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MACAU SURPRISINGLY ACCELERATES

November GGR forecast revised up to HK$21-22BN

 

 

This past week, average daily table revenue increased sharply to HK$781 million versus HK$639 million last week.  We expect the current week to slow again since many VIP players stay away from Macau during the Grand Prix celebration (race is on Saturday).  However, with Cotai somewhat immune to the congestion, the slowdown may not be as pronounced as in prior years and we should see a market share shift away from the peninsula.  We are projecting full month GGR (including slots) of $21-22 billion (+25-31% YoY) with a bias at the high end of that range.

 

SJM was the clear market share winner, a nice reversal from last year’s hold-affected decline.  We think SJM is holding around 3.5% month to date.  On the low end, MPEL held around 2.5% at both Altira and CoD so far in November, dragging down overall share.  MPEL bears should control their enthusiasm, however.  We think MPEL is on pace for over US$200 million in EBITDA and over US$220 million in hold adjusted EBITDA.  Street consensus is only US$195 million.  

 

MACAU SURPRISINGLY ACCELERATES - macau


THE HBM: DNKN, GMCR, MCD, SBUX, DRI, OSI

THE HEDGEYE BREAKFAST MONITOR

 

MACRO NOTES

 

Wheat


A glut in wheat prices is set to lead prices lower, according to Bloomberg, as exporters fight for sales.  France, in particular, is suffering as Ukraine can export wheat to northern Africa – an important export market for France – as much as $10-15 cheaper than the French can.

 

THE HBM: DNKN, GMCR, MCD, SBUX, DRI, OSI - wheat 1114


 

SUBSECTOR PERFORMANCE

 

THE HBM: DNKN, GMCR, MCD, SBUX, DRI, OSI - subsectors fbr

 

 

QUICK SERVICE

 

DNKN: Dunkin’ Brands has announced that JP Morgan, Barclays, and Morgan Stanley are waiving a lock-up restriction with respect to up to 732,758 shares of the company’s common stock.  The waiver will take effect on November 16, 2011, and the shares may be sold on or after such date, subject to the terms of the waiver.

GMCR: Green Mountain Coffee was cut to Hold from Buy at Argus Research.

 

MCD: McDonald’s aims to “at least” double coffee sales in Germany over the next four years according to the Financial Times Deutschland.

 

MCD: McDonald’s was maintained overweight at Barclays.

 

SBUX: Starbucks has raised over $1 million in donations within the first two weeks of its Create Jobs for USA Fund program’s launch.

 

 

CASUAL DINING

 

DRI: Darden featured in Barron’s this weekend where the publication, citing Goldman Sachs research, said the shares could rise to $60 due to a combination of new unit growth on college campuses and airports and pricing. Goldman’s PT is $53.

 

OSI: OSI Restaurant Partners LLC, parent to Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and other casual-dining chains reported a larger net loss for its third quarter despite strong top-line trends.  Domestic system-wide same-store sales rose 5.6% at Outback Steakhouse during the quarter.

 

 

THE HBM: DNKN, GMCR, MCD, SBUX, DRI, OSI - stocks 1114

 

 

Howard Penney

Managing Director

 

Rory Green

Analyst

 


Clever Confusion

This note was originally published at 8am on November 09, 2011. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.

“A clever person solves a problem. A wise person avoids it.”

-Albert Einstein

 

Yesterday was not a good day for me. Today will be. This is the game. And I love playing it.

 

Yesterday, I couldn’t have been more confused between the intraday and end of day signals I was getting in my risk management model. In general, when that happens (and I’ve had to learn this lesson the hard way by getting whipped around), the best decision is to take down exposure and get out of the way.

 

So this, fortunately, is what I did:

  1. Sold my US Equities in the Hedgeye Asset Allocation Model back down to 0% (from 6% on the open and 12% the week prior)
  2. Sold my LONGS in the Hedgeye Portfolio (different product) down from 9 LONGS on the open to 7 LONGS by the close
  3. Stayed with my best Global Macro long ideas – US Dollar (UUP), Long-term Treasuries (TLT), long UST Flattener (FLAT)

Unfortunately, staying with these long positions (UUP, TLT, and FLAT) made me feel shame yesterday. That’s what you should feel when you lose. Losing means you didn’t have it right. Winners need to lose before they can really learn how to win.

