In preparation for BYD's FQ1 2012 earnings release Tuesday, we’ve put together the recent pertinent forward looking company commentary.




  • "We are confident that 2012 will see Las Vegas set a record and surpass the 40 million visitor mark."
  • "We are confident that even with new competition entering the market, Borgata will remain the leading resort in the region."
  • "While we made progress toward that goal in 2011, reducing our overall leverage by almost full turn, we know we must continue this effort during 2012."
  • "We made great strides in 2011 creating efficiencies and improving our margins. We will stay focused on this in 2012."
  • "We saw encouraging strength in our Hawaiian customer segment, as both visitation and play from Hawaiians
    increased significantly from last year. There are a number of reasons to be optimistic about the future of Downtown. A number of new non-gaming businesses have been moving into the area. Development along the Fremont Street East district continues and The Smith Center, a 2,000 seat, world-class performing arts center will open its doors Downtown next month. These developments will bring new jobs, new visitors and new residents to Downtown Las Vegas. And we are already benefiting from the energy and excitement coming into the area, as visitor traffic has grown substantially on the Fremont Street Experience, helping to drive our strong results. The outlook for Downtown is bright and with one-third of the total market, Boyd Gaming will benefit from the area's renaissance." 
  • "We're on target to roll out B Connected at the IP during the second quarter, which will allow us to capitalize on the busy summer season and accelerate growth in the year ahead."
  • "We are working hard to ensure that Borgata's team members continue to deliver the best possible service to our customers. And the hotel room redesign already underway, will be completed by midyear, helping to keep our product at the top of the market. Based on the feedback we've received so far, the refreshed rooms have been well received by our guests."
  • "When it launches in the second quarter, we are confident that B Connected Online 2.0 will further enhance the exceptional, personal experience our customers have come to expect from Boyd Gaming."
  • "For 2012, we expect corporate expense to be approximately $44 million."
  • "For 2012, we expect consolidated depreciation expense to be approximately $200 million to $205 million, about $135 million to $140 million of which is attributable to Boyd and the remaining to Borgata."
  • "We expect share-based comp to be approximately $10 million in 2012. Pre-opening expense, before the consolidation of Las Vegas Energy was $4 million in the fourth quarter and that is a good quarterly run rate estimate for 2012"
  • "Using the current forward curve for LIBOR, we expect interest expense to be approximately $160 million for Boyd in 2012 and approximately $85 million for Borgata." 
  • "For guidance purposes, we are assuming a 35% tax rate for 2012."
  • "For 2012, at Boyd, we expect to spend approximately $100 million and at Borgata, approximately $60 million, which includes $35 million related to the room project that was started last year and is expected to be completed in the middle of this year."
  • "We expect wholly owned EBITDA, including IP and after the deduction for corporate expense, to be in the range of $88 million to $93 million. We expect Borgata to generate EBITDA of $32 million to $34 million. With this range of EBITDA guidance, including a full quarter of IP, adjusted EPS for the first quarter is expected to range from $0.05 to $0.09 per share."
  • [LV Locals growth] "I guess it's coming in both sides [gaming/non-gaming]. So we've turned the corner, we think it's low single-digits for 2012, but it's certainly higher than what you've seen in the last couple of quarters."
  • "We can see $0.60 on the dollar plus or minus flow through off of any revenue increases." 
  • [IP synergies] "We definitely feel very comfortable with the $5 million and we think there's pretty good upside to that number. As it relates to things like property insurance, utilities, savings on the procurement side by just being part of a much larger organization and buying at, frankly, just better rates because of volumes, are all starting to fold in now. We'll be completed with our insurance renewal in the second quarter and I think you'll see a full year of 2012 that reflects some healthy synergies, certainly well in excess of the $5 million that we have targeted."
  • [Margaritaville competition] "Relatively small project, no hotel rooms. Really I guess the best way to describe it, is a locals-oriented property with relatively tough location from an access perspective. Really don't see that impacting our business at all."

