• run with the bulls

    get your first month

    of hedgeye free



The Macau Metro Monitor, February 3, 2012




Marina Bay Sands is in discussions with existing lenders and relationship banks for a S$4.5bn (US$3.6bn) five- to six-year loan.  Proceeds will be used to refinance a facility signed in February 2008.


MORE DELAYS? The Standard

The much-delayed HK-Macau-Zhuhai bridge may be further delayed as tenders for some sections of the bridge have come in too high, forcing the government to retender the work.  Construction was initially set to begin early this year.  The retender procedure could start as early as today and is expected to be completed by the end of next month.



TODAY’S S&P 500 SET-UP – February 3, 2012

As we look at today’s set up for the S&P 500, the range is 10 points or -0.57% downside to 1318 and 0.19% upside to 1328. 











  • ADVANCE/DECLINE LINE: 410 (-1563) 
  • VOLUME: NYSE 810.39 (-9.21%)
  • VIX:  17.98 -3.07% YTD PERFORMANCE: -23.16%
  • SPX PUT/CALL RATIO: 1.99 from 1.68 (18.45%)


  • TED SPREAD: 45.43
  • 3-MONTH T-BILL YIELD: 0.08%
  • 10-Year: 1.82 from 1.82
  • YIELD CURVE: 1.60 from 1.60

MACRO DATA POINTS (Bloomberg Estimates):

  • 8:30am: Change in Nonfarm Payrolls, Jan., est. 140k (prior 200k)
  • 8:30am: Unemployment Rate, Jan., est. 8.5% (prior 8.5%)
  • 8:30am: Establishment Employment Survey Annual Revisions
  • 10am: ISM Non-Manf. Comp, Jan., est. 53.2 (prior revised 53.0)
  • 10am: Factory Orders, Dec., est. 1.5% (prior 1.8%)
  • 1pm: Baker Hughes rig count


  • President Obama delivers remarks on economy in Arlington, Va.
  • House, Senate in session:
    • House Ways and Means Cmte. marks up H.R.3865, the American Energy and Infrastructure Jobs Financing Act of 2012, 9am
    • Joint Economic Committee holds hearing on unemployment report, with John Galvin of Bureau of Labor Statistics, 9:30am
    • House Rules Committee meets to formulate rule on H.R.1734, the Civilian Property Realignment Act, 9:30am
    • House Science, Space and Technology subcommittee holds hearing on science quality at EPA, 10am
    • House Energy and Commerce panel holds hearing on Keystone XL Pipeline project, with testimony from U.S. Army Corps of Engineers, Bureau of Land Management officials, 10am


  • Employers probably added 140k jobs in Jan. after a 200k-plus gain in Dec., economists est.; jobless rate may have held at almost 3-yr low of 8.5%
  • Blackstone Group said to be studying leveraged buyout of Brocade Communications
  • Panasonic widened annual loss forecast to record $10.2b
  • Wall Street’s biggest lobbying group is split over a proposed settlement of state and federal foreclosure probes
  • Greece’s rescue plan includes a loss of more than 70% for bondholders in voluntary exchange and loans likely to exceed EU130b now on the table
  • European retail sales unexpectedly fell in December, led by Germany and France
  • Hutchison Whampoa agreed to buy Orange Austria from France Telecom and Mid Europa Partners; deal valued at EU1.3b
  • Nevada holds Republican presidential caucuses tomorrow
  • No IPOs expected to price today


    • Spectrum Brands Holdings (SPB) 6 a.m., $0.67
    • Macerich (MAC) 6 a.m., $0.87
    • Aon (AON) 6:30 a.m., $0.96
    • Simon Property Group (SPG) 7 a.m., $1.90
    • Beam (BEAM) 7:06 a.m., $0.67
    • Tyson Foods (TSN) 7:30 a.m., $0.34
    • Health Net (HNT) 7:30 a.m., $0.89
    • Domtar (UFS) 7:30 a.m., $2.24
    • Estee Lauder Cos (EL) 7:30 a.m., $1.01
    • Spectra Energy (SEP) 8 a.m., $0.38
    • Clorox (CLX) 8:30 a.m., $0.69
    • Brown & Brown (BRO) Post-Mkt, $0.22


