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The Macau Metro Monitor, September 21, 2011




SJM Holdings executive director Angela Leong On Kei said she is not concerned with the 3% cap on gaming table growth after 2013.  Leong said casino operators will be able to cope with government restrictions, but future amendments may be needed depending on market demand.  She added that the Macau government should not forget that gaming is Macau's biggest industry.



Sands China is expected to sign a 5-yr $3.7 BN loan today.  About 10% of the 5-yr loan was sold in general syndication. 



August CPI increased 6.15% YoY and decreased 0.04% MoM.  Price index of Recreation & Culture; and Transport rose by 0.97% YoY and 0.82% MoM upon higher charges for outbound package tours and airfare.



S'pore Changi Airport reported a 11.2% YoY increase in passenger traffic in August.  July's growth was 13.6% YoY.



A 'system upgrade' caused a three-hour delay as guests were unable to check in.  Without disclosing how many guests were affected, the spokesperson added, "We seek the understanding of our guests and regret any inconvenience caused." 


TODAY’S S&P 500 SET-UP - September 21, 2011


As we look at today’s set up for the S&P 500, the range is 41 points or -1.17% downside to 1188 and 2.24% upside to 1229.






THE HEDGEYE DAILY OUTLOOK - daily sector view


THE HEDGEYE DAILY OUTLOOK - global performance




  • ADVANCE/DECLINE LINE: -814 (+833) 
  • VOLUME: NYSE 926.25 (+1.97%)
  • VIX:  32.86 -0.40% YTD PERFORMANCE: +85.13%
  • SPX PUT/CALL RATIO: 1.91 from 2.33 (-17.87%)




FIXED INCOME: UST Yields look like they want to make higher-lows on whatever Twizzler move Bernanke tries (or no move at all) this afternoon.

  • TED SPREAD: 35.05
  • 3-MONTH T-BILL YIELD: 0.01%
  • 10-Year: 1.95 from 1.97     
  • YIELD CURVE: 1.77 from 1.81


MACRO DATA POINTS (Bloomberg Estimates):

  • 7 a.m.: MBA Mortgage Applications
  • 10 a.m.: Existing home sales, est. 4.75m (up 1.7% M/m)
  • 10:30 a.m.: DoE inventories
  • 2:15 p.m.: FOMC rate decision 



  • FOMC may decide to replace short-term Treasuries in its $1.65t portfolio with long-term bonds; Jefferies estimates $300b-sized action for “Operation Twist”
  • European officials to return to Greece next week to complete review of economy; Greece to hold Cabinet meeting to discuss accelerating budget cuts
  • SABMiller reached deal to buy Foster’s for A$5.10-shr
  • Google faces Senate panel today on the “Power of Google”
  • PepsiCo reaffirms 2011 guidance, forms global snacks group
  • FDA briefing docs due for 9/23 advisory panel on Miltenyi Biotec’s CliniMACS CD34 Selection System
  • Boeing is on schedule to deliver first 787 next week, CEO McNerney said at forum: WSJ
  • Obama addresses U.N. General Assembly as Palestinians prepare to seek full membership at the Security Council and the U.S. promises a veto




COMMODITIES: Gold fails (again) at the Hedgeye TRADE line of resistance ($1820).


THE HEDGEYE DAILY OUTLOOK - daily commodity view




  • Bullion Vaults Run Out of Space as Gold Rallies: Commodities
  • PepsiCo Poised for 49% Gain Imitating Kraft Breakup: Real M&A
  • Wild West Comes to India Where Miners Defy Supreme Court Rule
  • Lynas Slumps Most in Two Years on Rare Earths Price Drop
  • Corn May Reach Record on Supply ‘Nervousness,’ Newedge Says
  • Oil Drops in New York on Bets of Lower Demand, Higher Supplies
  • BHP Says Global Imbalances, High Debt Creating Uncertainty
  • Gold May Gain for Second Day on Growth Concerns, Fed Speculation
  • European Naphtha Exports Sinking to Year’s Low: Energy Markets
  • Rice to Drop as Indian Exports Intensify Export Competition
  • Parrilla Hires Ex-CastleBay Manager for Commodity Hedge Fund
  • Copper Climbs in New York on Speculation Fed Will Support Growth
  • Copper Imports by China Climb for Third Month on Low Stocks
  • Wheat Advances for a Second Day on Unfavorable Crop Conditions
  • Global Sugar Market Will Be in Surplus in 2011-2012, Licht Says
  • Copper Rises in London as Fed Meets to Boost Growth: LME Preview



THE HEDGEYE DAILY OUTLOOK - daily currency view





EUROPE: down, but not the disaster the shorts need here to keep getting paid (Italy is up small this morn and DAX sitting on TRADE line)


GERMANY: at 5514 DAX is still in crash mode (down -27% from May), but up +10% from the Sept12 capitulation low


THE HEDGEYE DAILY OUTLOOK - euro performance





ASIA: bottoming process in the KOSPI (Korea) could be in motion w/ a TRADE line breakout back above the critical 1813 line; China up +2.7%


THE HEDGEYE DAILY OUTLOOK - asia performance









Howard Penney

Managing Director

Let It Flow, Bro

This note was originally published at 8am on September 16, 2011. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.

