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FEBRUARY MACAU DETAIL

February gross gaming revenues (GGR) increased 23% YoY to $3.03BN.  The timing of the Chinese New Year celebration in January of this year versus February of last year had a negative impact on YoY growth comparison which was offset by an easy hold comparison and an extra day this year.  We estimate that total direct play this month accounted for 7.0% of the market, compared to 6.6% last year.  The total VIP market held at 2.88% vs. 2.68% in February 2011.  Accounting for direct play and theoretical hold of 2.85% in both months, February revenues would have increased 16% YoY.  Without the benefit of the leap day, revenues would have been up about 13% YoY. 

 

In a sign of slowing VIP growth, February was the first month since March 2009, that 4 of the 6 concessionaires saw declines in Junket RC volumes.  On the bright side, Mass market table revenues continued to be strong, growing 31% YoY, and the 4th straight month of growth that led the market.  Rolling Chip “only” increased 12% YoY.  Obviously, the higher margin profile of the Mass business makes this trend a very palatable one for the operators.  Commission rates do need to be monitored, however, given the slower growth of VIP coupled with the aggressive Four Seasons/Neptune deals.

 

February market shares were very similar to January.  After a slow start, MPEL was the biggest winner sequentially, driven by its highest Mass share ever at 12.5%, up 80bps MoM.  Fundamentally, MPEL continues to knock the cover off the ball.  If management would just come out and say they will not do a dilutive equity deal, this stock could have a real multiple.

 

Galaxy’s share fell sequentially following a strong, hold aided couple of months.  Yes, VIP hold was low but Mass share fell

120bps MoM.  Even on a normalized basis, Galaxy’s share is quite disappointing.

 

LVS posted another solid share month driven by higher hold and solid Rolling Chip growth.  However, Mass share fell 80bps.  LVS, WYNN, and Galaxy seem to be losing on the Mass side to SJM and MPEL.

 

 

Y-o-Y Table Revenue Observations

 

Total table revenue grew 23% YoY this month, on top of 47% growth last January.  Given the extra day this year and the easy hold comparison from last year, the impact of the shift in the CNY holiday was likely neutral.  Mass revenue growth of 31% was healthy but marked a deceleration from the +40% average growth we’ve seen since June 2011.  VIP revenues grew 21%, while Junket RC “only” increased 12%, with both continuing the ‘slowing trend’ that we began to observe in October.

 

LVS

 

Table revenues grew 28% YoY, outpacing the market mostly due to strong hold across Sands and Four Seasons.  We estimate that LVS’s properties held at 3.2% in February.  At 32%, LVS had the best VIP growth after Galaxy and ranked #4 behind Galaxy, MPEL, and SJM for Mass table growth.

  • Sands was only up 0.4% YoY despite high hold and an easy hold comparison
    • Mass was up 1%
    • VIP was up 0.1%.  Sands held high in February.  Assuming $300MM/month of direct play or 15% (in-line with the monthly absolute average in 4Q11), hold was 3.86% vs. 2.74% last February, assuming 10% direct play or $270MM/month (in-line with 4Q10).
    • Junket RC was down 21%, the first double digit decline since September 09
  • Venetian table revenues decreased 4% YoY, driven by a combination of a difficult hold comparison and low hold, and a drop in junket VIP RC volume
    • Mass increased of 23%
    • VIP decreased 18%, while junket VIP RC decreased 7%
    • Assuming 27% direct play in the quarter (below the 28% we saw in 4Q11 but higher than 2011), hold was 2.67% compared to 3.24% in February 2011, assuming 19% direct play (in-line with 1Q11)
  • Four Seasons grew 253% YoY, driven by a huge Junket RC growth, high hold, and an 87% increase in Mass revenues.
    • Junket VIP RC increased 3.7x YoY
    • Four Seasons is clearly seeing a benefit from LVS’s recent initiatives.  If we assume that monthly direct play volume of ~$725MM from 687MM/month in 4Q11, that implies a direct play percentage of 15% and a hold rate of 3.43%.  In comparison, if February 2011 direct play was around 50% (54% in 4Q10 and 40% in 1Q11) then hold was 2.46%.