 

Intermediate-term to long-term investors have not been losing being long these positions for the last 6-9 months as it’s become clear that Global Growth Slowing will dominate Global Macro investing in 2011.

 

Most of the losers out there who focus on whining and finger pointing will obviously disagree with that statement – blame Europe or blame Canada for US GDP growth being 0.36% in Q1 or China slowing sequentially throughout the year – that’s easier, I guess.

 

There is nothing that’s been easy about investing in a globally interconnected macro marketplace in 2011. That will not change with French, Italian, and US Equities collapsing early this morning.

 

Ironically enough, Madame Lagarde seems to be geeking out on Le Chaos Theory this morning, prefacing her great depression fear-mongering speech to the last bastion of money printing – the IMF:

 

“In our increasingly interconnected world, no country or region can go it alone… there are dark clouds gathering in the global economy.”

 

Really?

 

On what part? The Lord Voldemort darkness of it all that is required to scare the hell out of people, or the socializing of losses part where only the young can dare “go it alone” in this world and bet on themselves?

 

If you thought all of this begging, banning, and printing was going to end well, you certainly didn’t get that call from me. In the last 4 years of ranting to you, I have to say that some days it really sucks to have to write about reality.

 

I’m on the same team as you. I am responsible for both my family and firm’s well being. I am looking to make this world a better place for my kids. But piling-more-policy-upon-policy is not the way out of this confidence spiral. It’s sucking the life out of capitalism.

 

Let us fail.

 

That’s the only way anyone on any team I have ever played on was really able to learn. Let me give-away the puck in front of 10,000 crazy fans wearing Badger red in Wisconsin (when my Mom is in the stands wearing blue) and let me hear that building light me up with insults like a Christmas tree in December for giving away a Yale goal.

 

Mucker, high and off the glass next time, eh?

 

Avoiding risk is important. It’s a process, not an emotional beta chasing point. Here are some of the most important lines in all of Global Macro to avoid “buying the dip” on:

  1. EUR/USD $1.37 – do not buy Euros on that breakdown if/when it occurs (buy US Dollars)
  2. SP500 – do not buy the SP500 if it cannot sustain itself above 1268 TAIL line resistance
  3. CAC40 (France) – do not buy French stocks if the intermediate-term TREND line of 3403 isn’t recovered

With everyone talking about Italy this morning, focus on France. We’ve been shorting Italy for 2-years and as of this morning it’s still crashing (down -34.5% from its YTD peak). Berlusconi is going away, but European Stagflation isn’t.

 

Focus on where the puck is going, not where it’s been. If I had to learn that risk management lesson from The Great One, so be it. I’ll take that over losing money today, all day long.


My immediate-term support and resistance ranges for Gold, Oil, German DAX and the SP500 are now $1756-1808, $94.01-97.07, 5685-6019, and 1216-1268, respectively.

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Clever Confusion - 1. EL EUR

 

Clever Confusion - Virtual Portfolio


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MONDAY MORNING RISK MONITOR: THE RELENTLESS RISE OF THE TED SPREAD

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More than any other measure in our Risk Monitor, we advise keeping an eye on the trend in the TED spread, which continues to climb. As a gauge of interbank lending anxiety it has been sending one message consistently for months now: risk in the banking system continues to rise. This nervousness is mirrored in the downward longer-term trend in bank equities. Until we see a meaningful leveling off and then reversal in the TED spread investors should not assume the systemic risks have been properly addressed.