“I’m just saying, just let it flow, man.”

-Ray Dalio


I think I have milked both the quotes from Ray Dalio’s New Yorker interview and this week’s short squeeze in Global Equities bone dry. While there has been plenty of emotion embedded in this week’s 100 point S&P futures rally, it’s just time to “let it flow”, Bro.


“Bro” is a very sophisticated nickname that Wall Street trader types use when addressing each-other. Examples would be: “Bro, that was a monsta print, bro…” or “Bro, the two-hundo is still broken – this rally doesn’t make sense, bro.”


Both in the Bro Brotherhood and beyond, this week’s +9% rally in the S&P futures (from Monday’s pre-open low to yesterday’s intraday high) has left a mark. Not surprisingly, you’re seeing the commensurate hedge fund blowups that are associated with price volatility. The Goldman Beta Fund shutdown is a Top 3 story on Bloomberg this morning. Yesterday it was the Euro Bro at UBS.


Bull markets generally don’t blow up the Bros. Volatility does. And as a profession we have a lot of work to do in order to evolve the risk management process so that our clients are actually getting the protection we market to them.


Bridgewater’s Ray Dalio doesn’t blow up. To the contrary, his $100 Billion Dollar hedge fund capitalizes on other people blowing up. In the same New Yorker interview (“Ray Dalio’s Richest and Strangest Hedge Fund”, by John Cassidy, July 25, 2011) Dalio explains how emotion has no place on his team – or he, at a minimum, needs a way to govern it:


“What we’re trying to have is a place where there are no ego barriers, no emotional reactions to mistakes… if we could eliminate all of those reactions, we’d learn so much faster.”


Re-think. Re-work. Re-learn.


That’s what getting good at this Globally Interconnected Game of Risk is all about - not pointing fingers, fighting change, and/or Mr. Macro Market’s leading indicators.


Back to the Global Macro Grind


Not surprisingly, after prices have moved higher across the Global Equities universe, my price, volume, and volatility factors look a heck of a lot better than they did last Friday.


Let’s look at those core 3 factors in the SP500 for example:

  1. PRICE – what was immediate-term TRADE resistance at 1178 is now support
  2. VOLATILITY (VIX) – what was immediate-term TRADE support at 35.47 is now resistance
  3. VOLUME – remains less than dead in the water on the up moves with Wednesday’s volume signal being +9% above average

Now to be crystal clear on reading these factors, they are on 1 duration (the immediate-term TRADE), not all 3 (TRADE, TREND, and TAIL). From a long-term TAIL perspective, resistance for the SP500 remains up at 1265. In other words, all of the “long-term” investors out there should still be concerned about the long-term.


The hallmark of my risk management process is to be:


A)     Multi-Factor

B)      Multi-Duration


What that means (and I think Dalio would agree with this) is that you can heighten the probability of 1. not missing something big or 2. being overly exposed to one big thing, if you are analyzing multiple-factors (Countries, Currencies, Commodities, etc.) across multiple-durations.


So, if we broaden the immediate-term TRADE signals to Europe this morning, here’s what I see (and it’s not good):

  1. Germany’s DAX failing to overcome immediate-term TRADE resistance of 5631
  2. Italy’s MIB Index failing to overcome immediate-term TRADE resistance of 15,014
  3. Spain’s IBEX failing to overcome immediate-term TRADE resistance of 8437

Bear markets get immediate-term TRADE oversold. Then they bounce. We get that. That’s why we’ve made 2 calls in Q3 of 2011 (August 8thand Monday, September 12th) titled “Short Covering Opportunity.” And yes, these “calls” have time stamps.


Old Wall Street’s Sell-Side or the pop-media that provides it a marketing platform doesn’t really do the time stamp thing. We don’t champion time stamps to rub it in their face. We are explicitly challenging them to be transparent so that we can figure out if they can be additive to the collective risk management process that this industry needs.


Letting $2 Billion Dollar losses in the UBS bonus pool “flow” or blowing clients out of “risk managed” hedge fund products at every capitulation bottom we’ve had in the 2008-2011 period isn’t cool anymore, Bro.


