May probably won’t come close to April’s decent showing on the Strip.



“For love that smiled in April
Is false to me in May."


-  Sara Teasdale, May  



Based on taxi data and McCarran Airport figures, we project that May gross gaming revenues (GGR) fell 2-6% YoY assuming normal slot and table hold percentages.  The number of enplaned/deplaned airport passengers increased only 0.3% while the number of taxi trips increased 2.1% YoY in May.  In April, strong baccarat volume and high slot hold drove an 8% increase in GGR.


May will likely look a lot different than April.  Here are the May hurdles:

  • Tough slot hold comparison – 40bps above normal in May 2011
  • Baccarat drop increased 58% in May 2011 to an all-time May record
  • May 2012 contained one less Sunday than 2011

Nevada should release May gaming revenues some time this week and they could disappoint expectations.


Here are our projections:




The Macau Metro Monitor, July 10, 2012




According to Josephine Teo, Minister of State for the Finance Ministry, Singapore collected S$93 million ($73 million) from entry levies placed on locals visiting the city’s two casinos in 1H 2012.  The entrance fee of S$100 a day or S$2,000 annually from citizens and permanent residents amounted to S$195 million in 2011, Teo said in Parliament. 



Weidner Resorts Taiwan, a company run by former Venetian Casino Resort CEO Bill Weidner, said it planned to invest about NT$60 billion (US$2 billion) to build a casino resort on the Matsu archipelago and upgrade airports and other infrastructure necessary to realize the project.  Weidner Resorts Taiwan, which would have to win the bid for the development project once the legislature gives its go-ahead, aims to spend NT$30 billion establishing a giant casino resort with 2,000 hotel rooms, shopping malls, international conference centers, theme parks and other recreational facilities, Weidner said.


Weidner said his company would spend NT$12 billion upgrading the airport in Beigan from its current 2C classification to 3C, so that it would be able to accommodate larger aircraft and have fewer abortive flights caused by seasonal thick fog.


Only 5% of the planned resort would be devoted to gaming facilities, Weidner added.

Looking Back

This note was originally published at 8am on June 26, 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 farther back you can look, the farther forward you are likely to see.”

-Winston Churchill


It continues to both fascinate and frustrate me that our said leaders in our governments haven’t learned a damn thing about the relationship between debt and growth.


While plenty of both Bush and Obama’s economic advisors dismissed the seminal conclusion in Reinhart & Rogoff’s This Time Is Different, that certainly doesn’t mean that history isn’t rhyming.


Allow me to write this one more time in block letters. Once a country has crossed the proverbial Rubicon (90% Debt/GDP), DEBT SLOWS GROWTH. There is no other growth “policy” left other than getting out of the way.


Back to the Global Macro Grind


Breaking “news” this morning is that someone in Europe has a new plan to pile more debt-upon-debt. Great. Meanwhile, the US (via the Washington, DC based and US tax payer backed IMF) is wholeheartedly cheering it on. Just great.


Atta boy Timmy – you would have nailed it if you just had a bigger bazooka, right?


Right. And bears use baby wipes in the bush. Markets get how ridiculous all of this is becoming. Markets are now starting to get worried that the US fiscal cliff is getting closer too. Markets don’t lie; politicians do.


US Fiscal Cliff?


Get the denominator in the Deficit/GDP ratio right, and you’ll get the timing of the US Fiscal Cliff right. That’s just math. If #GrowthSlowing continues, GDP will fall and the Deficit/GDP ratio will rise, faster.


Looking Back, when we made this call in Q1 of 2010 on Europe, we signaled this sovereign “credit risk” pop on the short-end of the curve. We called it the “Sovereign Debt Dichotomy” (Hedgeye Macro 2010 Quarterly Theme) because not all debt maturity problems and sovereign credit risks occur on the same duration.


So, if you want a real-time risk management signal for the US Fiscal Cliff, we have your back in the Chart of The Day. Watch 2-year Treasury bond yields which have recently popped back above my long-term TAIL risk line of 0.28%. That is one of the biggest Bernanke balls that is still being held under water. When/if it pops, he’ll blame Congress.


Blame Congress? Blame Europe? Blame Hedgeye?


Yep, blame everyone that you can other than yourself. That’s US Politics 1.0. And it’s dying on opacity’s vine.


Looking Back, at all of this - and I mean all of it - from when Krugman told the Japanese to “PRINT LOTS OF MONEY” in 1997 to when Bush II gripped and ripped the money printing and spending handles, to Obama following through on both - I think the fundamental conclusions won’t be the same as Japan’s or Europe’s, but as Mark Twain would say, they will rhyme.




Where am I seeing the Growth Slowing signals accelerate on the downside this morning?

