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



Telsey Advisory Group Spring Consumer Conference (March 27)

  • [Octavius Tower] "The three villas are still under construction, and they're going to open in the third quarter of this year. The Octavius Tower, 662 rooms, are very high demand. It's at our best property in Las Vegas, which I mentioned was our best market, so we're very confident about the returns associated with that."
  •  [Thistledown]  "We have a pavilion that can support a temporary spot facility, we would expect to get up and running in a few months after the [Ohio Roundtable] legislation is cleared. And then, the question would be where do we put a permanent facility. But we would expect that to be operational as well in the latter part of this year."
  • "Additionally, at Baltimore, we have submitted the only remaining eligible bid for the downtown Baltimore license.  The project is currently under bid, as I mentioned, and we're waiting to hear back regarding the award of the license once that happens. It will be a relatively short bid and we would expect to be operational about 18 months after that."
  • [Nevada online gaming] "The regulations are more or less drafted. They're being finalized. They're under the process of licensing applicants, and we would expect to be up and operational probably in the fourth quarter, maybe in the first quarter, depending. We're investing in servers. We're building out our call centers. So it's well underway, and Nevada is going to be the first state that legalizes online gaming."
  • "Gaming online will happen, and it's going to either come in a state-by-state by format or by federally legislated bill."
  • "The primary one is the regional market, where we have a number of guests that visit us many times a month. And so those guests, let's say, they drive 30 miles and they visit us five or six times a month, will be impacted by the fuel. And it's really, as we've seen historically, it's the change in fuel price, not so much the absolute fuel price. So, to the extent that the fuel price is a slow increase, that really doesn't appear to impact our customers as much as it does a slow change in the fuel price....a change in fuel price does impact us but it's not as significant as it could be otherwise, if the trips were just eliminated."
  • "What we're seeing is a return in general in terms of trips. So, customers are starting to make more trips but they're really not spending a lot more on those trips."
  • [Revel impact on AC] "We believe they will grow the market because they're going to create a lot of excitement, but also they won't grow it sufficiently to offset the revenues that they're going to consume, so there will be same-store sale declines."

Youtube from Q4 Conference Call

  • "I'll begin by noting like my colleagues in the industry that we're bullish on the Las Vegas market. International business there has been primary driver of gaming growth for Caesars in Las Vegas recently, and an exceptionally strong Chinese New Year result suggests that this strength should continue in 2012 and beyond."
  • "Spending by core gaming customers has not yet returned to previous recession levels, but with Las Vegas visitation increasing and several important U.S. economic indicators trending positively recently, we're cautiously optimistic that these customers will spend more with us in Vegas in the remainder of the year."
  • "Horseshoe Cincinnati, is slated for a second quarter 2013 opening."
  • "We anticipate the Linq will open in phases from mid to late next year."
  • "Trends for group bookings continue to prove strong in 2012 and as we approach our theoretical capacity for group business in our hotels, we expect this strength to continue to translate into an improved rate environment."
  • [LA/MS region] "This region is still affected by relatively weak demand dynamics in most of its local market, with revenues mainly being affected by a decline in trips."
  • "Our contribution margin from hotel revenues is 80% to 90% generally and we've proven that for several quarters now, though in other quarters we've had more gaming revenue growth as well. So, in terms of its sustainability, I would expect that with – on hotel revenue growth in the future that we'll be able to deliver similar contribution margins. Gaming revenue growth of course would have a contribution margin more in the range of 50% to 60% but I also continue – I expect it will continue to drive down cost in Las Vegas as well as across the business."

What’s Asia Signaling About Trends in the Tech Sector?

Conclusion: The relevant growth data emanating from Asia suggests the tech sector is at risk of deteriorating operating metrics over the intermediate term.


If you’ve been following our research for the past 2-3 months, you’re likely well aware of our bearish intermediate-term outlook for the slope of Asian growth – which we typically view as a leading indicator for economic trends in the developed world, given Asia’s place in the global supply chain.