My immediate-term support and resistance ranges for Gold (which just broke its immediate-term TRADE line of $1817 and has no TREND support to $1630), Oil, and the SP500 are now $1779-1817, $86.54-90.26, and 1178-1212, respectively.


Best of luck out there today and enjoy your weekend with your families,



Keith R. McCullough
Chief Executive Officer


Let It Flow, Bro - Chart of the Day


Let It Flow, Bro - Virtual Portfolio

Big Default

“Greece should default, and default big.”

-Mario Blejer


The day after European stock markets put in their 2011 bottom (September 12th), Bloomberg’s Eliana Raszewski and Camila Russo wrote a  Big Headline article titled “Greece Should Default Big To Address Worsening Debt Crisis.”


Notwithstanding this newsy headline being a classic contrarian indicator in its own right (German stocks are up +10% in a straight line since September 12th), Bloomberg was citing a reputable source on the matter. Mario Blejer took over Argentina’s central bank during its epic $95B default in 2002.


Back then, that was considered a Big Default.


Today, what’s another $100, $200, or $800 BILLION dollars? That’s chump change compared to what Madame Lagarde has in mind with what she has dubbed, en englais s’il vous plait, an “infinite amount of resources.” Read: she’s thinking a bazooka 2-3x the size of Hank The Market Tank Paulson’s in 2008. The ECB and IMF central planning for a Euro-TARP is called the EFSF. And it’s Big!


Back to the Global Macro Grind


Whether it’s that September 13thBloomberg headline (the SP500 is up +3.4% since) or yesterday’s “How To Prevent A Depression” article from the venerable Perma-Bull himself, Mr. Nouriel Roubini, we have a lot of Big Government Intervention here on our plate to process. So let’s get cracking.


It takes an aggressive short seller to know one, and I can assure you that plenty of the bears thought yesterday’s selloff in the SP500 into the close was going to be bearish for both Asian markets overnight and the US stock market Futures this morning.


Not happening.



  1. ASIA – Last I checked, it’s a big part of this globally-interconnected earth and ostensibly still has a say in domestic matters that are not related to Europigs or Timmy The Squirrel Hunter Geithner’s latest Keynesian ideas. Both South Korean and Hong Kong unemployment dropped to generationally lows levels last night with August unemployment readings of 3.1% and 3.3%, respectively. On the news, the KOSPI Index (South Korea’s leading indicator for a real-time Global Macro Model like mine) shot back above the 1813 line. What was resistance in Korean stocks is now immediate-term TRADE support.
  2. EUROPE – Qu’est ce qui ce passe avec les higher-lows? (that’s French for why won’t Italy go down on the “news”). What goes down in a raging bear market eventually bounces and could bounce really big if Lagarde pulls out La Bazooka when she speaks in Washington (Fall meetings for the World Bank and IMF) in the next 24-48 hours.
  3. USA – While it’s hard to believe I have not mentioned La Bernank in this note yet (it really is his big Presser day), I think the poor Keynesian is out of bullets. Like his debt-monetizing predecessor of the 1970s, Arthur Burns, he has been neutered by Le Stagflation (0.36%-0.98% Q1/Q2 GDP Growth and 3.8% headline consumer price Inflation) and most likely won’t be able to Twist his way out of it before his career as central-economic-planner-in-chief comes to an end. Pardon le pun. 

Bernanke being in a box (he can’t cut or raise rates anymore) is, on the margin, bullish for Americans. No, not the 10% of us who actually traffic on the long side of the stock market casino. I mean the other 90% of us who really couldn’t give a damn about stocks and would much prefer lower prices for gas, food, college, etc. You know, the non-government manufactured stuff.


Bernanke not being able to do much to debauch America’s Dollar anymore will continue to Deflate The Inflation and put pressure on Gold prices. That’s why I cut our exposure to Commodities in the Hedgeye Asset Allocation Model to ZERO percent again yesterday. While commodity price deflation is very bad for Energy and Basic Material stocks, this is very good for Americans.


As for what a Big Default in Greece today or tomorrow will bring, don’t sweat it. That’s not going to happen. It’s already happened in both their stock and bond markets. We don’t need another big “Blue Chip Economist” who has been wrong on his 2011 GDP forecast by 60-70% to remind us commoners of that.


My immediate-term support and resistance ranges for Gold, Oil, and the SP500 are now $1, $85.69-86.93, and 1188-1229, respectively. Don’t let headlines freak you out at the high or low ends of these ranges. Proactively manage your risk around them.


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Big Default - Chart of the Day


Big Default - Virtual Portfolio

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