Optimistic Bias

This note was originally published at 8am on April 09, 2012. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.

“The optimistic bias may well be the most significant of the cognitive biases.”

-Daniel Kahneman


After a beautiful long Easter weekend with my family on the East Coast, I really don’t feel like writing negatively this morning. The S&P Futures will do that for you on their own.


Growth Slowing, globally, isn’t the “pessimist’s” view – it’s the realist’s view. As Risk Managers, we do not get paid to have an Optimistic Bias. We get paid to have a repeatable risk management process that is biased to the Global Macro data. On the margin, growth is either slowing or accelerating. We’re ok with being early in signaling either direction.


Since global growth data has been slowing for at least 6 weeks, why was Old Wall Street consensus so optimistic about the March Employment report? Some people call it perma-bull, but Kahneman’s behavioral psych explanation is a little nicer: we “tend to exaggerate our ability to forecast the future, which fosters optimistic overconfidence.” (Thinking, Fast and Slow, pg 255).


Back to the Global Macro Grind


Fortuitously, in the last 3 weeks, as Growth Slowing became more obvious, I raised the Cash position in the Hedgeye Asset Allocation Model to 79% (versus 61% two weeks ago). That should put us in a great position to buy on red this morning.


Or does it?


If I feel like I am too long this morning, I can’t imagine what my overly optimistic competition is feeling.


Today is not a day to freak-out and sell on red. Today is a good day to wait and watch. Since most of Europe is closed, the Top 3 Risk Management Signals to watch will be the US Dollar Index, SP500, and 10-year US Treasury Yield:


1.   US DOLLAR: after rising +1.4% last wk (its 1st up week in the last 4), the USD needs to show A) some follow through and B) no more policy to debauch it. If the US Dollar Index can hold its head above $79.51 intermediate-term support, that’s bullish.


2.   SP500: if the SP500 closes below 1391 support (my immediate-term TRADE line), that’s bearish and it puts 1331 in play over my intermediate-term TREND duration (next 3 months or more). Since 3 of the last 4 YTD SP500 tops occurred in the Feb-May periods, you want to be very careful on time and price here.


3.   TREASURIES: plenty who suggested “growth is back” and “bond yields could breakout (buy equities!)” have just seen the 10-yr yield drop -14% in a straight line (from 2.40% to 2.06%). That’s going to leave a mark on asset allocation moves. The long-term TAIL of Growth Slowing remains with 10-yr yield resistance up at 2.47%. Now we’ll see if 2.03% support holds.


This is the 3rdtime that Bernanke has made a formal decision to Debauch The Dollar with a Policy To Inflate (2010, 2011, and 2012) and the 3rd time that his policy has ignited short-term asset price inflation that, in turn, slowed growth.


Other than those who get paid by commodity price inflation, who wants QE 4, 5, and 6? Remember last year when Q1 GDP slowed to a halt (0.36%)? Back then, expectations were for 3.5-4% growth. Today, the perma-bulls are still talking about US Growth north of 3%. That’s an Optimistic Bias if I ever saw one.


Real (inflation adjusted) US Growth could get cut in half again from here if Bernanke decides to debauch further. If he doesn’t, Strong Dollar has every opportunity to emerge the victor in Bernanke’s War.


Strong Dollar Deflates The Inflation. Strong Dollar = Strong Consumption. Strong Dollar = Strong America.


The risk to all of that, of course, is that now I’m being the optimist.


My immediate-term support and resistance ranges for Gold, Oil (Brent), US Dollar Index, 10-year US Treasury Yield, and the SP500 are now $1618-1661, $121.61-124.18, $79.51-80.16, 2.03-2.18%, and 1387-1406, respectively.


Best of luck out there this week,



Keith R. McCullough
Chief Executive Officer


Optimistic Bias - Chart of the Day


Optimistic Bias - Virtual Portfolio


The Macau Metro Monitor, April 23, 2012




Sands China's board of directors recommended the payment of a final dividend of HK$0.58 per share for 2011.   If approved by shareholders at the annual meeting on June 1, the dividend will be paid on June 22. 



