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The Macau Metro Monitor, February 13, 2012




SJM will submit the master plan for its Cotai resort to the government as early as this week and expects the government to formally approve the land grant 'hopefully in the middle of this year'.  “The Cotai plots, we’re still waiting for the Macau Government’s formal approval of the land grant. We hope that this will come very soon... We’re doing it now because without this master plan, it is not possible for the government to calculate the premium to be charged and to start the land grant [process]. We’ll submit it as quickly as possible because we’ve got the parameters of the design now," said Ambrose So, CEO of SJM.


So promised that SJM will set aside more space for non-gaming attractions in its Cotai project, which he said would take about three years to construct.  "I think in Cotai it’s a different market, unlike those in the [Macau] peninsula which is gaming-oriented, gaming-centric. Of course we have to put in more non-gaming elements into our complex,”” said So.


So added that joining the ‘Cotai race’ later than everyone else could actually be a good thing for SJM.  “This is something we have to think about. Being the latecomer we have the advantage of knowing what can be done and what cannot be done, what is successful and what is not successful."  In December 2011, Ambrose So confirmed that the government had agreed to grant a plot in Cotai to SJM but the land premium had not yet been decided.  



SJM's CEO, Ambrose So expects GGR to grow 25% in 2012.  So pointed out that although casinos located in the Macau peninsula hold a 60% market share of the city’s total gaming revenue, his company was ready to compete in Cotai where he said the market was gradually picking up.



Two eco-luxurious hotels are set to redefine resort-style vacations in Singapore on Thursday.  The Equarius Hotel and Beach Villas, opening at Resorts World Sentosa, will come with 360-degree views that take in the waterfront, the harbourfront skyline and a lush tropical rainforest.





New Co-President at Juicy. We’ll reserve final judgment until we look him in the eye, but initially, the overlap in respective backgrounds seems like it’s just what the Dr ordered.


So…LIZ FINALLY announced a new Co-President of Juicy Coture, something we’ve been waiting for about 2 months to see.  LIZ hired David Bassuk. To be clear, I have never met the guy, and as of now, know little about him. That will change shortly. But in looking at his background, there’s much to like.

  1. The ‘go to’ MD on softlines retail at AlixPartners, a global brand consulting group with presence in virtually every sector.
  2. Unless his profile was embellished on the website (we’ll front him the benefit of the doubt on that one), he seems to have very good experience across multiple disciplines within retail – such as supply chain, enterprise planning, and turnarounds.
  3. He ‘gets’ the fashion biz, having been on the Board at Kurt Salmon – a well known retail consulting firm – a frequent lecturer at FIT.

Slap all this into a package of incentives to fix and globalize a brand like Juicy, and I can see why a) he’d want the job and b) why they’d want him to do it.

Clearly, we have to look him in the eye before making any real judgment, but initially it smells right.


A quick point on Co-Presidents. Our rather strong view in that Co-C-suite jobs rarely work. There are a few exceptions. One of which is in the fashion business, where there is a fashion leader, and a business leader. Rarely can one person do both jobs. Mickey Drexler is one of the few, and to a point he ultimately failed.

Take a look at Roger Farah and Ralph Lauren.  I’ve never heard Ralph Utter the words Return on Capital. But I don’t care. Roger knows the numbers in his sleep. We saw similar dynamics at GES. Let’s also not forget Kate Spade, where a similar structure is in place.

The point here is that when the product people can simply be left alone to drive that part of the model, it usually works – so long as there is an exceptional operational team to offset any and all holes in execution, brand management, sales, marketing, and strategic planning.


This is a positive development from where we sit.


LIZ: FINALLY - liz bassuk

CHART OF THE DAY: Emotional Conclusions


CHART OF THE DAY: Emotional Conclusions - Chart of the Day

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Emotional Conclusions

“The dominance of conclusions over arguments is most pronounced where emotions are involved.”

-Daniel Kahneman


Intraday on Friday we finally had a -1% down move in US Equities and a +1.5% up move in long-term US Bonds. So, I covered our short position in the SP500 (SPY) and sold our long position in US Treasuries (TLT) on that. Buy red, Sell green.