WYNN

 

Wynn table revenues only increased 2.5%, exhibiting the lowest growth of all 6 concessionaires.  While Wynn’s hold was low, last year’s comparison was also easy.  Wynn’s average growth over the last 4 months has slowed to an average of 6%.

  • Mass was up 10% and VIP increased 1%
  • Junket RC fell 4%
  • Assuming 11% of total VIP play was direct (in-line with 4Q11), we estimate that hold was 2.75% compared to 2.62% last year (assuming 10% direct play – in-line with 1Q11)

MPEL

 

MPEL grew 13%, propelled by strong Mass table growth at 37% behind Galaxy, offset by slower 8% growth in VIP

  • Altira revenues fell 2%, due to a 3% decrease in VIP.  Altira revenues have declined 3 of the last 4 months.
    • Mass revenues increased 12%
    • VIP RC decreased 10% - marking the 3rd consecutive month of declines
    • We estimate that hold was 2.7%, compared to 2.5% in the prior year
  • CoD table revenue was up 21%, driven by 41% growth in Mass and 15% growth in VIP
    • Junket VIP RC fell 3%
    • Assuming a 16% direct play level, hold was 3.2% in February compared to 2.8% last year (assuming 13.7% direct play levels in-line with 1Q11)

SJM


Revs grew 12%

  • Mass was up 22% and VIP was up 8%
  • Junket RC was down 7%, implying 2.89% hold across the company’s properties

 

GALAXY

 

For the 9th month in a row, Galaxy posted table revenues growth north of 100% - at 122%. Mass soared 239%, while VIP grew 105%.

  • StarWorld table revenues grew 14%
    • Mass grew 35% and VIP revenue grew 12%
    • Junket RC grew 19%
    • Hold was low at 2.3% but the comparison from last February was also easy, at 2.4%
  • Galaxy Macau's total table revenues were $253MM – down MoM and 25% lower than October’s seasonal high and below November to January run rate of $281MM
    • Mass table declined 23% MoM to $52MM, the lowest level since September 2011
    • VIP table revenue declined 6% MoM to $201MM, also the lowest level since September
    • Hold was 2.74% - the property’s lowest hold since opening
    • RC volume of $7.3BN was 8% higher than January and compares to a peak of $8.3BN in October

MGM

 

Table revenues grew 6%, giving MGM the second slowest growth slot in February despite high hold

  • Mass revenue growth was 4% - the slowest of the concessionaires for the 2nd month in a row
  • VIP revenue grew 6%
  • Junket RC declined 4%
  • Assuming a direct play level of 9% for both periods, we estimate that hold was 3.12% this month vs. 2.83% in February 2011

 

Sequential Market Share

 

LVS

 

LVS share was flatish at 18.5% in February vs. 18.6% in January.  This compares to a 6 month trailing market share of 15.5% and 2011 average share of 15.7%.

  • Sands' share dropped 50bps to 4.2%.  For comparison purposes, February share was below 2011's share of 4.6% and 6M trailing average share of 4.3%.
    • VIP rev share decreased 50bps while Mass share fell 30 bps
    • RC share decreased 30bps to just 2.4%, an all-time low for the property
  • Venetian’s share dropped 1.8% to 7.9% from 9.7% in 4Q11- the lowest market share in 6 months.  2011 share was 8.4% and 6 month trailing share was 8.2%.
    • VIP share decreased 1.9% to 5.9%
    • Mass share fell 1.1% bps to 13.9%
    • Junket RC fell 70bps to 4.8%
  • January was the 5th consecutive month where FS gained share.  FS share was 6.2%, up 2.4% and an all-time high.  This compares to 2011 share of 2.2% and 6M trailing average share of 2.5%.
    • VIP share increased 3.0% to 7.4%, an all-time property best –aided by high hold.  This is the first time that FS VIP revenues exceeded those of Venetian and the second month in a row where they exceed Sands’ revenue.
    • Mass share increased 50bps to 2.4%
    • Junket RC improved 60bps to 5.9% - an all-time high for the property.  January marked the second month where RC share at Four Seasons exceeded that of Sands Macao and the first where volumes exceeded Venetian's.