  • Bets on Raw Materials Expanding Fastest Since 2006: Commodities         
  • Gold May Extend Gains From Two-Month High on Europe Debt Concern              
  • Brazil Sugar Crop Seen Failing to Compensate for Indian Drop
  • Coffee Exports From Vietnam May Climb in February on Weather
  • India May Make Enough Sugar to Meet Demand, Averting Imports         
  • Oil Near Six-Week Low Before Jobs Report; Brent Premium Widens       
  • Copper May Gain Before Figures Showing U.S. Employment Advanced 
  • Wheat Gains as Lack of Snow Cover Puts European Plants at Risk
  • Rubber Gains, Paring First Loss in Five Weeks, as Oil Recovers
  • Contango Widest Since October in Cushing Deluge: Energy Markets       
  • Glencore-Xstrata Bankers May Reap Up to $140 Million for Advice           
  • Saudis Set to Price Arab Heavy to Tap Fuel Oil Boom, Survey Says             
  • Ship Rates’ 63% Collapse Will Snap Share Rally: Chart of the Day
  • Gold May Extend Gains From Two-Month High 
  • Copper Stockpiles in Shanghai Surge to 21-Month High
  • Soybean Traders Most Bullish This Year on South American Weather      
  • Coffee Rebounds as Vietnam Sales May Slow in March; Cocoa Gains





















The Hedgeye Macro Team



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.

Cognitive Strain

“With the fearful strain that is on me night and day, if I did not laugh I should die.”

-Abraham Lincoln


In one of my favorite books, Team of Rivals, by Doris Kearns Goodwin, you get an introspective sense of Lincoln as a human being. To me, his greatest leadership quality was being a realist. That’s different than being an optimist.


If I wasn’t optimistic about my family, partners, and firm, I wouldn’t have invested most of my net wealth into building this company. It wasn’t easy committing free-market capital that could fail during the thralls of 2008. But I wouldn’t have done this if it was. The fearful strain that we bear, night and day, is the most important part of who we are and what we create.


In Chapter 5 of “Thinking, Fast and Slow”, Daniel Kahneman explains the difference between being at Cognitive Ease and experiencing Cognitive Strain. “Cognitive strain is affected by both the current level of effort and the presence of unmet demands.” And “easy is a sign that things are going well – no threats, no major news, no need to redirect attention or mobilize effort.” (page 59)


Easy is as easy does. There is nothing easy about being a leader in this country who has to deal with this market and meet a payroll every month. Don’t ask a talking head or a politician in America about that. They have no idea what it means to sit in this seat every morning embracing the uncertainties of whatever risks the next central plan brings.


Back to the Global Macro Grind


I’m personally experiencing Cognitive Strain this morning – I have to deal with being short the SP500, the daily dirty laundry list of threats to my company’s competitive position, and whatever this power-ball ticket on the US Employment Report brings at 830AM.


And I like it …


There’s no whining in winning. No matter what you throw at my senior management team every morning, we’ll suck it up and turn that into our own positive momentum. There a plenty of good teams in this business. Only the great ones get how to work together.


Back to this short SPY position.


What do I do with it this morning if the employment report is better than expected? What do I do if it’s worse?


Actually, the answer to those 2 questions is precisely why I have the position on – under both scenarios I know exactly what I am going to do. These are the risk management setups that we spend hundreds of hours preparing for. Very infrequently do Short Selling Opportunities like this present themselves with these odds.


That doesn’t mean the market is going to blow up. All it means is that my probability-weighted setup won’t get me run-over if I am wrong. No one ever went broke booking a gain either.


Across my three core risk management durations (TRADE, TREND, and TAIL), here are the scenarios I’m looking at:

  1. SP500 goes up – I wait and watch for 1333, and short it again there (lower long-term high)
  2. SP500 goes up, and up – I wait and watch for 1363, and short it again there (lower long-term high)
  3. SP500 goes down – I wait and watch for 1318 to hold – if it does, I book the gain – if it doesn’t I smile

It’s really not that complicated. There really is no Cognitive Strain associated with the SPY position itself. My personal strain tends to be cumulative. It occurs when everything else about running my company hits me from all directions at once, and then – bang! A central planner says or does something that I didn’t see coming.