Buying on red and Selling on green? That’s meant to be an over-simplification of what it is that I do. I love saying it, tweeting it, and doing it – because actually finding it within me to do it when I have so many other risk management signals banging around in my head is quite difficult.


On page 103 of “Thinking, Fast and Slow” Kahneman compartmentalizes what’s happening in my little brain and reminds me that I am hostage to what his psychologist buddy, Paul Slovic, coined as “The Affect Heuristic.” It helps explain why “people let their likes and dislikes determine their beliefs about the world.”


Back to the Global Macro Grind


At least in my own head, I’m crystal clear that I dislike Big Government Interventions, Socializations, and Regulations of free-market pricing. If all I did was trade on the Emotional Conclusions that are embedded in those thoughts, I’d be wrong a lot more than I am. Separating what should happen versus what is going to happen is critical in markets that whip around like this.


What whipped around last week?

  1. The US Dollar Index finally stopped going down (1stup week in the last 4) = up +0.3%
  2. Commodity Inflation (18 component CRB Index) stopped inflating = down -0.6%
  3. US Equity Volatility (VIX) ripped to 20.79 = straight up +21.6%

What’s fascinating and sad about this all at the same time is that it reminds us how sensitive market prices are to a devaluation of the US Dollar. Emotional Conclusions drive expectations too. The US Dollar currently has an immediate-term +0.7 correlation to Volatility (VIX).


Emotional? Right before they stopped inflating, CFTC (Commodities Futures Trading Commission) data showed that in the week ended February 7th, 2012, money managers ramped up their net-long positions to commodity inflation by +13% week-over-week. At 929,199 contracts (Bloomberg.com), that’s the biggest net-long position since September of 2011. Atta boy Bernank!


For those of you who still remember who and what got crushed in September 2011, the CRB Index dropped from 343 to 293 by the first week of October 2011. That was a -14.6% vertical drop as the US Dollar Index ramped +7%. Got Emotional Conclusions about causality?


Or was that Correlation Risk? Or was it expectations? Or Europe?


Whatever it was, it was the real-time score.


That’s the thing about market prices. They could not care less about what you or I think. They do what they do when they do them, rendering our immediate-term opinions about valuation, supply, and demand useless.


We’re all book smart. Or at least, technically, that’s what the diplomas say. Being market-smart will be determined many years after we leave this game – when every week, month, and year of our risk management performance has been TimeStamped.


In the meantime, we need to know what we are going to do now. As in right now. Markets wait for no one. And now that the Greek “news” is out of the way, I think this week’s focus will turn to:

  1. Japan: nasty Keynesian Growth Slowdown (down -2.3% GDP Growth y/y for Q411) and pending sovereign debt maturity in March
  2. China: growth slowing (again) as global inflation expectations rise (again)
  3. USA: economic data to be reported this week which should already start to show inflating import, consumer, and producer prices

I’ve dropped the Cash position in the Hedgeye Asset Allocation Model from 91% on the day of Bernanke’s Policy to Inflate (January 25th, 2012) to 64% this morning. Effectively, I’m long Inflation Expectations Rising (Energy, Gold, etc.) and I’m right worried about it. If we see the US Dollar hold last week’s gains, I’ll have no problem selling inflated prices on green.


My immediate-term support and resistance ranges for Gold, Oil (Brent), EUR/USD, and the SP500 are now $1, $114.89-120.01, $1.31-1.33, and 1, respectively.


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Emotional Conclusions - Chart of the Day


Emotional Conclusions - Virtual Portfolio


TODAY’S S&P 500 SET-UP – February 13, 2012


As we look at today’s set up for the S&P 500, the range is 22 points or -0.35% downside to 1338 and 1.29% upside to 1360. 












  • ADVANCE/DECLINE LINE: -1604 (-1640) 
  • VOLUME: NYSE 750.64 (-1.13%)
  • VIX:  20.79 11.59% YTD PERFORMANCE: -11.15%
  • SPX PUT/CALL RATIO: 1.40 from 1.54 (-9.09%)


  • TED SPREAD: 42.47
  • 3-MONTH T-BILL YIELD: 0.08%
  • 10-Year: 2.02 from 1.99
  • YIELD CURVE: 1.75 from 1.71

MACRO DATA POINTS (Bloomberg Estimates):

  • 11am: Export inspections: corn, soybeans, wheat
  • 11:30am: U.S. to sell $33b 3-mo., $31b 6-mo. bills
  • 9:45pm: Fed’s Williams speaks in Claremont, Calif.


