It looks like Macau total gaming revenues will come in around HK$23 billion for May, up 39%. 



Through the 29th, table revenues were just under HK$21 billion.  Add in 2 more days of table revenues and slot revenues of HK$950 million to get to our full month projection.  Business definitely slowed over the past week, dropping to HK$544 million per day versus HK$775 million last week (the first week of Galaxy Macau).  Indeed, total gaming revenues will fall at the low end of our previous estimate of HK$23-24 billion.  We don’t know yet if hold played a part.


There were some surprising shifts in market share post the Galaxy Macau opening.  Not surprisingly, most Macau operators lost share – the exception being Galaxy and MGM.  MGM is off to a solid start in Q2 and should report a strong first Q out of the blocks of its IPO.  The biggest surprise to the Street may be that Wynn lost the most share.  Low hold probably played the biggest role but Wynn Macau/Encore has the highest VIP revenue per table, so theoretically the most to lose.  Galaxy is a pretty fierce VIP competitor and may be going after Wynn’s lucrative VIP business.  We’re pretty sure Galaxy Macau was very aggressive in providing junket liquidity/credit through the opening.


From what we can glean from the limited data, Galaxy Macau is off to a great start.  Even after normalizing the current pace somewhat and including cannibalization of Starworld, ROI appears to be trending well above the 20% bogey.  However, it is still very early.


Here is the latest data:



Distributing The Future

This note was originally published at 8am on May 25, 2011. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.

“The future is here. It’s just not evenly distributed yet.”

-William Gibson


Speculative-fiction author Bill Gibson is my kind of guy – he’s an American-Canadian. He also likes to make up his own terms for things and put himself out there with contrarian predictions about the future.


I’m currently in the middle of reading “The World In 2050” by Laurence Smith (excellent research read on resource risk, demographic risk, etc). In the very first chapter of the book, Smith gets your attention with the aforementioned Gibson quote and another by Niels Bohr.


Making market “calls”, or proactively managing risk around the edges of this globally interconnected marketplace, isn’t as hard as people crack it up to be. Sure, the daily grind is hard - but the data is there.


The future of Global Macro Risk Management is here.


Getting what people in this business used to call “edge” doesn’t come without orange jump suit risk. Ask The Raj about that. In economic cycles that are being shortened by Fiat Fool policies, the future of Risk Management Edge is going to be grounded in getting TIME and PRICE right.


To do that, in today’s marketplace at least (and this will change), you really need to get The Correlation Risk right.


To get The Correlation Risk right, you need to get the US Dollar right. To get the US Dollar right, you need to get monetary policy right. To get monetary policy right, you have to grind (or buddy up with The Gopher).


If the future was evenly distributed, you wouldn’t be seeing these massive moves in asset classes from quarter-to-quarter. It was only 6 months ago that Hedgeye had a Global Macro Theme called “Trashing Treasuries” (as in short them). Today, one of my highest conviction positions is long the long-bond (TLT). And in 3-6 months, I am sure that will change too.


What if you don’t change? What if you haven’t evolved your risk management process since 2008?


Dagny Taggart probably has a few answers for us all to those questions. My simple one is this – if you don’t evolve the process, you’ll lose. And I don’t mean lose whatever moneys you’ve made. I mean you’ll lose your confidence in making emotionless decisions. You’ll lose the conviction that it takes to change your mind.


So what is my Global Macro Risk Management process flagging this morning?

  1. Vietnam is the first Asian Equity market to crash – down -4% last night and down -20.5% since May 4th
  2. Japan continues to resemble the Big Government Intervention train wreck that bailout beggars in America want our markets to be
  3. Chinese equities have once again broken their intermediate-term TREND line of support (2811 on the Shanghai Composite Index)
  4. Indian stocks were down another -0.7% overnight to -12.8% YTD and remain one of our best Macro short ideas in 2011
  5. South Korean and Australian Equities have moved to bearish TRADE and TREND in our model – nasty signals for Global Growth
  6. Pakistan was up overnight, hooray
  7. European Equities are starting to look as ugly as their socialist policy to keep Greek and Portuguese bond markets ticking
  8. Germany, which we like, doesn’t look good
  9. Sweden, which we like, doesn’t look good
  10. Spanish and Italian Equities have broken their TRADE and TREND lines (this is new – in Q1 they were bullish on both durations)
  11. Russian stocks have broken their intermediate-term TREND line on the RTSI of 1964 – bearish signal for The Petro Dollar markets
  12. The Euro is testing and intermediate-term TREND breakdown of $1.41 TREND line support
  13. The US Dollar has moved to bullish immediate-term TRADE – what was big resistance at $74.41 is now big support
  14. US stocks have been down for 3 consecutive days and 4 consecutive weeks
  15. TREND lines in the SP500 (1321), Nasdaq (2794), and Russell2000 (826) are all broken as of last price
  16. Only 3 Sectors in our S&P Sector Risk Management Model are bullish TRADE and TREND (Healthcare, Utilities, and Staples)
  17. Volatility (VIX) is bullish on 2 of our 3 core durations (TRADE and TAIL), with a big breakout line at 18.04 daring you to buy the dip
  18. US Treasury Bonds look awesome – as in awesome bullish