I’m not alone in this country thinking about stress this way. I’ll bet that 100% of small business owners agree with me on this. How do I deal with Cognitive Strain perpetuated by the Bernankes and Geithners of this world? Follow me on Twitter, and you’ll figure that out in a hurry. “If I did not laugh,” I’d hand in the keys to this Made in America company to Wesley Mouch.


My immediate-term support and resistance lines for Gold, Oil (Brent), EUR/USD, Shanghai Composite, and the SP500 are now $1, $110.84-112.36, $1.30-1.32, 2, and 1.


Best of luck out there today and enjoy watching some Red, White, and Blue Leadership on the field on Sunday,



Keith R. McCullough
Chief Executive Officer


Cognitive Strain - Chart of the Day


Cognitive Strain - Virtual Portfolio


Soft quarter and boring conference call.  Can't remember when we've said that about WYNN.




  • Really? Opening with their new website...We couldn't even find the webcast on the new site.
  • Operating expense in Macau increased due to a large increase in bad debt expense and some increase in payroll expenses
  • They do feel a lot of competitive pressure in Macau.  Their competitors have really stepped up their game.
  • They are still working hard on their plans in Cotai
  • Cash split is about 50/50
  • CNY levels were a little lower in Vegas than last year partly because of the calendar shift.  According to Steve, people had less vacation time this year.  There was also more choice for their Asian customers so business was spread a bit thinner.
  • Their strategy in Vegas is to identify lodgers that will stay and spend at the property.  $110MM of the EBITDA increase at the Vegas property came from the hotel.
  • They are adjusting their table mix and junket mix to compete better in Macau
  • Galaxy spend a lot of money on the property since opening to improve the property
  • Sands also spent hundreds of millions to make their properties better
  • They are constantly tweaking Macau, but no material capex
  • They call their special dividend special because they are not necessarily recurring
  • Bad debt provision was flat YoY and they are still well north of 50% reserved on their receivables.  Bad debt as a % of receivables are flat.  They are seeing no credit issues in Macau.  They do not use credit as a marketing tool. They give credit out in appropriate amounts to appropriate parties. 
  • The increase in doubtful accounts this year is mostly due to higher levels of play in Las Vegas.  Macau is actually flat.
  • "We've enjoyed Mr Okada's participation for 12 years." They had a sharp disagreement over the Philippines project. Wynn feels like it is not an appropriate investment for Wynn and this created a problem for Okada and stress in their relationship.  Wynn has no interest in doing business in the Philippines.
  • Hope that 2012 comes in at the same level for convention business in Las Vegas.  They are getting a little more rate in the 1st Q but they are worried about the summer time and fear deep discounts there.  Looking forward to a flat year on the convention side.  They are going to be pushing transient rate in 2012. 
  • Tax rate for next year? 
    • Somewhere between 2010 and 2011
  • What is a collection trip? Linda is basically asking their customers to pay up what they owe. Not rocket science Steve Kent.
  • Market share in January?  They are around 13% of the market - and the market has gotten a lot bigger.  They focus on their fair share.
  • Had robust growth in January because of CNY calendar shift.  Not sure about the rest of the quarter.  Last year, they made $62MM in Vegas in February so it's a really tough comparison
  • Their Chinese business connections feel confident in the continuation of the healthy Chinese economy.
  • The Macanese government is ok with inflation as long as there is full employment in the market.  The government suggests annual wage increases to deal with the issue. 



  • Net revenues of $1,344M and adjusted property level EBITDA of $402MM, both a little short of consensus.
    • Macau: Net revenue of $995.5MM and Adjusted EBITDA of $313.1MM
      • Net revenues were 1% ahead of Street while EBITDA was 2% below
      • Benefited from high hold of 3.18%
    • Vegas: $348.4MM of net revenue and $89.1MM of Adjusted EBITDA, 3% and 9% below the street, respectively
      • 1% of rooms were out due to renovations
  • Cash: $1.3BN; $3.2BN of debt ($2.6BN at Wynn Las Vegas and $628MM at Wynn Macau)
  • "Approved a cash dividend for the quarter of $0.50... payable on March 1, 2012, to stockholders of record on February 16, 2012."