 

Financial Risk Monitor Summary (Across 3 Durations):

  • Short-term (WoW): Negative / 1 of 11 improved / 6 out of 11 worsened / 4 of 11 unchanged
  • Intermediate-term (MoM): Negative / 2 of 11 improved / 4 of 11 worsened / 5 of 11 unchanged
  • Long-term (150 DMA): Negative / 1 of 11 improved / 8 of 11 worsened / 2 of 11 unchanged

 

MONDAY MORNING RISK MONITOR: THE RELENTLESS RISE OF THE TED SPREAD  - Summary

 

1. US Financials CDS Monitor – Swaps widened for 24 of 27 major domestic financial company reference entities last week.    

Widened the most vs last week: GS, MS, RDN

Tightened the most vs last week: MTG, MBI, AGO

Widened the most vs last month: MS, MTG, RDN

Tightened the most vs last month: LNC, MBI, GNW

 

MONDAY MORNING RISK MONITOR: THE RELENTLESS RISE OF THE TED SPREAD  - CDS  US

 

2. European Financials CDS Monitor – Bank swaps were wider in Europe last week for 32 of the 40 reference entities. The average widening was 6.2% and the median widening was 11.5%.   The German bank Bayerische Hypo- und Vereinsbank saw swaps widen by almost 30%. In addition, the four Italian banks we track saw swaps widen an average of 18%. 

 

MONDAY MORNING RISK MONITOR: THE RELENTLESS RISE OF THE TED SPREAD  - CDS  europe

 

3. European Sovereign CDS – European sovereign swaps mostly widened last week. Spanish sovereign swaps widened by 7% (+28 bps to 427) and French by 11% (+20 bps to 202). 

 

MONDAY MORNING RISK MONITOR: THE RELENTLESS RISE OF THE TED SPREAD  - Sovereign CDS 1

 

MONDAY MORNING RISK MONITOR: THE RELENTLESS RISE OF THE TED SPREAD  - Sovereign CDS 2

 

4. High Yield (YTM) Monitor – High Yield rates rose 12 bps last week, ending the week at 7.82 versus 7.70 the prior week.

 

 MONDAY MORNING RISK MONITOR: THE RELENTLESS RISE OF THE TED SPREAD  - High Yield

 

5. Leveraged Loan Index Monitor – The Leveraged Loan Index rose 4 points last week, ending at 1592. 

 

MONDAY MORNING RISK MONITOR: THE RELENTLESS RISE OF THE TED SPREAD  - LLI

 

6. TED Spread Monitor – The TED spread hit another new YTD high of 45.7 this week versus last week’s print of 44.3.  

 

MONDAY MORNING RISK MONITOR: THE RELENTLESS RISE OF THE TED SPREAD  - TED spread

 

7. Journal of Commerce Commodity Price Index – The JOC index fell 2.5 points, ending the week at -23.3 versus -20.8 the prior week.

 

MONDAY MORNING RISK MONITOR: THE RELENTLESS RISE OF THE TED SPREAD  - JOC index

 

8. Greek Yield Monitor – The 10-year yield on Greek debt rose 168 bps last week, ending the week at 2845 bps, a new all-time high. 

 

MONDAY MORNING RISK MONITOR: THE RELENTLESS RISE OF THE TED SPREAD  - Gr Bonds

 

9. Markit MCDX Index Monitor – The Markit MCDX is a measure of municipal credit default swaps.  We believe this index is a useful indicator of pressure in state and local governments.  Markit publishes index values daily on six 5-year tenor baskets including 50 reference entities each. Each basket includes a diversified pool of revenue and GO bonds from a broad array of states. We track the 14-V1.  Last week spreads widened, ending the week at 172 bps versus 163 bps the prior week.

 

MONDAY MORNING RISK MONITOR: THE RELENTLESS RISE OF THE TED SPREAD  - MCDX

 

10. Baltic Dry Index – The Baltic Dry Index measures international shipping rates of dry bulk cargo, mostly commodities used for industrial production.  Higher demand for such goods, as manifested in higher shipping rates, indicates economic expansion.  Last week the index rose 51 points, ending the week at 1835 versus 1784 the prior week.

 

MONDAY MORNING RISK MONITOR: THE RELENTLESS RISE OF THE TED SPREAD  - Baltic

 

11. 2-10 Spread – We track the 2-10 spread as an indicator of bank margin pressure.  Last week the 10-year yield rose to 2.06, pushing the 2-10 spread to 182 bps, 2 bps wider than a week ago.   