Awesome is as awesome does. That’s the future. It’s here. And it’s our job to manage risk around it.


My immediate-term support and resistance ranges for Gold, Oil, and the SP500 are now $1508-1527 (bullish), $96.98-100.93 (bearish), and 1311-1321 (bearish), respectively.


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Distributing The Future - Chart of the Day


Distributing The Future - Virtual Portfolio

DKS: Shorting (Again)


Keith added to our DKS short today on the day’s high. See updated levels below.


DKS: Shorting (Again) - DKS Levels 5 27 11



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 Week Ahead

The Economic Data calendar for the week of the 30th of May through the 3rd of June is full of critical releases and events.  Attached below is a snapshot of some (though far from all) of the headline numbers that we will be focused on.


The Week Ahead - cal1

The Week Ahead - cal2




May 27, 2011






  • Genesco’s Lid’s business continues to outpace its other concepts growing over 40% in Q1 and now accounts for more than 30% of total sales. One of the key initiatives in this higher margin segment is the company’s new‘er’ team sports concept that it has been working on closely with Nike – in fact, the company is one of Nike’s largest team dealers. In addition, the company is beginning to penetrate smaller markets via its rollup strategy of smaller mom and pop team stores gaining additional access to smaller teams at both the high school and college level.
  • In the wake of anomalous weather events in April, management of Fred’s Department Stores noted a trend shift back toward basic and consumable products during the quarter compared to a higher discretionary merchandise higher margin mix realized over the last three quarters. The company also noted that more significant than weather was the impact of higher fuel prices on both freight costs and customers during the quarter.
  • Continuing its voracious appetite for increasing square footage, RUE highlighted its plan to add approximately 110 new stores over each of the next two years implying ~15% annual growth. With one of the smaller formats in teen retail at an average size of 5,000 sq. ft., management highlighted that some of the company’s top performing stores are located in small population suburban locations where they are the only teen retailer in town. Interestingly on the contrary to other retailers, RUE saw no difference in traffic patterns between their outlet vs. strip vs. mall-based locations.



Foot Locker Implements Organizational Changes - The company announced on Thursday a number of organizational and management changed designed to strengthen its retail store and direct-to-customer business units. Effective July 1, Richard Johnson, who currently serves as president and CEO of Foot Locker U.S., Lady Foot Locker, Kids Foot Locker and Footaction, will be promoted to EVP and group president of retail stores. He will also oversee all of the company’s domestic and international stores. The direct-to-customer business unit, under the new organizational chart, will now report directly to chairman, president and CEO Ken Hicks. Current EVP and CFO Robert McHugh will undertake new duties as EVP of operations support and be responsible for information systems and technology, real estate, logistics and sourcing. “This senior management reorganization will allow us to focus our key business units on improving our execution and continue to build on the success of our businesses,” Hicks said in a statement. “In particular, consistent with our strategic priorities, it will also enable us to strengthen our brands and put more emphasis on our high potential growth areas of dot-com and international development.” <WWD>

Hedgeye Retail’s Take: This is not a move resulting from poor financial management and an impending blow up. Quite the opposite; financial acumen has never been a core part of FL’s MO at the business level – only financial engineering sent down from above starting in the destructive Hartman years. With the direct-to-customer business now accounting for nearly 10% of total sales up from just 7% in ’08, getting the CFO in the ops side of the house makes sense to us.


