The Macau Metro Monitor, May 18, 2011




John Paulson's firm plans to invest up to US$75MM in the MGM JV; through his company Tracinda Corp, Kirk Kerkorian has agreed to subscribe for up to US$50MM; property developer Asia Standard International, controlled by HK businessman Poon Jing, has pledged to invest up to US$40MM; and Dornbirn Inc, owned by Hong Kong real-estate developer Walter Kwok, will chip in up to US$25MM—Kwok is the former chairman of blue chip developer Sun Hung Kai Properties Ltd.


Like the other cornerstone investors, Paulson & Co. has agreed not to sell its shares for at least six months after the listing.  The public offering runs from May 23 to 26 with pricing due to be announced on May 27. The shares are set to begin trading on June 3 under stock code 2282.

RWS FINED S$530,000 FOR FOUR BREACHES Channel News Asia

RWS was fined S$200,000 for reimbursing the entry levy payable by Singapore citizens and permanent residents.  On July 15 last year, a senior management staff of RWS gave cash to media representatives - who are Singapore citizens and permanent residents - to help them pay the entry levy payable by them to enter its casino premises to cover the launch of the Ladies Club.  Also, RWS was fined S$330,000 for 3 separate cases of casino surveillance non-compliance.


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We have put together a slide deck that illustrates my outlook on the consumer. 


The consumer's propensity to spend has exceeded expectations over the last nine months even as underlying fundamentals such as housing and confidence that have flat-lined.  Income has improved somewhat, albeit artificially, while the jobs picture has been moving in the wrong direction for weeks now.


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The slow improvement in employment levels in the U.S. since 2009 has almost become ingrained in people's economic analysis.  However, what many analysts seem to ignore is the established reversal in this trend that has been in place for much of 2011.  Without initial claims declining to approximately 375k, according to Financials Sector Head Josh Steiner, we cannot expect material improvements in the unemployment rate.  Despite a labor force participation rate at record lows, the unemployment rate has not meaningfully declined and even ticked up in March to 9%. 



Consumer Credit


The consumer's appetite for credit is not what it used to be.  Households are retrenching in order to build up savings and pay off debt.  While the consumer is deleveraging at a slower rate than before, the year-over-year growth in revolving debt outstanding remains negative.





Spending data has been strong of late with PCE trending higher over the past nine months.  However, a sharp increase in gas prices is negatively impacting consumer spending and S&P revenues.  While temporarily reduced payroll tax withholding is buttressing income for now, wage income needs to pick up the slack in order to make the trend sustainable.  Recent ISM manufacturing employment indices' data has pointed to a slowdown in growth.



Retail Sales


Retail sales are showing signs of fragility as April retail sales recorded their slowest pace of growth this year as sales outside of gasoline stations increased a meager 0.2%.  Higher energy prices are weighing on retail sales and chain store sales, according to recent releases. 





Consumer confidence has been soft following an upward trajectory that began in 4Q10 abruptly ended with the March disappointment.  In general, the rebound in consumer sentiment has been driven by expectations while current attitudes have remained depressed.  In the absence of a pickup in wage income and hiring levels, expectations may decline.  Small businesses' confidence levels are also low at present.  Importantly, as the NFIB Small Business Optimism survey reveals, expectations among small businesses for economic improvement have been declining. 





House prices have been an important metric for consumers but, of late, the impact of housing market jitters has not manifested itself strongly in consumer behavior.  That said, we believe that it is early days in this regard, and the consumer is far from immune from the ongoing slide in property prices.  Hedgeye's Financials team, in mid-2010, was out with a call for a decline in house prices of approximately 20% in 2011.  The data continues to corroborate with that thesis, this morning's housing starts and permits numbers being the latest confirming data points.  When this begins to matter for the market, the impact should be significant.




Howard Penney

Managing Director

JNY: Oversold TRADE


KM covering - Immediate-term TRADE oversold. McGough remains bearish on Jones Group for the intermediate term TREND. Fundamentally, we still don’t think that this company will earn over a buck ever again without major internal change.


JNY: Oversold TRADE - JNY 5 17 11



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