 

MONDAY MORNING RISK MONITOR: THE RELENTLESS RISE OF THE TED SPREAD  - 2 10 spread

 

12. XLF Macro Quantitative Setup – Our Macro team’s quantitative setup in the XLF shows 3.6% upside to TRADE resistance and 1.9% downside to TRADE support.

 

MONDAY MORNING RISK MONITOR: THE RELENTLESS RISE OF THE TED SPREAD  - XLF quant

 

Margin Debt Falls in September

We publish NYSE Margin Debt every month when it’s released. 

 

 NYSE Margin debt hit its post-2007 peak in April of this year at $320.7 billion. The chart below shows the S&P 500 overlaid against NYSE margin debt going back to 1997. In this chart both the S&P 500 and margin debt have been inflation adjusted (back to 1990 dollar levels), and we’re showing margin debt levels in standard deviations relative to the mean covering the period 1. While this may sound complicated, the message is really quite simple. First, when margin debt gets to 1.5 standard deviations or greater, as it did this past April, that has historically been a signal of extreme risk in the equity market - the last two times it did this the equity market lost half its value in the ensuing period. We flagged this for the first time back in May of this year. The second point is that margin debt trends tend to exhibit high degrees of autocorrelation. In other words, the last few months’ change in margin debt is the best predictor of the change we’ll see in the next few months. This is important because it means that margin debt, which has retraced back to +0.43 standard deviations as of September, still has a long way to go. We would need to see it approach -0.5 to -1.0 standard deviations before the trend reversed. There’s plenty of room for short/intermediate term reversals within this broader secular move, but overall this setup represents a material headwind for the market.  

 

One limitation of this series is that it is reported on a lag.  The chart shows data through September.

 

MONDAY MORNING RISK MONITOR: THE RELENTLESS RISE OF THE TED SPREAD  - Margin Debt

 

Joshua Steiner, CFA

 

Allison Kaptur

 

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THE HEDGEYE DAILY OUTLOOK

THE HEDGEYE DAILY OUTLOOK

 

TODAY’S S&P 500 SET-UP - November 14, 2011

 

Super Mario II not having the impact some hoped he might...

As we look at today’s set up for the S&P 500, the range is 21 points or -1.25% downside to 1248 and 0.41% upside to 1269. 

 

SECTOR AND GLOBAL PERFORMANCE

 

 

THE HEDGEYE DAILY OUTLOOK - hrmsl

 

THE HEDGEYE DAILY OUTLOOK - bpgm1

 

THE HEDGEYE DAILY OUTLOOK - hrmsp

 

EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: +2177 (+1016) 
  • VOLUME: NYSE 762.30 (-15.31%)
  • VIX:  +30.04 -8.44 YTD PERFORMANCE: +69.24%
  • SPX PUT/CALL RATIO: 1.48 from 1.96 (-24.55%)

 

CREDIT/ECONOMIC MARKET LOOK:

 

BOND YIELDS – Italy issued another roll of piig paper at 6.29% (5yr!), so the bond market continues to have European Stagflation right as the US Treasury market has Growth Slowing (Q4 vs Q3) right; immediate-term TRADE line of resistance for UST 10yr yields = 2.13%.

  • TED SPREAD: 45.22
  • 3-MONTH T-BILL YIELD: 0.01%
  • 10-Year: 2.04 from 2.00    
  • YIELD CURVE: 1.80 from 1.76

 

MACRO DATA POINTS (Bloomberg Estimates):

  • 8:30am: NOPA monthly oil stocks
  • 11am: Weekly export inspections: corn, soybeans, wheat
  • 11:30am: U.S. to sell $29b 3-mo., $27b 6-mo. bills
  • 4pm: Weekly crop conditions

WHAT TO WATCH: 

  • Banks adding fees under the radar – NYT
  • Mitsubishi UFJ Morgan Stanley Securities to privately place ¥40-50B of shares this month – Nikkei
  • AMAZON.com willing to lose hundreds of millions of dollars annually on Amazon Prime – WSJ
  • Iraq threatens to kick Exxon Mobil out of country - Independent on Sunday
  • Former EU Competition Commissioner Mario Monti will head a new Italian govt after Prime Minister Silvio Berlusconi resigned.
  • German Chancellor Angela Merkel said EU must forge closer union to send a message to bondholders that leaders are serious about ending the sovereign debt crisis