According to the 2010 Las Vegas and the 2011 Macau visitor profile studies, visitors come to Macau 3.9 times a year on average, versus 1.7 times to Las Vegas.  Macau visitors’ average gaming budget was MOP 15,257 with an average of 3.7 hours spent on gaming, against MOP 3,739 and 2.9 hours for their Las Vegas counterparts.


Only 68.7% of visitors who come to Macau stay overnight, while 99.3% stay overnight in Las Vegas.  Visitors going to Las Vegas are more willing to spend on food, transportation and sightseeing, but less on shopping compared with those to Macau.



The Singaporean government may launch new measures to prevent the expansion of gaming activities within the communities and explore new rules to further restrict Singaporeans from entering casinos.  The proposed new law might include a daily entry limit on those with weak financial backgrounds and addicted to gaming, in addition, entrance fees to casino will be raised by S$100.  Some analysts said that the related legislation may not be started before 2017.



S'pore March CPI rose 5.2% YoY, beating Street estimates of 4.7%.  The core inflation rate was 2.9% in March.



Macau CPI for March 2012 increased by 6.22% YoY and 0.86% MoM.

Early Look

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TODAY’S S&P 500 SET-UP – April 23, 2012

As we look at today’s set up for the S&P 500, the range is 38 points or -1.63% downside to 1356 and 1.12% upside to 1394. 












    • Up from the prior day’s trading of -530
  • VOLUME: on 4/20 NYSE 965.98
    • Increase versus prior day’s trading of 17.38%
  • VIX:  as of 4/20 was at 17.44
    • Decrease versus most recent day’s trading of -5.01%
    • Year-to-date decrease of -25.47%
  • SPX PUT/CALL RATIO: as of 04/20 closed at 1.31
    • Down from the day prior at 1.62 


GROWTH SLOWING – when we say that, we mean it globally. The words USA “de-coupling” is an Old Wall St word that has not worked in the last 5yrs. The world is as globally interconnected as its ever been and what policy does to the world’s reserve currency has very consequential impact on the intermediate-term slopes of growth and inflation. 

  • TED SPREAD: as of this morning 40
  • 3-MONTH T-BILL YIELD: as of this morning 0.07%
  • 10-Year: as of this morning 1.92
    • Down from prior day’s trading of 1.96
  • YIELD CURVE: as of this morning 1.66
    • Decrease from prior day’s trading at 1.70 

MACRO DATA POINTS (Bloomberg Estimates):

  • No major U.S. economic releases scheduled
  • 11:30am: U.S. to sell $30b 3-mo., $28b 6-mo. bills
  • 11:45am: ECB’s Weidmann speaks in New York City 


    • Treasury Secretary Timothy Geithner holds briefing on Social Security, Medicare trustee reports, 1:45pm
    • FDIC board meets on projected deposit insurance fund losses, income, reserve ratios for its restoration plan, 2pm
    • President Obama speaks at Holocaust Memorial Museum in Washington
    • House, Senate in session 


  • Nestle agrees to buy Pfizer baby food unit for $11.9b
  • ITC judges expected to rule in Motorola Mobility disputes, 5pm
  • Amylin said to seek buyers after rejecting earlier Bristol offer
  • Vodafone agrees to acquire Cable & Wireless for $1.7b
  • AstraZeneca to buy Ardea Biosciences for $1.26b
  • Beam may announce today $600m purchase of Pinnacle vodka brand from White Rock Distilleries Inc.: WSJ
  • Wal-Mart Stores’s probe of possible bribery in Mexico may prompt executive departures, steep U.S. government fines: corporate government experts
  • IBM hosts annual meeting tomorrow; watch for dividend boost and/or buyback announcement in next two days
  • US Airways said Friday it reached agreement on contract terms with AMR’s major unions, moves closer to bid for co.
  • Socialist Francois Hollande, President Nicolas Sarkozy progressed to the final round of France’s election 