One supply chain that has had consensus a’buzzing in recent months is the tech sector (second-best S&P 500 performer YTD at +17.3%) – particularly at the consumer-facing end. While it can be strongly argued that the trend of stellar operating results out of AAPL are strong justification for its price performance, we’d be remiss to dismiss Apple’s tempered guidance in the context of the manufacturing, export, and headline growth trends coming out of what we view as they key tech-focused countries in Asia. Consider the following metrics:


Real GDP:

  • S. Korea: +2.8% YoY in 1Q12 vs. +3.3% in 4Q11; slowest rate of growth since 3Q09
  • Taiwan: +0.4% YoY in 1Q12 vs. +1.9% in 4Q11; slowest rate of growth since 3Q09
  • Thailand: reports 1Q12 GDP on MAY 20; likely to continue rebounding from the 2H12 flooding

What’s Asia Signaling About Trends in the Tech Sector? - 1


Manufacturing Production:

  • S. Korea: +0.4% YoY in MAR vs. +4.2% in JAN-FEB (combined to smooth out Lunar New Year distortions)
  • Taiwan: -3.8% YoY in MAR vs. -5.7% in JAN-FEB
  • Thailand: -3.7% YoY in MAR vs. -9.1% in JAN-FEB (Capacity Utilization has since rebounded; in fact, it’s at a 4yr high)

What’s Asia Signaling About Trends in the Tech Sector? - 2


What’s Asia Signaling About Trends in the Tech Sector? - 3



  • S. Korea: -1.4% YoY in MAR vs. +5.6% in JAN-FEB
  • Taiwan: -3.3% YoY in MAR vs. -4.5% in JAN-FEB
  • Thailand: -6.5% YoY in MAR vs. -2.4% in JAN-FEB

What’s Asia Signaling About Trends in the Tech Sector? - 4


Absent a marked-acceleration in production orders and developed-world consumer demand (occurrences we’d classify as “improbable”), we would expect the aforementioned sour trends in Asian growth data to negatively impact corporate operating metrics to varying degrees throughout the tech supply chain over the intermediate term. For example, AAPL, even if it has its own secular story independent of the broader technology supply chain, attributes 70% of its COGS to companies in Taiwan (50.9%) and S. Korea (19.1%) – not inconsequential in the context of heightening expectations.


What’s Asia Signaling About Trends in the Tech Sector? - 5


The caveat is that this is but one of many read-throughs into Apple’s and other tech companies’ operating trends and we seldom make calls on a stock without a thorough analysis of all of the puts and takes in a company’s business model. Still, the data is what it is and we see risk in ignoring it – an activity (i.e. ignoring bad data) consensus tends to do repeatedly when making valuation calls near cyclical market peaks. Another caveat is the potential for sour Asian economic data to be bifurcated at the micro level (particularly U.S. vs. the Eurozone) – a trend we’ve seen highlighted recently by Chinese export figures.


What’s Asia Signaling About Trends in the Tech Sector? - 6


All told, it is our view that this data should force tech-focused investors to, at a bare minimum, exercise caution over the intermediate term. AAPL is currently flirting with a quantitative breakdown on our immediate-term TRADE duration. Further, the quantitative setup (bearish TRADE & TREND) in both Korea’s KOSPI Index and Taiwan’s TAIEX Index are in support of our fundamental view. Thailand’s SET Index, which is bullish TRADE & TREND, continues to benefit from an idiosyncratic tailwind (flood recovery). All of these proprietary risk management levels are included in the charts below.


Darius Dale

Senior Analyst


What’s Asia Signaling About Trends in the Tech Sector? - 7


What’s Asia Signaling About Trends in the Tech Sector? - 8


What’s Asia Signaling About Trends in the Tech Sector? - 9


What’s Asia Signaling About Trends in the Tech Sector? - 10

Retail: Bullish Near-Term Factors???

There’ll be headline ugliness on Thursday bc of the holiday calendar shift, but the Macro consumer spending setup is positioned very favorably for the next quarter. Potential good news – for the retailers that have invested to capitalize on it.


Some interesting takeaways from today’s PCE data.

1)      With 2.6% growth in personal income, we saw the 12th sequential deceleration in the rate of personal income growth.

2)      Over that 12 months, the aggregate personal tax rate is up by 1 full point. That’s holding steady at 11.1%.

3)      So with income down by a full 220bps, and taxes up by 100bps, one would think that consumption must be down by 320bps, right?

4)      Nope. It’s +4.0%, versus +3.5% a year ago.

5)      We could nit-pick and point to the 30bp sequential erosion in the growth rate in consumption. But the reality is that the US consumer acted in the past year exactly like…well…the US Consumer. The personal savings rate oscillated between a 150bp band, and now sits at just 3.8%.

6)      Logically, one could make an argument that with Personal Income compares getting very easy this Spring, the savings rate will creep higher. Not so. History shows us that the savings rate – or the ‘Fear Index’ as we’ll call it – only goes up when consumers are afraid to spend.