WYNN

 

Wynn’s share inched up 10bps to 12.6%, below its 6 month trailing average share of 12.9% and well below its 2011 average share of 14.1%.  We expect Wynn’s share to continue to struggle with the opening of Sands Cotai Central in April.

  • Mass market share fell 60bps to 9.4%
  • VIP market share improved 30bps to 13.3%, despite below market hold
  • Junket RC share fell to 13.3%, a 90bps MoM decline

MPEL

 

Flip-flopping once again, MPEL was the largest share winner in February. Market share bounced back 1.6% points to 14.1%.  This compares to their 6 month trailing share of 14.2% and 2011 share of 14.8%.

  • Altira share improved 30bps to 4.1%, still well below the property’s 2011 share of 5.3% and 6M trailing share of 4.6%
    • Mass share ticked down 10bps to 1.4% while VIP share increased 30bps
  • CoD’s share improved 1.1% to 9.8%; above its 2011 share of 9.3% and 6M trailing share of 9.5%
    • Mass market share increased 80bps to 11%
    • VIP share increased 80bps to 9.4%
    • Junket RC was flat at 7.7%

SJM

 

SJM gained 60bps of share to 28.0%, better than their 6-month trailing average of 27.2% but below their 2011 average of 29.2%.

  • Mass market share increased 3% off of January lows to 36.6%
  • VIP share ticked down 30bps to 26.0%
  • Junket RC share fell 1% to 27.8%

GALAXY

 

Galaxy was the biggest share loser in February, impacted by low hold.  Galaxy’s share fell for the 5th consecutive month after ‘peaking’ at 20.9% in October.  February share of 16.6% was 1.9%, down MoM and below the 6-month trailing average of 19.7%. 

  • Galaxy Macau share declined 70bps to 8.7% below its 6-month trailing average of 9.8%, partly due to low hold
    • Mass share fell 1.5% to 7.2%, the lowest share in 6 months
    • VIP decreased 50bps to 9.2%, the lowest share in 7 months
    • RC share ticked increased 40bps to 10.4% - consistent with the 4 month average
  • Starworld share fell 1.1% to 6.7% below its TTM average share of 9.1% before Galaxy Macau opened.
    • Low hold was largely to blame for the share loss as Junket RC share increased 50bps to 10.8%

MGM

 

MGM share was flat at 10.3%. February share sits a little below MGM’s 2011 and 6-month trailing average share of 10.5%.

  • Mass share ticked down 10 bps to 6.7%
  • VIP share was flat at 11.2%
  • Junket RC ticked up 10bps to 10.1% 

 

Slot Revenue


Slot revenue totaled $132MM in February, with growth decelerating to just 9% YoY. None of the concessionaires hit records this month.

  • As expected, GALAXY slot revenues grew the most with 251% YoY to $16MM
  • MGM slot revenues had the second best growth at 16% YoY to $19MM
  • MPEL slot revenues grew 9% YoY to $24MM
  • SJM slot revenues grew 7% YoY to $17MM
  • LVS slot revenues fell 10% YoY to $29MM- the company’s absolute lowest level since June 2011 and marking the 3rd YoY decline in 7 months
  • Wynn experience the highest YoY decline with a 11% YoY drop to $25MM.  This was Wynn’s first month of declines in 2 years.

 FEBRUARY MACAU DETAIL - table

 

FEBRUARY MACAU DETAIL - mass

 

FEBRUARY MACAU DETAIL - rc


MCD : JUST A MATTER OF TIME?

February is only one month but MCD needs global sales trends to remain strong to maintain its current valuation.  February, if this morning’s release is any indication, could be the first sign that MCD is not immune to the global economic reality. 

 

Our stance on the stock at this point is to wait and see.  We are not buyers of the stock on this selloff.  In short, if austerity is having an impact it will not be a one month phenomenon.

 

 

FEBRUARY SALES

 

Adjusting for all the noise (weather and the trading days), in the month of February there was a sequential slow down in traffic trends in McDonald’s global business.  In Japan the “Great American Burger” promotion, in its third year, lost steam and the Chinese New Year also negatively impacted the headline APMEA number.  In Europe, France and Italy are a drag on same-store sales, while Spain – albeit modeslty – and Germany are having a positive impact.