    • SunTrust Banks (STI) 6am, $0.33
    • Eaton (ETN) 6:30am, $0.90
    • Wolverine World Wide (WWW) 6:30am, $0.55
    • Hasbro (HAS) 6:30am, $0.07
    • Xerox (XRX) 6:47am, $0.22
    • DR Horton (DHI) 7am, $0.03
    • MGIC Investment (MTG) 7am, $(0.38)
    • RadioShack (RSH) 7am, $0.05
    • Roper Industries (ROP) 7am, $1.04
    • Brinker International (EAT) 7:45am, $0.56
    • ConocoPhillips (COP) 8am, $2.08
    • WR Berkley (WRB) 4pm, $0.66
    • Canadian National Railway Co (CNR CN) 4:01pm, $1.03
    • Illumina (ILMN) 4:01pm, $0.32
    • Ameriprise Financial (AMP) 4:05pm, $1.39
    • Netflix (NFLX) 4:05pm, $(0.27)
    • Health Management Associates (HMA) 4:05pm, $0.22
    • Zions Bancorp (ZION) 4:10pm, $0.27
    • Texas Instruments (TXN) 4:30pm, $0.17
    • IDEX (IEX) 4:35pm, $0.64
    • Crane Co (CR) 5:15pm, $0.91
    • Allison Transmission Holdings (ALSN) NA, NA    


  • Hedge Funds Cut Bullish Wagers Most in Four Months: Commodities
  • Gold Declines in London as Stronger Dollar Curbs Investor Demand
  • Copper Drops as Chinese Manufacturing May Shrink for Sixth Month
  • Oil Drops From Three-Day High as China Crude Consumption Falls
  • Soybeans Fall on Speculation U.S. Farmers Will Increase Sowing
  • Wheat, Rice Harvests in India Seen Reaching Record on Yields
  • Copper May Fall 12% on Elliott Wave Signal: Technical Analysis
  • Robusta Coffee May Fall as Global Supplies Improve; Sugar Gains
  • Rusal’s $43 Billion Seven-Year Glencore Deal Feeds Investor Feud
  • Oman, Dubai Crudes Drop as Saudi Output Rises: Persian Gulf Oil
  • U.K. Gas Rises a Third Day as Temperature to Stay Below Average
  • Three Nigerian Bonny Light Crude Cargoes Added to May Program
  • Goldman Closes Recommendation to Short May-June WTI Spread
  • Carbon Declines as Weaker Euro, Fall in Stocks May Curb Demand
  • China to Buy U.S. Corn If Price Drops to $5.50, Center Says
  • Natural Gas Bulls Cut Bets With Futures Below $2: Energy Markets
  • Chesapeake 25% Decline Seen Spurred by Personal Conflict: Energy 





COPPER – the Doctor is getting tagged this morning, down -1.7% and in a Bearish Formation (bearish TRADE, TREND, and TAIL in our model). Commodity prices (or Bernanke’s Bubbles) look a lot like US Treasury Yields again. 10yr yield getting smoked to a fresh 2mth #GrowthSlowing low of 1.93%.






EUROPE – Spanish stocks are crashing again (down -23% since Growth Slowing started, globally in Feb – Hong Kong and India stock markets stopped going up in Feb too). The French Services PMI print for April was awful (46.1 vs 50.1 MAR) and Italian consumer confidence just hit a record low. Central planning not working. DAX snapping TREND support (6689).















The Hedgeye Macro Team



Exporting Dogma

“Currency devaluation as a path to increased exports is not a simple matter.”
-Jim Rickards, Currency Wars


My week of family vacation would not have been complete without thinking about Keynesians. Sadly, from the gas pumps in Fort Myers, Florida to those in New Haven, CT, centrally planned Policies To Inflate are now part of the cost of everyday American life.