7)      Given that the average Joe has no reason to be more afraid today – especially with the equity market having rallied – our sense is that any boost in the rate of personal income growth will be spent.

8)      Definitely a bullish setup for the next quarter – for those retailers that are prepared to capitalize on it.


Retail: Bullish Near-Term Factors??? - CIS


Retail: Bullish Near-Term Factors??? - consumption vs. income


Retail: Bullish Near-Term Factors??? - essential vs. disc spend

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European Banking Monitor

Below are key European banking risk monitors, which are included as part of Josh Steiner and the Financial team's "Monday Morning Risk Monitor".  If you'd like to receive the work of the Financials team or request a trial please email .

Key Takeaways:


*European sovereign swaps tightened last week, with Spanish swaps tightening the most (-6.9%) and Irish swaps tightening the least (-2.85%).  While Spanish sovereign swaps saw tightening, most Spanish bank swaps continued to widen out.


* We caution against using the Euribor-OIS spread as a measure of interbank lending within the Eurozone.  We looked at the relationship between the Euribor-OIS spread and French Bank CDS. It is evident from the results that the relationship between these two data series has been falling apart since mid-march. We now think the Euribor-OIS spread is a potentially dangerous and misleading risk indicator, which is understating the underlying risks. For reference, the Euribor-OIS was roughly flat over last week, while the TED spread continued to fall.



Euribor-OIS spread – The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. The Euribor-OIS spread tightened by less than one basis point to 39 bps.


European Banking Monitor - 11. euribor


ECB Liquidity Recourse to the Deposit Facility – The ECB Liquidity Recourse to the Deposit Facility measures banks’ overnight deposits with the ECB.  Taken in conjunction with excess reserves, the ECB deposit facility measures excess liquidity in the Euro banking system.  An increase in this metric shows that banks are borrowing from the ECB.  In other words, the deposit facility measures one element of the ECB response to the crisis.  The latest overnight reading is €793.96B.


European Banking Monitor - 11. facility


European Financials CDS Monitor – Bank swaps were tighter in Europe last week for 24 of the 39 reference entities. The median tightening was 2.6%. Spanish banks continued to see their default probabilities rise notably week over week.


European Banking Monitor - 11. Banks


Security Market Program – For a seventh straight week the ECB's secondary sovereign bond purchasing program, the Securities Market Program (SMP), purchased no sovereign paper for the latest week ended 4/27, to take the total program to €214 Billion. The Q&A in Thursday’s ECB conference call may provide some detail if this positioning will change. For now, the ECB appears to be at a “wait-and-see” mode, measuring the impact of the two 36-month LTRO programs before it commits more assets to the European project.


European Banking Monitor - 11. SMP


Matthew Hedrick

Senior Analyst

THE WEEK AHEAD (image refreshed)

The Economic Data calendar for the week of the 30th of April through the 4th of May is full of critical releases and events. Attached below is a snapshot of some (though far from all) of the headline numbers that we will be focused on.


THE WEEK AHEAD (image refreshed) - 1


Due to the public holiday, we probably won’t have Macau numbers until Wednesday.  Here are some things we're hearing from Macau this past week:


  • Golden Week has already started on April 29, rather than the usual May 1, however, play levels this weekend were normal and have not yet seen a big move up on the holiday.
  • Volumes should pick up May 1 and this coming weekend should be strong
  • Since opening a few weeks ago, Sands Cotai Central (SCC) is running at approximately double the rate of Mass play compared to Venetian when it opened in August 2007
  • While SCC Mass volumes have been solid, the Group’s results have been dragged down by weak hold across LVS’s other properties.  We understand that hold at Sands Macau may have been only 2.2% while Venetian and FS are running around 2.5% MTD.
  • VIP volumes at SCC are probably below expectations, however, they are expected to start ramping this weekend
  • 80-120 tables from SCC came from other LVS properties
  • We don’t expect any announcements (including WYNN) on new Cotai licenses until after the May holiday - possibly on June 1
  • As far as approvals go, Sands China’s Lot 3 project is on the back burner. 
  • Galaxy Macau Phase 2:  land is approved but the additional tables are not approved.  They also do not have approval for the building.  They can however, start the pilings.
  • The gaming component of Phase 2 at Galaxy Macau was surprisingly large relative to the other amenities in Phase 2.

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