  • Obama delivers remarks on FY2013 budget request in speech to Northern Virginia Community College students, 11am
  • Numerous departments, including transportation, HHS, energy, hold budget briefings
  • House meets in pro forma session, 1pm. Senate meets 2pm    


  • Greek parliament approves austerity measures as rioters battled police, set fire to buildings in Athens
  • European finance ministers will meet Feb. 15 to ratify Greek aid package
  • Japan’s 4Q GDP fell more than expected, -0.6% on quarter vs -0.3% est.
  • U.S. Budget to outline how govt. spends more than $3 trillion in next fiscal year
  • Vodafone says in early stages of evaluation a potential offer for Cable & Wireless
  • Weatherford cleared of Macondo disaster liability, Judge says
  • Apple adds patent infringement claims against Samsung with suit
  • ‘The Vow’ is No. 1 movie with $41.7m in ticket sales, second weekend on record that four movies gross more than $20m each
  • Goldman to Sell 9.5m Shares in Hana Financial: Dow Jones
  • EU Willing to Be Flexible on Airlines Emissions Tax: WSJ


  • Regeneron Pharmaceuticals (REGN) 7 a.m., $(0.61)
  • Diebold (DBD) 7:30 a.m., $0.84
  • Brookfield Renewable Energy (BEP-u CN) 8 a.m., $0.07
  • Regal Entertainment Group (RGC) 4 p.m., $0.04
  • Rackspace Hosting (RAX) 4 p.m., $0.15
  • Alexander & Baldwin (ALEX) 4:01 p.m., $0.23
  • Gen-Probe (GPRO) 4:01 p.m., $0.68
  • Health Management Associates (HMA) 4:01 p.m., $0.21
  • Lender Processing Services (LPS) 4:05 p.m., $0.58
  • Seattle Genetics (SGEN) 4:05 p.m., $(0.30)
  • Fidelity National Information Services (FIS) 4:06 p.m., $0.65
  • Charles River Laboratories International (CRL) 4:30 p.m., $0.56
  • Masco (MAS) 5 p.m., $(0.02)
  • TAL International Group (TAL) 5:48 p.m., $0.98



OIL – hooo-wah! Big breakout for Brent Oil to $118.28/barrel this morning with no immediate-term TRADE resistance to $120ish. If you’re looking for the #1 factor that will slow global consumption growth sequentially here in February (vs what was a big growth ramp in DEC/JAN), the black stuff in the barrel is it.

  • Speculators Lift Wagers to Highest Since September: Commodities
  • Gold Advances in London as Weaker Dollar Spurs Investor Demand
  • Oil Rises From Three-Day Low as Greece Passes Austerity Measures
  • Copper Rises as Equities, Euro Gain on Greek Austerity Approval
  • Wheat Gains as Drought Threatens Ukraine, Egypt Buys From U.S.
  • Robusta Coffee Rises as Vietnamese Exports Fall; Sugar Advances
  • Iran Sanctions Tighten as OSG to Frontline Halt Crude Loading
  • Soybean Oil Futures Rise in China to 3-Month High: Beijing Mover
  • Dragon-Year Baby Boom Seen Boosting China’s Milk-Powder Imports
  • Rusal Plans to Keep First-Quarter Output Stable, Sell Inventory
  • Chinalco Unit Expects China Aluminum Market in Surplus This Year
  • Hedge Fund Heating Oil Bets Surge on Deadly Cold: Energy Markets
  • First Solar-to-Vestas Wind Profit Crash Deters New CEOs: Energy
  • Crude Rises From Three-Day Low on Greece
  • Russia Wheat Exports Restricted by Domestic Price, SovEcon Says











FRANCE – alongside covering our SPY short, we covered our French Equity short position on Friday as well. Typically, short-and-hold isn’t what we do. That said, we’re watching the long-term TAIL line of resistance for the CAC of 3556 very closely as we think that’s going to be a good proxy for non-German European growth/inflation for the next few quarters.