If you didn’t know that the world’s markets are globally interconnected, you might actually believe the Academic Dogma that a “cheap currency” is going to provide you the yellow brick road to Export prosperity. If you’ve analyzed the last 5 years of US Export versus US Consumption growth data, you probably think otherwise. America is a Consumption economy. Period.


Debauching the US Dollar to all-time lows into the Spring of both 2008 and 2011 inspired bouts of global food and energy inflation like the world has never seen. With sovereign debt levels having crossed the Rubicon (structurally impairing long-term growth), Ben Bernanke had no business imposing another inflation policy on January 25th, 2012. Growth started slowing in February.


Back to the Global Macro Grind


Growth Slowing in February? Yes, most major Asian and European stock markets stopped going up in February (Hong Kong, India, Spain, etc). This morning’s abruptly bearish reaction in global equity markets is simply a function of consensus catching up to where we’ve been. This isn’t our first rodeo calling for a sequential slowdown in growth. It won’t be our last.


What would change my view? I’ll give a free tank of natural gas to the first best guess.


Strong Dollar is the only way out. The best way to achieve that is to get these un-elected Keynesian policy makers out of the way.


A Strong Dollar will: 


A)     Deflate The Inflation

B)     Strengthen (inflation adjusted) Consumption Growth


That’s the 71% of the US Economy that matters, not Exports.


Not seeing US Exports work drives the Keynesians right batty. It should - look at the US Export contribution to US GDP for the last 3 quarters:

  1. Q2 2011 = 0.48%
  2. Q3 2011 = 0.64%
  3. Q4 2011 = 0.37%

Oh, and by the way, you have to net out Imports from Exports to get to US GDP (calculating GDP = C + I + G + (EX-IM)), so Exports aren’t doing anything for US Growth where it matters most, on the margin.


The biggest concern that Keynesian politicians from Nixon/Carter to Bush/Obama have had is seeing the stock market go down. During periods of economic stagflation, stock markets get addicted to inflation inasmuch as the politicians do. If you Deflate The Inflation, stocks and commodities fall. So, in the short-term, they’re right.


But what’s right for the long-term prosperity of a country’s economy, attempting to centrally plan stock and commodity prices, or maintain price “stability” and “full” employment?


This is why The People are so upset. This is why US Equities in particular have zero inflows. The People don’t trust this game of gaming policy anymore – and they shouldn’t.


This morning’s Global Macro “news” is laden with stagflation – unless we see WTIC Oil prices snap and stay below $96/barrel, that’s just the way it’s going to be. Global Growth has never NOT slowed with Oil prices at these levels. Never is a long time.


Rather than have some Keynesian Economist who takes car service or a NYC cab to work tell you to put some natty gas in your truck and like it, look at what the rest of the world is reporting this morning:

  1. French Services PMI slows, big time, to 46.4 in April versus 50.1 in March
  2. Italian Consumer Confidence hits an all-time lows (all-time is a long time)
  3. Singapore Consumer Price Inflation for March accelerated to 5.2% versus 4.6% in February

That last data point is stale news now (March), and should start to ease in April/May if we see a continued Deflation of The Inflation. That’s the best news I can tell you this morning. But, like it was during the Q1 to Q3 stock market draw-downs of 2008, 2010, and 2011, this will be a process, not a point. Global Consumption doesn’t turn on a futures broker’s dime.


In the meantime, we’ll be using the same research and risk management process to monitor changes on the margin. While it’s alarming that Old Wall Street has not changed what it is that they do in the last 5 years, we don’t want to interrupt them as they continue to make the same mistakes, confusing short-term stock and commodity market inflations with real growth.


Our immediate-term support and resistance ranges for Gold, Oil (Brent), US Dollar Index, and the SP500 are now $1, $116.95-119.41, $79.11-79.54, and 1, respectively.


Best of luck out there this week,



Keith R. McCullough
Chief Executive Officer


Exporting Dogma - Chart of the Day


Exporting Dogma - Virtual Portfolio


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