 

Adjusting for calendar-shifts, all three divisions saw declines in two-year average comparable restaurant sales trends.  Japan reporting -1.2% was also a disappointment for the company. 

 

The February top line results in the USA adjusting for the leap year suggest a decline in two year trends as well as in the rest of the world.  Japan reporting down 1.2% was a big disappointment to the Asia region. 

 

McDonald’s reported sales of 11.1%, 4.0%, and 2.4% for the U.S., Europe, and APMEA, respectively.  Consensus was looking for 8.7%, 6.8%, and 8.6%, respectively.  Due to calendar shifts, the numbers include an adjustment ranging from approximately 3.1% to 3.4%. 

 

MCD : JUST A MATTER OF TIME? - MCD US

 

MCD : JUST A MATTER OF TIME? - mcd eu

 

MCD : JUST A MATTER OF TIME? - MCD APMEA

 

 

THOUGHTS ON INVESTOR EXPECTATIONS VS MGMT COMMENTARY

 

We were struck by the words “as previously communicated” in this morning’s press release because, while management did highlight the uncertain economy, austerity in Europe, and inflation as issues that posed business risk to the company, these factors have been withstood for some time by the McDonald’s business.  The oft-repeated explanation for MCD being the Teflon Don of the restaurant space last year was that the economic malaise actually benefitted the company.  Management’s commentary on conference calls never explicitly said this, but it was certainly inferred by many in the investment community;  management recently said, “…at the same time, Europe stayed committed to delivering compelling fourth-tier options and promoting everyday affordable pricing for consumers feeling the pressure in their local economies”… “despite this backdrop, our European business remains strong” (1/24 transcript).   The question is, from here, has the game changed for McDonald’s?  Was the investment community far too optimistic in its reading of management’s commentary and the apparent immunity of McDonald’s business to economic uncertainty?  Why is the soft economy now impacting results when it has little effect previously?

 

From a bottom line perspective, the impact of any top line slow down will be compounded by the fact that both D&A (from the all the remodels last year) and G&A, which will be up 6% in 2012 (due to technology, the Olympics, and world-wide franchise convention), are putting pressure on reported operating profit.

 

A quick scan of all of MCD recent filings terms “austerity” is mentioned two times in the  most recent 10-K and nine times in the most earnings call.  “Labor cost pressures” was mentioned once in the most recent 10-K and zero times in the most recent earnings call. “Economic uncertainty” was mentioned three times in the most recent 10-K and zero times in the most recent earrings call transcript. Again, management did communicate these issues, but we need to read between the lines to get to the conclusion about the impact on 1Q12.

 

The economic uncertainty and austerity measures in Europe are not new.  Commodity inflation is not a new trend either; beef prices have been moving higher but that is neither a new trend nor should it be a surprise.  Management highlighted mid-teen inflation in beef costs as being the most significant impact on COGS in 2011 and guided to a similar level in 2012 during the 4Q EPS call on 1/24. 

 

From the 10-K filed on 2/24/12: “In 2012, our European business will continue to face headwinds due to economic uncertainty and additional government-initiated austerity measures implemented in many countries. While we will closely monitor consumer reactions to these measures, we remain confident that our business model will continue to drive profitable growth.”   Again, no sign that there was going to be any real margin pressure – in fact this suggests less pressure in Europe this year versus last year.

 

From the most recent earnings transcript management filed on 1/24/12: “Europe's commodity inflation is expected to moderate a bit in 2012, with a projected increase of 2.5% to 3.5%.”  Additionally, the company said that the impact of “austerity” in 2012 was going to be less severe than in 2011, stating, “…some of these incremental austerity measures, so the increased social charges and some of the other taxes that are hitting the restaurants, those are going to be, while we'll have some new ones, the magnitude of those will be lower than we saw in 2011.”

 

Our stance on the stock at this point is to wait and see.  We are not buyers of the stock on this selloff.  In short, if austerity is having an impact it will not be a one month phenomenon.