Retail: Keeping It All In Context


January sales appear to have improved on the margin, but let’s take a step back and keep the quarter in context. November kicked off the quarter with sales coming in lighter than expected following Black Friday bullishness. Then December disappointed with more companies guiding down than up. Then we have today’s results with the ratio of beats-to-misses coming in net negative (11 companies missed to 8 beats), but six companies guided Q4 higher while only one (SSI) guided lower. Dizzy yet? Quite simply, from start to finish Q4 has been weaker than originally expected especially in the mid-tier. The negative setup headed into 1H remains unchanged.


In taking a look back through not only the companies reporting monthly comps (an increasingly less relevant sample), but also the broader group over the last three months, we’ve seen 11 of companies lower expectations for the quarter compared to only 4 taking numbers higher. That’s not good. In addition, KSS taking Q4 EPS up by $0.09 after cutting it by $0.30 last month is hardly net positive. Also, let’s not forget JCP taking numbers down by 35% before officially bowing out of the monthly sales game. Take a look at the table below. It tracks company guidance throughout the quarter and the net change versus original expectations, not simply the most recent data point. Among the most notable negative callouts TGT, KSS, and JCP.


Volatility is clearly on the rise and continues to expand the bifurcation between upward and downward revisions. We fully expect this bifurcation to remain present through the 1H at a minimum in an increasingly more competitive pricing environment.


A few additional callouts in January:

  • The High/Low-end performance spread remains divergent though higher-end sales slowing on the margin. Within department stores, JWN +5%, M +2.4%, SKS +10.5% and Neimans +9% remain positive despite both JWN and M comping below expectations in January compared to KSS +0.6%, SSI -0.1%, and BONT -3.5%.
  • Not surprisingly, off-price retailers TJX & ROST were the most positive standouts in January coming +7% and +5% respectively and ahead of expectations. The off-price channel is beginning to emerge as an early beneficiary as the higher-end starts to decelerate and competition at the mid-tier heats up. Both increased their outlook for the quarter as well. Interestingly, ROST was the first retailer to offer up its view of F13 at $3.12-$3.27 vs. $3.21E.
  • Following a very strong December, M missed expectations in January, but raised guidance for the second quarter in a row. Online remains a key driver up +39% in Jan and +40% for the quarter and year.
  • Food/Grocery continues to outperform driving results at discounters. Both COST and TGT reported the food/grocery up HSD and low-teens respectively outpacing all other categories with inflation still up LSD. While both came in better than expected, TGT is the notable callout given the sequential reacceleration in the monthly comp for the first time in four months. Improvements in the Apparel and Home categories were key incremental improvements – especially Home up LSD, positive for the first time since September.
  • January marks the first month ex-JCP. There goes another $18Bn of sales relevance out of the SSS sample.
  • GPS posted negative comps again -4.0%, but more importantly above expectations (-5.3%E). Despite missing comps in the first two months of the quarter, the company is either getting less promotional or more aggressively cutting expenses as the company took Q4 EPS up to $0.41-$0.42 vs. $0.35E. This is more positive for GPS on the margin given just how low expectations are, but our bet is that it's the later and stress amongst its competitors in the mid-tier remains a major overhang.
  • The only commentary on inventory levels came from TGT, TJX, and GPS all of which were positively skewed.
  • At the category level:
    • Handbags and accessories were strong particularly at the high end with JWN, SKS, M, and Neimans all highlighting the category. Good for COH, KORS, and LIZ.
    • Home was another positive callout by TGT, KSS and DDS.


Longs: LIZ, WMT, NKE, RL



Retail: Keeping It All In Context - Guidance Tracker


Retail: Keeping It All In Context - TGT sales grid


Retail: Keeping It All In Context - Total SSS


Retail: Keeping It All In Context - SSS 1 yr


Retail: Keeping It All In Context - SSS 2 yr


Retail: Keeping It All In Context - SSS 3 yr


Retail: Keeping It All In Context - equal weighted SSS


Casey Flavin


Early Look

daily macro intelligence

Relied upon by big institutional and individual investors across the world, this granular morning newsletter distills the latest and most vital market developments and insures that you are always in the know.