Gap Enters Italy - In line with its bullish international expansion plan, on June 2, Gap Inc. will open its first outlet store inside the Vicolungo Outlet Center near Milan. The 7,560-square-foot space will carry Gap staples, including jeans and logoed sportswear, as well as seasonal assortments for men, women, kids and baby. “We are excited to bring the value expression of Gap brand to Italy for the first time and provide Italian consumers with the opportunity to purchase products designed specifically for Gap¹s fashion-minded, value-driven customer,” said Stephen Sunnucks, president of Gap Inc. Europe and Strategic Alliances The outlet, which comes six months after the inauguration of Gap’s first flagship in Milan, represents the “fastest execution of our international strategy to date,” said Sannucks. Moreover, fueled by the buoyant retail start, later this year Gap Inc. will inaugurate a store in Rome and two venues in outlet centers. Gap Inc. currently operates more than 370 stores through its outlet channel and over the last four years, its international outlet business skyrocketed 500 percent across the United Kingdom, Canada and Japan. Gap Inc. plans further growth in this channel with about 25 additional global stores in 2011 and through new market, such as China in 2012. <WWD>

Hedgeye Retail’s Take: International is the part of Gap, Inc that remains underappreciated. They actually have a real strategy and plan here, and it’s playing out. Unfortunately, it’s too small to matter – at least yet.


Syms Explors Strategic Options - Shares of Syms Corp. soared more than 27 percent Thursday after the off-price retailer known for its fondness for educated consumers said it had begun to explore strategic options. Syms said it has “initiated a process to explore and evaluate various potential strategic alternatives, which may include a possible sale of the company.” In addition, Syms said it hired Rothschild Inc. as its financial adviser to assist in the process. The company said there was “no defined timetable” for the review. According to a credit source, Alvarez & Marsal, the consultancy that specializes in restructuring, earlier this month completed a project for Marcy Syms, the firm’s chairman, president and chief executive officer. An Alvarez & Marsal spokeswoman didn’t return a call requesting comment. Syms acquired Filene’s Basement, now a wholly owned subsidiary, in a bankruptcy court auction in 2009. It operates 47 off-price stores under the Syms and Filene’s Basement nameplates, including five co-branded Syms/Filene’s Basement stores. <WWD>

Hedgeye Retail’s Take: Timing is solid. With inventories starting to build in the channel while sitting at the high end of a men’s apparel cycle, Syms gets even better buys headed into the summer and fall, which should optimize its margin structure and valuation.


Richemont Plan Aggressive Expansion - Luxury goods group Richemont is planning a significant expansion of its workforce over the next two years to cope with rising demand, sources reported. Richemont's deputy chief executive Richard Lepeu revealed to a Swiss media that the company is seeking to extend its operations following the release of a strong financial report. Lepeu told the press that the company would need between 850 and 900 new staffers in 2011, adding that a similar number would be required the following year.  He also stated that the firm was set to invest around 2.58 billion euros (£2.23 billion) in its production and distribution facilities as this is one area which is hindering Richemont's development. <FashionNetAsia>

Hedgeye Retail’s Take: Huh? A company that actually invests in taking on new employees to grow its business instead of simply making the existing ones work at unsustainably high productivity rates? There’s something you don’t see every day.


BCBG Vendors Unpaid - While BCBG Max Azria Group Inc. is negotiating new debt agreements, its vendors and creditors are waiting. The fashion firm, with interests ranging from mass to luxury, is at work on a deal to refinance its debt and untangle a web of interconnected financial arrangements, leaving vendors and creditors wondering when they’ll be receiving payments. Credit sources told WWD the firm has been slow in paying creditors, with some invoices unpaid since February. And last week, the fashion house told creditors BCBG had “suspended” all payments pending completion of new financing arrangements, according to one credit contact. BCBG has been trying to complete a deal to secure a new $230 million term loan to refinance a portion of its debt. A $94 million first-lien term loan comes due on Aug. 10, but that date would be moved up to June 16 if the $230 million term loan isn’t completed. If and when it’s refinanced, its maturity would extend until 2015. The company hopes to complete the refinancing by June 14, in advance of the deadline. According to credit sources, BCBG last August refinanced a $460 million asset-based loan through 2014. However, the ABL requires a “timely” refinancing of its first-lien term loan. <WWD>

Hedgeye Retail’s Take: As we all know, the shame here is that once a company gets tight on its payment and seeks protection, vendors naturally restrict product flow. That’ in turn, propagates weak inventory positioning and a severe competitive disadvantage.