 

 

Howard Penney

Managing Director

 

Rory Green

Analyst

 


PREDICTING INITIAL CLAIMS: THE SINE WAVE MODEL

When Confusion Reigns, Call in the Sine Wave

The headline initial claims number rose 11k WoW to 362k (up 8k after a 3k upward revision to last week’s data).  Rolling claims rose 0.3k to 355k. On a non-seasonally-adjusted basis, reported claims rose 32k WoW to 366k.

 

Today's print is consistent with our "Lehman's Ghost" thesis. To recap, the collapse of Lehman Brothers in late 2008 distorted the seasonal adjustment factors in various government data sets. The dislocation in the economic data was incorrectly read as a seasonal pattern and the factors were revised accordingly. 

 

The seasonal distortion plays out as follows.  Claims were understated in the last weeks of February by the largest amount. From now through May, the understatement disappears.  Absent an underlying trend in the series, this effect will drive claims higher by 20-30k over the next three months. This trend continues to push claims higher by another 20k through July, by which time the series will be seeing its peak overstatement (claims are being reported higher than they actually are). Thereafter, the cycle starts over again. We do our best to depict this graphically with the sine wave chart below. The red arrow represents the current underlying trend in the jobs series, which is improving at a rate of around 3k per month. The blue sine wave represents the distortive impact the seasonal adjustment model is having on the data.  

 

PREDICTING INITIAL CLAIMS: THE SINE WAVE MODEL - sine wave claims

 

PREDICTING INITIAL CLAIMS: THE SINE WAVE MODEL - Rolling

 

PREDICTING INITIAL CLAIMS: THE SINE WAVE MODEL - raw 2

 

PREDICTING INITIAL CLAIMS: THE SINE WAVE MODEL - NSA

 

PREDICTING INITIAL CLAIMS: THE SINE WAVE MODEL - S P

 

PREDICTING INITIAL CLAIMS: THE SINE WAVE MODEL - FED

 

2-10 Spread

The 2-10 spread widened less than 1 bps versus last week to 168 bps as of yesterday.  The ten-year bond yield also stayed relatively flat over last week, increasing less than 1 bps to 198 bps.

 

PREDICTING INITIAL CLAIMS: THE SINE WAVE MODEL - 2 10

 

PREDICTING INITIAL CLAIMS: THE SINE WAVE MODEL - 2 10 QoQ

 

Financial Subsector Performance

The table below shows the stock performance of each Financial subsector over four durations. 

 

PREDICTING INITIAL CLAIMS: THE SINE WAVE MODEL - Subsector performance

 

Joshua Steiner, CFA

 

Allison Kaptur

 

Robert Belsky

 

Having trouble viewing the charts in this email?  Please click the link at the bottom of the note to view in your browser.   


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THE HBM: MCD, PNRA, AFCE, CBRL, BWLD

THE HEDGEYE BREAKFAST MONITOR

 

MACRO NOTES

 

Consumer

 

Initial jobless claims came in at 362k versus 352k consensus for the week ended 3/3 and 354k during the week prior (revised up from 351k)

 

THE HBM: MCD, PNRA, AFCE, CBRL, BWLD - claims

 

 

SUBSECTOR PERFORMANCE

 

THE HBM: MCD, PNRA, AFCE, CBRL, BWLD - subsector

 

 

QUICK SERVICE

 

MCD: McDonald’s reported sales of 11.1%, 4.0%, and 2.4% for the U.S., Europe, and APMEA, respectively.  Consensus was looking for 8.7%, 6.8%, and 8.6%, respectively.  Due to calendar shifts, the numbers include an adjustment ranging from approximately 3.1% to 3.4%.  We will have a note up detailing our thoughts on MCD shortly.

 

THE HBM: MCD, PNRA, AFCE, CBRL, BWLD - MCD US

 

THE HBM: MCD, PNRA, AFCE, CBRL, BWLD - mcd eu

 

THE HBM: MCD, PNRA, AFCE, CBRL, BWLD - MCD APMEA

 

 

PNRA: Panera is featured in the Wall Street Journal today stating that it will increase its media investment by 26% this year.  "A lot of people think, if you do nothing, you will stay at zero. But the reality is, if you do nothing, you'll be at a negative," said Founder and Chairman Ron Shaich.

