The Macau Metro Monitor, July 2, 2012
MONTHLY GROSS REVENUE FROM GAMES OF FORTUNE DSEC
June total GGR rose 12.2% YoY to MOP23.33 billion (US$ 2.92 billion, HK$ 22.65 billion).
CHINA HOUSING PRICES RISE AFTER 9 MONTHS OF DECLINE WSJ
According to China Real Estate Index System, the average housing price in 100 major Chinese cities recorded its first sequential rise after nine straight months of decline. A survey of property developers and real-estate firms showed the average price of housing in June was 8,688 yuan ($1,369) a square meter, rising 0.05% from 8,684 yuan in May, and overturning May's 0.31% decline.
Q2 PRIVATE-HOME PRICES REVERSE SHORT-LIVED FALL Channel News Asia
Preliminary data released by the Urban Redevelopment Authority (URA) showed private-residential prices rising 0.4% QoQ in 2Q. Home prices had eased 0.1% QoQ in 1Q, the first decline since Q2 2009.
2.1 MILLION SINGAPOREANS TO RECEIVE GST VOUCHERS UNDER NEW SCHEME Strait Times
About 2.1 million Singaporeans will be receiving cash handouts, utility rebates and Medisave top-ups in the next two months, under a new GST voucher scheme for lower-income families that is to become a permanent feature of Singapore's social system. A $3.6 billion fund will be set up to pay for this new GST Voucher scheme over the next five years until 2016, of which $680 million will be spent for this year alone.
This note was originally published at 8am on June 18, 2012. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.
“Our mediocre and bankrupt elite, concerned with its own survival, spends its energy and our resources desperately trying to save a system that cannot be saved.”
This weekend I finished reading Death of The Liberal Class. It’s my kind of book. Not because I agreed with everything in it, but because it made me think outside of my comfort zone. Chris Hedges was fired by the New York Times for having a point of view.
Some people call Hedges a socialist; others call him a libertarian. I’ll call him one of the many men and women who need to be heard. You don’t have to agree with everything someone says to be empathetic to their perspective. That’s a democracy.
The perspective of almost every politician making central planning calls on the fly right now is that of their own political career risk. In the short-run (this morning), that means they might need a “coordinated action” for the market’s un-coordinate reaction. In the long-run (the next 3 years), doing more of what has not worked will make their political careers dead.
Back to the Global Macro Grind…
Let’s start with what markets are not doing this morning – going up. This is coming off the 2nd Bailout Sunday in a row where the S&P Futures opened 15 handles higher than where they wound up come Monday morning.
Got expectations? Markets do. Sadly, Our Saviors don’t. From Obama’s Spanish bank bailout man Tim Geithner to Italy’s Mario Monti, these people don’t have a clue as to what they are building into this globally interconnected market’s set of expectations.
Big Government Intervention policies (causality) drive currencies. Currency moves drive asset price inflation/deflation (correlation). For now, that is the deep simplicity of what anyone who manages real-time risk has to deal with in real-time. Fun.
With the US Dollar DOWN for the 2nd consecutive week, Global Equity and Commodity prices went UP last week:
- US Dollar Index = -1.5% in the last 2 weeks to $81.63 (from $82.89, the weekly YTD closing high)
- CRB Commodities Index = +1.5% in the last 2 weeks to 272
- SP500 = +5.0% in the last 2 weeks to 1342 (from 1278, the weekly YTD closing low)
Now, while some might say the last few weeks of stocks and commodities rising were based on “fundamentals”, I’ll remind you that is a crock.
Never mind Europe, last week’s US economic data was as weak as any we have seen in 2012:
- US Retail Sales missing on Wednesday had stocks selloff hard on the news (Consumer stocks down -1.6% on the day)
- US Jobless Claims rising to 386,000 (20% higher than where the data was in March), got Qe3 whispering back “on”
- US Consumer Confidence (University of Michigan survey) dropped like a rock in June to 74.1 (vs 79.3 in May)
So, you buy stocks and commodities on that, right?
The only reason why you’d do that (and more of it was short covering, by the way, because volume in this stock market has gone bone dry) is because you were either begging for (or fearing) more bailouts and easing.
Is that what Our Saviors have reduced our markets to? Begging and fearing? This is all turning out to be as pathetic and sad as each and every rally looks to lower long-term highs, on lower and lower volumes.
To be fair, some of the options brokers in currency and commodity markets are seeing some flow (the flow is what you get paid when customers pay you a commission to transact). Chucky Evans from the Chicago Fed loves getting a piece of that flow. Who said a politicized man at the Fed can’t be bought and paid for? Can you pay me $25,000 to speak at a road-show lunch?
To get a little more granular on the commodity “speculation” side of the flow, here’s how last week’s CFTC flow data looked:
- CRB Commodities net long contracts = +9.1% week-over-week (to 587,327 contracts)
- Silver net long contracts = +12% week-over-week
- Farm Goods net long contracts = +21% week-over-week
Yeah, bro. You get Chucky up there talking down the Dollar and we’re going to dance. Especially as global demand slows, bro. Because we are absolutely and positively paid to speculate on policy, not fundamentals, bro.
Not sure on the bro thing, but I am certain that I have no idea what do in these markets any more than the next guy/gal who has the next Fed or Treasury or ECB whisper. Maybe that’s what Our Saviors consider the New Democracy.
