORKERS

The Macau Metro Monitor, March 10, 2011

 


GALAXY ENTERTAINMENT: NEW MACAU PROPERTY GRAND OPENING MAY 15 WSJ

Galaxy Entertainment Group Ltd said Galaxy Macau will open May 15, 2011 with 450 tables, 2,200 hotel rooms and +50 F&B outlets.  Chairman Francis Lui said Galaxy will apply to the government to host more gaming tables (room for 150 more) beyond its initial 450 "if and when necessary."  It expects Galaxy Macau to be the only new resort to open in the Chinese gambling territory until "at least the end of 2011."

 

CHINA NEW BANK LENDING UNDER $600 BILLION YUAN IN FEBRUARY Xinhua News

Chinese banks extended less than $600 billion yuan in new loans in February.  In January, Chinese banks loaned just over $1 trillion yuan.

 

MACAU: BORDER CHECKPOINT HOURS TO BE EXTENDED Macau Daily News

The daily opening hours of the Gongbei‐Macau border is expected to extend by 2 to 3 hours by the end of the year or early next year.  The first meeting between Guangdong and Macau will be held next month, and both sides have already agreed to put the extension of immigration checkpoint’s opening hours and regulations for cars with Macau registration plates to be driven in Hengqin Island on this year’s agenda. The Macau government has indicated the ultimate aim to operate a 24‐hour border checkpoint.

 

The Macau government also plans to establish a joint venture with Henguin for developing the business zone. The construction of the Henguin initiative is expected to be kicked off by the end of next month. The government intends to support some high potential emerging industries and may introduce new measures to encourage gaming enterprises to develop non‐gaming businesses.

 

ILLEGAL WORKERS FOUND AT GALAXY MACAU'S SITE Macau Daily Times

According to the Public Security Police, Macau authorities yesterday found 23 illegal workers during a raid on the Galaxy Macau construction site.


Dark Moon

“I like to think that the moon is there even if I am not looking at it.”

-Albert Einstein

 

On this day in 1973 British rock band Pink Floyd released the Dark Side of The Moon. In Hedgeye-speak, that album was multi-factor and multi-duration, focusing on the interconnectedness of the world. Money, war, and death – from time to time, these can be the dark sides of this world. Pretending that their impacts on human behavior cease to exist isn’t my view of a risk management process; neither is hope.

 

So far, the best strategy we can offer Global Macro Risk Managers is grounded philosophically in Chaos Theory. Some people call it Complexity Theory – mathematically speaking, Chaos and Complexity theories are pretty much the same things.

 

Much like Einstein’s aforementioned admission of a Dark Moon, there are some things in markets that you can’t see. But, from dark pools, to the “flows”, and inside information – it’s all there. No matter where your concept of your research “fundamentals” go, there it is – either by expectation or by the actual “news”, it’s always being absorbed into the market’s last price.

 

Where I used to get run-over in positions was when I considered my research on a company the center of the universe. As if Mr. Macro Market knew me and owed me something. You can go get yourself a Yale degree and draw up a “smart” looking slide presentation about your bottom-up investment thesis – and that investment strategy will be all good and fine, until it isn’t.

 

Usually what hits you like Big Alberta when he has you lined up at the blue-line with your head down is the macro. Or, as some bottom-up only investors like to call it, “the unknown.” Well that excuse, losing your investor’s money, and a few false teeth might get you a ride home on the bus, but it’s certainly not going to give you an entitlement to dress in the next game.

 

The next risk management game in a globally interconnected marketplace starts now. Like a good Chaos Theorist, you either wake up accepting that Global Macro market risk is grounded in uncertainty, or you don’t. Like the moon, Asian Growth Slowing and Greek Debt Imploding is still there this morning, even if you weren’t looking at it…

 

Here’s this morning’s Global Macro grind:

 

1.       Asian Growth Slowing As Global Inflation Accelerates

-Japan revised its Q4 GDP estimate LOWER again to -1.3% (don’t forget that the US has done the same with Q4 GDP, twice)

-China reported a huge sequential slowdown in Exports for February at +2.4% (lowest level of demand since early 2009)

-South Korea raised interest rates to 3% (2nd rate hike for 2011 YTD with the #1 reason being inflation)

 

2.       European Sovereign Debt Yields Rising As Global Inflation Accelerates

-Credit ratings being cut in Spain this morning aren’t leading indicators – and neither is the assumption that more debt will solve this

-Greek bond yields continue to rise to higher all-time highs (all-time is a long time)

-British and German Equity markets are breaking down through their respective immediate-term TRADE lines of support

 

3.       US Growth Expectations Slowing (finally) As Global Inflation Accelerates

-US Treasury yields are finally backing off (2s down to 0.68% this morning) dulling one of the “growth signals” the bulls had in FEB

-Oil prices remain elevated and impose a significant sequential tax on US consumption growth (Q4 avg oil price = $85/barrel)

-Volatility (VIX) remains well above our intermediate-term TREND line of support (18.08) as fundamentals challenge the “flows”

 

So, that’s what we call The Big Stuff here at Hedgeye. And the Risk Manager strategy is to stay ahead of The Big Stuff. Whether you are looking at a company from the bottom-up or a country from the top-down, Growth Slowing as Inflation Accelerates in your cost structure definitely matters.

 

The Big Stuff can also morph into consensus. For example, I think The Inflation that we’ve been belaboring since October is now becoming consensus. This is where managing risk gets a lot trickier. What’s priced in? How long can consensus be right?

 

Here’s some more Big Stuff with potentially long-term tails:

  1. A Super Sovereign Debt Cycle Structurally Impairing Long-Term Growth
  2. A Global Inflation and Unemployment Problem Inspiring Revolutionary Revolt
  3. A Global Belief In The Fiat Currency System Coming Under Attack

Again, like the Dark Moon – it’s all there…

 

So, we’ll keep focusing on what we see in our globally interconnected risk management model, trying our best to change our asset allocation and long/short positioning as consensus changes are absorbed into market prices.

 

My immediate term TRADE lines of support and resistance for WTI crude oil are $102.11 and $108.71, respectively. My immediate-term lines of support and resistance for the SP500 are now 1302 and 1334, respectively.

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Dark Moon - dark moon

 

Dark Moon - CH2


TALES OF THE TAPE: SBUX, GMCR, BWLD, TAST, DRI

Notable news items/price action from the past twenty-four hours.

  • SBUX and GCMR have struck a deal to bring single-cup Starbucks coffee and Tazo pods to Keurig users.  Terms were not disclosed.  GMCR is trading up 13% premarket.
  • BWLD is trading strongly, up 4% yesterday on accerlerating volume, as chicken wing prices continue to slide.  The other key factor to monitor here is the dispute between the NFL Players’ Association and the NFL.  A players’ strike could materially impact traffic at BWLD restaurants.  We continue to follow the developments of the NFL dispute for any impact on BWLD.
  • TAST continues to trade higher on accelerating volume. 
  • DRI has traded strongly of late, rising 1.8% on higher volume  on Ash Wednesday.  Red Lobster is looking forward to a boost in seafood consumers this Lenten season!
  • The U.S. cattle herd is the smallest since 1958 as beef exports surged 19 percent in 2010 to about 2.3 billion pounds (1.04 million metric tons), according to the U.S. Department of Agriculture. Cattle prices have jumped 27 percent in the past year, fueled by a global economic recovery that is boosting meat demand in emerging economies, including China.

TALES OF THE TAPE: SBUX, GMCR, BWLD, TAST, DRI - stocks 310

 

Howard Penney

Managing Director


investing ideas

Risk Managed Long Term Investing for Pros

Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.

next