JAPAN – top 3 economy in the world drops to a -2.3% y/y GDP print in Q411 (brutal); now its full throttle game on for the Japanese as we head toward a massive sovereign debt maturity in March ($745B!). When we were getting hawked up about Italian debt in Feb of 2011, consensus didn’t have it in the area code of its map either. Stay tuned…











The Hedgeye Macro Team



The short interest data is showing a lot of capitulation on the short side in the restaurant space.  Even Starbucks saw a reduction in short interest according to data released Thursday.  In this post, we go through our sentiment score card and then, below that, some callouts on short interest in QSR and Casual Dining names.


For the most recent data, which was released yesterday and reflects the short interest level as of the settlement date of 1/31, short interest declined sharply in most names in the restaurant space, as the second table below illustrates.  Only RUTH, CBOU, BWLD, and CBRL saw meaningful upticks in short interest during the two week period ended 1/31.  


Below is our sentiment score card.  The usual suspects are at the top: MCD, YUM, SBUX.  EAT and PFCB languish near the bottom with other “untouchables”.  As we wrote earlier in the week, we don’t see much downside to PFCB.  We feel that there is a couple of outlier FY12 estimates (~$1.80) being baked into consensus that are skewing the consensus EPS number higher than true expectations.  We believe that the more accurate consensus EPS number for FY12 is $1.50.  Earnings are, in our view, in a bottoming period for PFCB.  For investors looking for two-to-three year turnaround stories, we believe PFCB is one to consider.  We like what management is doing and, clearly, the investment community has written it off.  There may be a couple of difficult quarters ahead but we view the longer term risk/reward as favorable on the long side.




SHORT INTEREST – HOW LOW CAN IT GO? - sentiment scorecard






SHORT INTEREST – HOW LOW CAN IT GO? - short interest





  • PNRA saw short interest in the stock decline dramatically as it had been for some time.  The stock had posted impressive gains throughout the fourth quarter only to miss on the top line (5.9% bakery comps versus 6.3% consensus)
  • SBUX and MCD sentiment can’t get much better.  SBUX is rated highly by the street (21 Buy ratings, 8 Hold, and 1 Sell) with only 0.9% short interest.  Despite shorts covering coming into earnings on 1/26, the stock declined on the print before regaining ground and reaching a new high yesterday.  MCD has traded lower since its January sales results came out on 2/8.  Despite beating estimates, expectations are extremely high for MCD.  The street remains extremely bullish despite the stock price appreciating by 35% since the beginning of 2011; there are 21 Buy ratings, 9 Holds, and 0 Sells on the stock and a mere 0.7% of the float is sold short.  Even what would be considered as a small factor, like FX turning from a tailwind to a headwind, is enough to move the stock with the long side this crowded.  We expect McDonald’s to continue to take share domestically but as investors ponder the company’s ability to outstrip the impressive top-line growth of 2011, the trajectory of the stock’s price chart will likely moderate.  However, as the remodel program progresses in the U.S., we expect a benefit to same-store sales both through incremental traffic in the box and more efficient execution at the drive-through (6 seconds of time shaved off the process equals one point in same-store sales). 



  • CBRL short interest is building as gas prices climb higher. 
  • Short interest was building in BWLD ahead of its 4Q earnings release as investors were concerned about rising costs and the company’s growth prospects versus the street’s expectations.  Unfortunately for those pressing the short side (we had a bearish fundamental view on the quarter), the top-line blew away expectations and 1Q12 to-date comps – although the impact of weather was not disclosed (PNRA said January comps were helped by 350 bps by weather) – were given as +12.9%.  The stock responded very strongly to this and, with comps like that, it is difficult to argue that it should not.  One concern that we maintain needs to be monitored by investors in this name is the fact that margins declined year-over-year despite flat wing prices (will be unfavorable in 1Q) and a surging top-line. 
  • CAKE is reporting on 2/21 and has seen short interest come down sharply over the last two weeks.  During 4Q11 and 1Q12 to-date, the stock has traded extremely well.  We will be publishing on our view ahead of CAKE’s release on 2/21 late next week.



Howard Penney

Managing Director


Rory Green