 

AFCE: AFC reported 4Q EPS of $0.24 versus $0.24 consensus.

 

NOTABLE PERFORMANCE ON ACCELERATING VOLUME:

 

AFCE: AFC Enterprises gained 3% on accelerating volume.

 

 

CASUAL DINING

 

CBRL: Cracker Barrel continues to highlight gas prices as a potential risk going forward.  Most of the other restaurant companies that have addressed the topic have been downplaying the impact of gas prices and highlighting the consumer handling current levels quite well.

 

BWLD: Sanderson Farms CEO Joe Sanderson said yesterday that there is no chance of the supply of chicken growing this year.

 

NOTABLE PERFORMANCE ON ACCELERATING VOLUME:

DIN: Dine Equity bounced back after three consecutive down days.

 

THE HBM: MCD, PNRA, AFCE, CBRL, BWLD - stocks

 

 

Howard Penney

Managing Director

 

Rory Green

Analyst

 


Politics and Prejudice

This note was originally published at 8am on February 23, 2012. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.

“Politics and prejudice keep pushing their way into things.”

-Izzeldin Abuelaish

 

I’m often inspired by doers in this world. Instead of pandering to the political wind, they simply lead by example. Their respect is earned each and every day, not centrally allocated.

 

The aforementioned quote comes from a Palestinian doctor who was educated in Cairo and at Harvard. He practiced in both Saudi Arabia and Israel, and now lives in Canada. His story is called “I Shall Not Hate”, and I highly recommend reading it if you’re looking for cultural context in analyzing the Middle East.

 

The last decade has been a particularly disappointing period in this grinding conflict that keeps us apart. Our leaders bicker like children, breaking promises, behaving like bullies, keeping the kettle of trouble boiling. The people I talk to – patients, doctors, neighbors in Gaza, friends in Israel – are not like our leaders.” (I Shall Not Hate, page 121)

 

Until he mentions Gaza, you’d think he was writing about the 112th US Congress. But what is it about Iran or Illinois that keeps us from having a discussion about economic facts? Why are we wedded to Western Academic Dogmas gone bad? Why are we so partisan?

 

Unlike debating science and math (where there are actual answers to the questions), American economic opinions, strategies, and forecasts are heavily weighted to Politics and Prejudice – and massively underweight transparency, accountability, and trust.

 

Back to the Global Macro Grind

 

I was looking for a way to bridge the gap between what Inflation Expectations are doing (last price) and what partisan politicians are saying about oil prices this morning. In a globally interconnected marketplace of colliding factors, to call this rip to $124/barrel in oil prices simply a function of “Iran” is as simple does – un-American and uninspiring.

 

Multi-factor, Multi-Duration.

  1. Oil is up +11.7% in the last month
  2. Oil is up +193.4% in the last 3 years
  3. Oil is up +503.3% in the last 10 years 

This, of course, is what The Bernank calls The Deflation.

 

Iran is definitely a factor. But it’s certainly not the only factor. Having a dual mandate (monetary and fiscal policy) to debauch the Dollar puts the world’s reserve currency in a position where we are all subject to more volatility associated with “external shocks.”

 

If that’s not the case, why didn’t Oil go to $130 or $150 during the Reagan and/or Clinton years? There were plenty of Middle Eastern, Russian, and US supply scares over the course of the 1980s and 1990s, weren’t there?

 

Ah, but there was also a global expectation for Strong Dollar Policies from both the Reagan and Clinton Administrations: 

  1. Monetarily: Reagan was Strong Dollar (Volcker raising interest rates and the rate of return on American Savings, again, and again)
  2. Fiscally: Clinton was Strong Dollar (Balanced Budget Act 1997 and the only President since Truman to run 3 consecutive surpluses) 

Got Politics and Prejudice?

 

Oh there is plenty folks. But the beauty of being Canadian this morning is not only that we have Steven Harper instead of Santorum, but we can sit back and not be Republican or Democrat about this. Economic policy context here is critical, because when it comes to the last decade of Bush/Obama, both of these Presidents are much more like Nixon/Carter than anything else – Keynesians.

 

Solution?

