The Macau Metro Monitor, February 7, 2012




A record number of visitors came to Singapore last year as new casinos lured gamblers, the Singapore tourism authority said. Visitor arrivals rose to 13.2MM, up 13% from 2010.  About 2.6MM Indonesians visited Singapore last year, followed by tourists from China, Malaysia and Australia.  Arrivals from China surged 35% in 2011.



The Gaming Inspection and Coordination Bureau has released new Macau-specific technical standards for electronic gaming machines.  Among the new rules, it is stated that “any electronic gaming machine [that] plays a game that is recognizable to be a simulation of a live casino game ... must have an identical RTP [return to player rate]”.  The new rules will come into effect on Friday but a grace period applies until October 1.

Corridors of Power

“Inspired by a common creed, the young Keynesians sought each other out in the corridors of power.”

-Nicholas Wapshott


Picture that. I just love the drama associated with that quote by Nicholas Wapshott in Chapter 11 of “Keynes Hayek” titled Keynes Takes America. He was referencing meetings these guys would have in Washington at the National Planning Association in the early 1930s.


A National Planning Association!


Back to the Global Macro Grind


Evidently we are now centrally planning a tax on not only American Savers, but Global Consumers too. Nice.


The price of Brent Oil is up almost +6% ($115.95/barrel this morning) since The Bernank’s decision to pander to the Corridors of Power and adopt his conflicted and compromised 0% rate or return for American Savers through 2014.


This is not new, but since President Obama took office in January of 2009:

  1. The US Dollar Index = down -8.3%
  2. The Price of Oil = up +165.8%

Now before you get all heated for my using the name Obama (my wife and I voted for him – team vote), long-time readers of my morning rants will recall that I was equally critical of President Bush’s Keynesian Policies to Inflate. Democrat or Republican in this country, if you’ve been economically “advised” in the last decade within the Corridors of Power, you’ve been Keynesed.


So how is that working out for you?

  1. The net jobs added during the Bush/Obama decade in America = 0
  2. The Price of Oil = +460% in the last decade (since February 2002)
  3. Your Savings Account has been given The Gold Finger (Gold up for 11 consecutive years)

But say nothing of these common Keynesian Creeds because political life is easier that way. Or is it? And for whom?


Broadening our horizons beyond the World Bank and IMF’s headquarters (right next to the Fed in Washington, DC), what’s happening in the rest of the world right now (particularly in the East) is that, ironically enough, 80 years later, young economists are gathering at their own meetings – Hayekians, Thatcherites, and Chaos Theorists – all of them. They don’t believe in National Planning Boards.


Look at what’s going on outside of the Corridors of Washington Power this morning:

  1. The Prime Minister of Singapore is warning of a “rough landing” in China if food/energy inflation re-accelerates
  2. The head of the Reserve Bank of Australia, Glenn Stevens, refused to cut interest rates on his citizenry’s savings accounts
  3. Greece

What about Greece? It’s literally the first time in 2012 that all 3 of the Most Read headlines on the Bloomberg machine are about Greece this morning. Now that the Greek stock market is down -54% since February of last year when your local Keynesian strategist was telling you Greece was a “one-off” and Global Growth was “going to be fine”, I guess it matters…


Or does it?


Bloomberg news also reports this morning that the “Irish Urge Children to Leave Amid Job Losses.” Great.


The Global Zeitgeist on these macro matters is fairly straight forward. No one trusts that any one of these aging Keynesians will get it right in the end. That’s one of the many reasons why the US Labor Participation Rate in last week’s glorified employment report hit a 30-year low. People are giving up.


Keynes nailed it – in the long-run, all of the politicians will be dead. That said, in the short-run the rest of us have to live.


Larry Kudlow asked me last night where I see the immediate-term economic pressure (growth expectations falling as inflation expectations are rising). With Energy stocks (XLE – we’re long inflation expectations) up +1.2% on the day and the SP500 flat, it was fairly obvious yesterday. That was good for my P&L – not good for the country.


Long-term US Treasury yields have been signaling Growth Slowing since Ben Bernanke made his move on January 25th. Just when free markets were getting ready to bust a move above my key intermediate-term TREND line of 2.03% resistance on the 10-year, boom – we got Bernanked.


Being Keynesed or Bernanked may be good for short-term stock sector and commodity market inflations, but they’re not good for the long-term economic health of this or any other consumption led economy.


My immediate-term support and resistance ranged for Gold, Oil (Brent), EUR/USD, Energy (XLE), 10-year UST Yield, and the SP500 are now $1, $112.56-115.93, $1.30-1.32, $71.93-73.76, 1.80-1.96%, and 1, respectively.


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Corridors of Power - Chart of the Day


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We continue to hold a positive view of YUM on all three durations (trade, trend and tail).  The earnings call tomorrow at 9:15am will offer a chance for analysts and investors to hear further details about 2011 and trends in 2012 to-date.


With both MCD and SBUX seeing their stocks decline on 4Q11 earnings results that were strong but not strong enough, the pressure was on YUM to print an exceptional quarter and, on the surface, it looks like they delivered.


Yum! Brands’ stock had a tremendous 4thquarter, outperforming the S&P 500 by 8.3%.  At first take, there does not seem to be many holes we can poke in the results such that we can say that the momentum is going to slow in the near term.  The top-line momentum in YUM’s China division is strong although food and labor inflation continue to pressure margins. 


We’ll be waiting for additional color from management tomorrow on the call.  The US division might be turning as the compares get easier from here and the worst for Taco Bell appears to be over.



  • The China division reported $5.56 billion in revenues in 2011, up 35% versus 2010
  • System sales grew 40% year-over-year in the fourth quarter (33% excluding FX), while comparable restaurant sales came in at 21% versus 17% consensus
  • By concept, KFC comps were 22% in the fourth quarter while Pizza Hut delivery and casual dining comps gained 25% and 15%, respectively, during the fourth quarter
  • Restaurant margin decreased 240 basis points to 15.8% in 4Q11 due to 11% commodity inflation and 18% wage rate inflation. FY11 commodity inflation was 8% and labor inflation 20%

YUM: GLOBAL ROCK STAR - yum china pod1


YUM: GLOBAL ROCK STAR - yum china quadrant




  • YRI reported system-sales up 11% (up 10% excluding FX) with same-store sales of 3%, slightly above consensus
  • Comparable restaurant sales of 3% implied two-year average trends flat with 3Q11
  • Restaurant operating margin decreased by 67 basis points to 11.6% in 4Q11

YUM: GLOBAL ROCK STAR - yum yri pod1


YUM: GLOBAL ROCK STAR - yri quadrant




  • The most significant 4Q11 upside surprise came from the US division
  • 4Q comparable restaurant sales were up 1% versus consensus of -2.5%.  KFC comps decline -1%, Taco Bell comps declined -2% and Pizza Hut comps were up 6% versus 4Q10.  “The Box” promotion drove high single-digit comps in the latter stages of 4Q11
  • 4Q restaurant operating margin declined by roughly almost 75 basis points driven by commodity inflation of 7% 

YUM: GLOBAL ROCK STAR - yum us taco bell pod1


YUM: GLOBAL ROCK STAR - yum us quadrant






Howard Penney

Managing Director


Rory Green


Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

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