My immediate-term support and resistance ranges for Gold, Oil (Brent), US Dollar, EUR/USD, Spain’s IBEX, and the SP500 are now $1587-1637, $95.72-98.47, $81.58-82.26, $1.24-1.26, 6260-6794, and 1319-1347, respectively.
Best of luck out there today,
Keith R. McCullough
Chief Executive Officer
TODAY’S S&P 500 SET-UP – July 2, 2012
As we look at today’s set up for the S&P 500, the range is 29 points or -1.92% downside to 1336 and 0.21% upside to 1365.
SECTOR AND GLOBAL PERFORMANCE
- ADVANCE/DECLINE LINE: on 6/29 NYSE 2281
- Up from the prior day’s trading of 397
- VOLUME: on 6/29 NYSE 1094.36
- Increase versus prior day’s trading of 20.71%
- VIX: as of 6/29 was at 17.08
- Decrease versus most recent day’s trading of -13.34%
- Year-to-date decrease of -27.01%
- SPX PUT/CALL RATIO: as of 6/29 closed at 1.35
- Down from the day prior at 1.85
CREDIT/ECONOMIC MARKET LOOK:
- TED SPREAD: as of this morning 38
- 3-MONTH T-BILL YIELD: as of this morning 0.08%
- 10-Year: as of this morning 1.64
- Unhanged from prior day’s trading
- YIELD CURVE: as of this morning 1.33
- Down from prior day’s trading at 1.34
MACRO DATA POINTS (Bloomberg Estimates):
- 8am: Markit US PMI Final, June
- 9:30am: Intl Grains Council monthly crop report
- 10am: ISM Manufacturing, June, est. 52 (prior 53.5)
- 10am: ISM Prices Paid, June, est. 45.7 (prior 47.5)
- 10am: Construction Spending, May, est. 0.2% (prior 0.3%)
- 11:30am: U.S. to sell $30b 3-mo. bills, $27b 6-mo. bills
- 1:15pm: Fed’s Williams to speak in San Francisco
- House, Senate not in session
- White House has no public events scheduled
WHAT TO WATCH:
- Bristol-Myers Squibb to buy Amylin for $31-shr cash
- Linde to buy respiratory-care company Lincare for $3.8b
- Dell said to be near buying Quest to add data-ctr software
- Euro-Area Unemployment Climbs to Record 11.1% on Spanish Cuts
- Barclays Chairman Agius said poised to quit after Libor fine
- Fund-Manager Pay Rules Included in EU Response to Madoff Fraud
- Pena Nieto Claims Win in Mexico Election as PRI Returns to Power
- American Electric forecasts a week to fix storm blackouts
- Airbus to Invest $600 Million in Alabama Facility, Reuters Says
- Japan Tankan Confidence Improves Even as Yen Limits Exports
- BNP Said to Mull Plan for $50 Billion Spain-Italy Funding Gap
- Weekly agendas for Media/Entertainment, Industrials, Finance, Energy, IPOs, Transports, Real Estate, Consumer, Health, Tech, Rates, Canada Mining, Canada Oil & Gas
- U.S. Jobs, Tankan, Mexico President: Wk Ahead June 30-July 7
- Acuity Brands (AYI) 8:30am, $0.79
COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)
- Speculator Bullish Oil Wagers Rose Before Rally: Energy Markets
- Platinum Slump Seen Spurring China’s Jewelers: Chart of the Day
- Corn Extends Rally as Hot, Dry Weather Threatens Midwest Yields
- Hedge Funds Win on Bull Bets Before Biggest Rally: Commodities
- Oil Declines After Biggest Gain Since 2009 on Europe Concerns
- Copper Falls on Signs of Worldwide Manufacturing Deterioration
- Iran-Oil Sanctions Risk Biggest OPEC Export Loss Since Libya
- Gold Set to Decline as Biggest Gain in Four Weeks Spurs Sales
- U.S. Natural Gas Futures Slide From Highest Price Since January
- Isramco Says ‘Significant’ Natural Gas Signs at Shimshon Site
- German 2013 Power Declines as European Coal, Carbon Permits Drop
- Japan’s LNG Imports May Rise 6.5% to 88.6 Mln Tons, IEEJ Says
- Russian Oil Output Falls on Month, Holds Near Post-Soviet High
- EU’s Iranian Ban Will Push Up Demand for Sour Crude, JBC Says
- Dubai Backwardation Rises Amid Iran Sanctions Start: Asia Crude
- Hedge Funds Win on Bull Bets Before Rally
- Goldman Raises Price Forecasts for Corn, Soybeans, Wheat
The Hedgeye Macro Team
With high quality consumer stocks dropping like flies, we thought it’d be prudent to take a look at earnings expectations by size/cap and the credence that the market is placing on hitting them.
The interesting call out for us is that the weighted average earnings growth expectation for apparel/footwear/department stores is 21%, and the market is placing a 17x p/e on those expectations. Note – we exclude Wal-Mart and Target from this analysis otherwise they’d dwarf the other 80 companies in the group collectively.
Looking at the median growth rate, however, we see that the Street is looking for about 15% -- a rate that has been remarkably steady for the past year. We’re looking at a more reasonable 14x p/e on those expectations.
Our simple conclusion…The big boys better deliver. They have a longer way to fall.
The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.
LONG SIGNALS 80.35%
SHORT SIGNALS 78.44%