 

Abuelaish says one thing they haven’t tried in the Middle East is empowering women to make decisions. I like that, because the American men running economic policy couldn’t be worse. And by the way, the only major head of State to be Strong Currency (both fiscally and monetarily) in the last 40 years was Margaret Thatcher. If I was Mitt Romney, I’d be doing the required Hayekian reading on that, fast.

 

In other news: 

  1. Japan – Former BOJ deputy chief Muto says the Japanese fiscal and monetary situation has reached a “trigger point”
  2. China – Premier Wen is whispering about cutting China’s GDP run rate below 8% at the National People’s Congress (March 5th)
  3. Europe – Economic Stagflation (rising inflation, slowing growth) is back in the headlines instead of Greece 

Maybe we should blame Iran (or Canada?) for Big Government Policies to inflate slowing global growth again too?

 

Macro Math on what those big 3 represent as a % of total Global GDP: 

  1. Japan = 9.3%
  2. China = 11.1%
  3. European Union = 28.1% 

So, that’s only 48.4% of the world’s economic output. I guess it’s a really good thing that Bernanke sees no inflation slowing real (inflation adjusted) economic growth in America. Sadly, Politics and Prejudice have made us willfully blind.

 

My immediate-term support and resistance ranges for Gold, Oil (Brent), US Dollar Index, and the SP500 are now $1736-1782, $119.45-123.86, $79.01-79.47, and 1353-1363, respectively.

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Politics and Prejudice - Chart of the Day

 

Politics and Prejudice - Virtual Portfolio


THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – March 8, 2012


As we look at today’s set up for the S&P 500, the range is 18 points or -0.56% downside to 1345 and 0.77% upside to 1363. 

 

SECTOR AND GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 1

 

 

THE HEDGEYE DAILY OUTLOOK - 2

 

 

THE HEDGEYE DAILY OUTLOOK - 3

 

 

EQUITY SENTIMENT:

 

With Bernanke’s Policy To Inflate back into the whispers of sweet nothing volume rallies again, we are still tasked with risk managing the immediate-term ranges of being long Inflation until the Growth music stops. Fun.

  • ADVANCE/DECLINE LINE: 1724 (4233) 
  • VOLUME: NYSE 800.91 (-8.76%)
  • VIX:  19.07 -8.62% YTD PERFORMANCE: -18.50%
  • SPX PUT/CALL RATIO: 1.74 from 1.63 (6.75%)

CREDIT/ECONOMIC MARKET LOOK:

  • TED SPREAD: 40.33
  • 3-MONTH T-BILL YIELD: 0.08%
  • 10-Year: 1.99 from 1.98
  • YIELD CURVE: 1.70 from 1.67 

MACRO DATA POINTS (Bloomberg Estimates):

  • 7am: Bank of England rate decision, est. 0.5%
  • 7:30am: Challenger Job Cuts (Y/y), Feb.
  • 7:45am: ECB rate decision, est. 1.0%
  • 8am: RBC Consumer Outlook Index
  • 8:30am: Jobless Claims, week of Mar. 3, est. 351k (prior 351k)
  • 9:45am: Bloomberg Consumer Comfort, week Mar. 4, est. -39.0
  • 10am: Freddie Mac 30-yr mortgage
  • 10:30am: EIA Natural Gas 

GOVERNMENT:

  • President Obama meets with Ghanaian President John Atta Mills
  • Treasury Secretary Tim Geithner will tour BNSF facility in, Texas, discuss economy at event hosted by Dallas Regional Chamber, 4pm
  • House, Senate in session
    • House Appropriations subcommittee hears from Transportation Secretary Ray LaHood on budget request, 9:30am
    • House Energy and Commerce panel holds hearing on FDA user fees, accelerated approval of treatments, with testimony from Alnylam Pharmaceuticals CEO John Maraganore, 10am
    • House Budget Committee meets on FY2013 budget, 10am
    • Senate Appropriations subcommittee hears from Attorney General Eric Holder on Justice Department’s budget request, 10am
    • House Energy and Commerce subcommittee hears from Energy Secretary Steven Chu on budget, 10am
    • Senate Appropriations subcommittee hears from acting Federal Housing Administration head Carol Galante, 10am
    • Senate Appropriations subcommittee hears from Homeland Security Secretary Janet Napolitano on budget request, 10am
    • Senate Homeland Security Committee hears from Homeland Security Secretary Janet Napolitano on budget request, 2:30pm 