Enter Rachel Zoe - When Rachel Zoe heard the long list of retailers that ordered her first collection for fall, she went numb. No wonder. Nordstrom, Saks Fifth Avenue, Bloomingdale’s, Intermix, Selfridges, Kirna Zabête and have purchased her label, Zoe said, though she has “no clue” what annual sales might be for the Li & Fung licensed brand. Neiman Marcus is launching the celebrity stylist’s sportswear, handbags and shoes in July at all 41 doors plus online and at Bergdorf Goodman. The rollout across the entire Neiman Marcus Group is a rare endorsement of a fledgling brand. Neiman’s backing is what brought her to a board room of the Ritz-Carlton hotel in Dallas with Mandana Dayani, her vice president, general counsel and chief wrangler, and Ken Downing, senior vice president and fashion director of Neiman Marcus. “She is a real talent,” Downing said. “She understands the customer and she’s brought an effortless chic to the collection. The clothes are going to appeal to women of many ages. And, she’s got an amazing name.” fashion jewelry for fall 2012. “I wish it were for spring,” she said wistfully. “I am dying to do jewelry. I’m gagging.”

Hedgeye Retail’s Take: Just goes to show how low barriers to entry are in this business. Incumbents need to invest to stay relevant. You listening Jones?


Inditex Targets Tailored - Spanish apparel retailer Inditex is planning to launch more tailored products across the emerging markets particularly in the Southern hemisphere, sources reported. Owning a number of retail chains including Zara and Bershka, the retailer is creating lines designed specifically for customers in key markets such as Brazil and South Africa. Zara currently operates 30 stores in Brazil and expects to open outlets in South Africa and Australia this year. In an interview with the Financial Times, Inditex's chief executive Pablo Isla claimed that it is important to offer consumers seasonal clothes in all regions across the world. <FashionNetAsia>

Hedgeye Retail’s Take: This company has earned the right to sell just about anything it wants. Its turn times and consistency of results dwarf US standards.


Japan Deflation Run Over - Japan’s policy makers, striving for more than two years to end deflation, refrained from calling a victory after prices rose in April, with an economic recession damping the nation’s outlook. Consumer prices excluding fresh food rose an annual 0.6 percent, the first gain since 2008, the statistics bureau said. Economy Minister Kaoru Yosano indicated today’s data don’t signal sustained gains. Japan’s challenges were highlighted by Fitch Ratings cutting its sovereign-rating outlook, citing the risk of rising debt on post-earthquake reconstruction.  The Bank of Japan is poised to keep its monetary stimulus, contrasting with counterparts from China to India that are tightening policy to stem inflation. Prices climbed in Japan after global energy and food costs rose and retailers suffered product shortages in the aftermath of a record earthquake and tsunami that caused the economy to shrink in the first quarter.  The increase in consumer prices in April, the first since 2008, matched the median estimate in a Bloomberg News survey of 25 economists. Retail sales fell 4.8 percent from a year earlier in April, the Trade Ministry said in a separate report released today, underscoring the impact on consumers from the March disaster. The drop reinforces forecasts for gross domestic product to shrink for a third straight quarter in the three months to June. <Bloomberg>

Hedgeye Retail’s Take: Not sure if this matters, but Tiffany’s Japan comps were up in April. It’s going to take a heck of a lot more than a month or two to reverse a long-term decline that’s made even more severe by a near term event of nature. But interesting to note the coexistence of the two datapoints.




The Macau Metro Monitor, May 27, 2011



The MGM China IPO was priced at HK$15.34 (US$1.97), the high end of the range.  The company sold 760MM shares, raising HK$11.66 billion ($1.5 billion).



RWS' executive chairman Tan Sri Lim Kok Thay said that barring any incidents, the resort is on track for its Phase Two opening and he is confident that it will attract more than 16MM visitors in 2011, up from last year's 15MM.  Starting with the opening of the maritime museum in 3Q, other attractions to open under Phase Two include the Equarius hotel, an oceanarium and a water theme park.



Macau's unemployment rate for February-April 2011 was 2.7%, unchanged from the previous period (January-March 2011).  Total labor force was 334,000 in February-April 2011 and the labor force participation rate stood at 71.2%. 

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.