 

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

 

  • Hu Pledges More China Imports as IMF’s Zhu Sees ‘Soft Landing’
  • Oil Trades Near Highest Since July as Italy Rebuilds Government
  • Wheat Shippers Fight for Sales as Grain Glut Grows: Commodities
  • Ethanol Futures at Records as U.S. Ousts Brazil: Energy Markets
  • Gold May Gain as New European Leadership Limits Dollar Demand
  • Iron Ore Seen Extending Advance on Chinese Steelmaker Demand
  • Sugar Harvest in India Seen Missing Forecast as Yields Drop
  • Copper Extends Gains on New European Leadership, Stockpile Drop
  • Rusal’s Third-Quarter Net Jumps 15-Fold, Beating Estimates
  • Nickel Surplus May Jump to Most in Four Years on Slow Demand
  • Palm Oil May Advance to 4,000 Ringgit by June, Mistry Says
  • Codelco Said to Offer Copper Premium at $110 to China Buyers
  • Copper Jumps Most in Two Weeks on Japan’s Growth: LME Preview
  • MF Trustee Fires Entire Broker-Dealer Workforce of 1,066
  • Rubber Jumps Most in 8 Months as Car Output Resumes After Flood
  • Aditya Birla Group Said to Make Bid for Aquila’s Washpool Mine
  • Goldman Sees Commodity Prices Rising 15% in Next 12 Months
  • Gold May Decline in London on Reduced European Debt Concern

THE HEDGEYE DAILY OUTLOOK - dcommv

 

CURRENCIES

 

EURO – Goldman made the call to buy the Euro on Friday, so we shorted it. We’re long the US Dollar and looking forward to Super Mario I (Draghi) being politicized to cut rates to zero = bad for the Euro, as is failing at this 1.37-1.38 TRADE zone of resistance

 

THE HEDGEYE DAILY OUTLOOK - dcurrv

 

EUROPEAN MARKETS

 

CAC – France is where we want to be focusing our positioning as the media focuses where we’d been. Italy still matters obviously, but the French banks are in a much more precarious position. CAC fails, again, at the only line of support it had left (3169 TRADE line) as the MIB index does the same (fails at 15988 TRADE resist)


THE HEDGEYE DAILY OUTLOOK - bpem1

 

ASIAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - bpam1

 

MIDDLE EAST

 

THE HEDGEYE DAILY OUTLOOK - me

 

POPULAR MIDDLE EAST HEADLINES FROM BLOOMBERG

  • Boeing’s Record Emirates Deal Cements Wide-Body Lead Over Airbus
  • Jibril Turns Against Foreign Powers That Aided Qaddafi Overthrow
  • Syria Calls for Summit Meeting After Arab League Suspension
  • Republican Answers on Iran Nukes Face Same Reality as Obama’s
  • Dubai Sukuk Yield Rises to Month High on Europe: Islamic Finance
  • Dana Gas Working With Banks on Refinancing $1 Billion Sukuk
  • Airbus to Sign Qatar Airways Order Worth $6.5B, La Tribune Says
  • Abu Dhabi Commercial Bank Said to Plan U.S. Dollar Sukuk Sale
  • Dana Gas Net Quadruples to 143 Million Dirhams on Oil Prices
  • Iraq to Recognize Kurdish Oil Deals With Foreign Explorers
  • Yemen Seeks $4 Billion as Recession Worsens Crisis: Arab Credit
  • Afren Rises After Completing Nigerian Oil Asset Purchase
  • Iran Rejects Bahrain's Claim of Terror Cell Links
  • Marfin Invest, Abu Dhabi Mar Reach Agreement on Investments
  • Orascom Telecom Reports Third-Quarter Loss of $975,000
  • Iraq Government Says Accord Made With Kurds on Oil Contracts
  • Gulf Keystone Plans to Ship 20,000 Barrels a Day From Kurdistan

               

The Hedgeye Macro Team

Howard Penney

Managing Director

 

 


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