WHAT TO WATCH:

  • ECB may lift its 2012 inflation forecast above the 2% price- stability threshold today, economists est.; interest rate seen to remain at 1%
  • AIG shares said to be offered at $29 each as Treasury reduces stake
  • AT&T in talks to sell a majority stake in its Yellow Pages unit to Cerberus
  • Investors with ~60% of the Greek bonds eligible for debt swap have so far indicated they’ll participate, putting it on verge of biggest sovereign restructuring in history
  • U.S. said to warn Apple, publishers over e-book pricing: WSJ
  • FDA staff issues report of new class of pain medicines that target nerve growth factor
  • Facebook gets $8b credit line while adding to banker list
  • Toyota revamps North American management to boost regional unity
  • McDonald’s to release monthly sales at 7:58am; Texas Instruments to provide mid-quarter update post-market
  • Rick Santorum-backers pressuring Newt Gingrich to drop out of Republican presidential contest
  • Italian-German 10-yr yield spread falls to least since Sept. 1 

EARNINGS:

    • Smithfield Foods (SFD) 6 a.m., $0.65
    • Canadian Imperial Bank of Commerce (CM CN) 6 a.m., $1.93
    • Williams-Sonoma (WSM) 6:30 a.m., $1.13
    • Navistar (NAV) 7 a.m., $(0.27)
    • Buckle (BKE) 7 a.m., $1.15
    • Viterra (VT CN) 7 a.m., $0.21
    • AltaGas Ltd (ALA CN) 7:24 a.m., $0.30
    • Cominar Real Estate Investment Trust (CUFu CN) 8 a.m., $0.43
    • John Wiley & Sons (JW/A) 8 a.m., $0.94
    • JinkoSolar (JKS), Pre-mkt, ($1.88)
    • Cooper (COO) 4:01 p.m., $1.04
    • Ulta Salon Cosmetics & Fragrance (ULTA) 4:01 p.m., $0.67
    • Aeropostale (ARO) 4:01 p.m., $0.38
    • Renren (RENN) 5 p.m., $-
    • Approach Resources (AREX) Post-Mkt, $0.22 

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • Drought Tightens Corn Supply Before Record Harvest: Commodities
  • World Food Prices Climb for a Second Month on Grains, Oils
  • Oil Rises a Second Day on Signs Sanctions Cutting Iran Exports
  • Copper Climbs Most in a Week on Signs of U.S. Rebound, Stocks
  • Gold Climbs as Decline in Dollar’s Value May Signal More Demand
  • Soybeans Gain on Speculation USDA to Cut Brazil Crop Estimate
  • BofA Says U.K. LNG Imports May Halt If Japan Reactors Stay Shut
  • Palm-Oil Stockpiles in Malaysia Set to Reach Six-Month Low
  • Sugar Imports by Bangladesh More Than Double on Crop, Price
  • BHP Stirs Memory of Alcan Writedowns as Shale Gas Sours: Energy
  • Asia Gasoil Crack Falls; Hin Leong Buys Fuel Cargo: Oil Products
  • Global Insurers Targeted in Proposed U.S. Sanctions Against Iran
  • China Said to Stop New Crushing Plants Using Imported Rapeseed
  • Oil Rallies More From Dollar Outlook Than Iran: Chart of the Day
  • China Wants India’s Cotton Ban Lifted as Ministers Review Curb
  • Sugar Falls as Producers Sell After Price Rises; Coffee Rose
  • U.S. Spring May Be Warmer Than Normal, AccuWeather Forecasts 

THE HEDGEYE DAILY OUTLOOK - 4

 

 

CURRENCIES


THE HEDGEYE DAILY OUTLOOK - 5

 

 

EUROPEAN MARKETS


THE HEDGEYE DAILY OUTLOOK - 6

 

 

ASIAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - 7

 

 

MIDDLE EAST


THE HEDGEYE DAILY OUTLOOK - 8

 

 

 

The Hedgeye Macro Team

 


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