  1. Spain issued 3-month pig paper at 2.36%! (versus 0.84% at their last auction)
  2. Italian CDS is pushing back up towards 600bps after printing a bomb of a Retail Sales report (-6.8% y/y)
  3. Cyprus is asking for a Spanish style (or is it Greek) bailout equivalent of ½ the country’s GDP
  4. Japan passes its tax hike bill in the Lower-House (doubling the consumption tax to cover deficit spending)
  5. Germany’s DAX snapped its last line of consequential support (our immediate-term TRADE line of 6251)
  6. Chinese stocks are in the midst of their longest losing streak in 6 months (down -9.3% since May 2nd)

Oh, but that’s everywhere else. The USA is going to “de-couple” this time. This Time Is Different!

  1. US stocks are down for 3 of the last 4 days (down -3.2% since our 100% Cash call)
  2. US stocks (SP500) have snapped their immediate-term TRADE line of 1318 support
  3. US Treasury Yields (10yr) remain in a Bearish Formation, with a wall of resistance between 1.69-1.93%

Maybe you can click your red shoes and believe that there is no place like investing at home until month/quarter-end (Friday). But you better not be long anything pro-cyclically American in the meantime:

  1. Energy stocks (XLE) lead losers, down -2.53% for June (down -10.3% YTD)
  2. Industrial stocks (XLI) are 2nd worst, down -1.63% for June (barely up at +1.03% YTD)
  3. Tech and Consumer (XLK and XLY) stocks both broke immediate-term TRADE support yesterday

When both leaders (Tech) and losers (Energy) are snapping, that’s bad.


Oh snap. Looking Back, it’s only the countries that don’t find it in themselves to change that end up like Japan or Argentina have for the last 20-30 years.


Do not stand idle. We have to stop these people before it’s too late. Stand up, and be the change in our society. Be patriots, and lead from the front. We are already there. We are Hedgeye. And we are not Looking Back.


My immediate-term support and resistance ranges for Gold, Oil (Brent), US Dollar, EUR/USD, and the SP500 are now $1558-1593, $88.27-94.27, $81.96-82.66, $1.24-1.26, and 1305-1318, respectively.


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Looking Back - Chart of the Day


Looking Back - Virtual Portfolio

investing ideas

Risk Managed Long Term Investing for Pros

Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.

President Obama’s Reelection Chances

The President’s climb continues, albeit slower. For the third consecutive week, President Obama’s odds of being reelected ticked up 20 basis points (0.20%) to 57.8%. Yes, this is the third week of an upward trend but it could be the last week. People were very disappointed with the jobs number last week and the uptick this week compared to last week is abysmal. If you didn’t believe growth is slowing, you better believe it now.


Hedgeye developed the HEI to understand the relationship between key market and economic data and the US Presidential Election. After rigorous back testing, Hedgeye has determined that there are a short list of real time market-based indicators, that move ahead of President Obama’s position in conventional polls or other measures of sentiment.


Based on our analysis, market prices will adjust in real-time ahead of economic conditions, which will ultimately shape voters’ perception of the Obama Presidency, the Republican candidates and influence the probability of an Obama reelection.  The model assumes that the Presidential election would be held today against any Republican candidate. Our model is indifferent toward who the Republican candidate is as the sentiment for Obama and for any Republican opponent is imputed in the market prices that determine the HEI. The HEI is based on a scale of 0 – 200, with 100 equating to a 50% probability that President Obama would win or lose if the election were held today.


President Obama’s reelection chances reached a peak of 62.3% on March 26, according to the HEI. Hedgeye will release the HEI every Tuesday at 7am ET until election day November 6.



President Obama’s Reelection Chances - HEI July10

Lie To Us

“The average person lies 3 times for every 10 minutes of conversation.”

-Dr. Cal Lightman


Most recently, I have thrown a little spice into my life – staying up past 10PM, watching some Netflix. Since I generally don’t watch TV, the whole experience of viewing something that’s not on mute has been exhilarating.


This past week while on vacation, I stumbled upon a crime mini-series called “Lie To Me.” Dr. Cal Lightman (Tim Roth) is the star of the show. He runs a firm called The Lightman Group where, through the study of micro-expressions, body language, etc., his team’s job is to figure out when people are lying.


I loved the premise of the show because it’s all about something our head of Healthcare Research, Tom Tobin, and I have been studying since at least 2003 – liars. Formally, it’s called Kinesics. And, if you take some time to embrace its principles, it won’t take you long to figure out when a central planner or banker is probably lying.


Back to the Global Macro Grind


Fiction or non? This morning’s Global Macro news-flow had 2 different lines of storytelling:

  1. Pre-4AM US Futures down 6 handles on a bad start to US earnings season, Patriot Coal (PCX) filing for bankruptcy, and Chinese import growth continuing to slow.
  2. Post 5AM US Futures up 5 handles on Spain getting a re-do (almost as popular as getting a sticker for trying hard) on the timing of its bank bailout and Barclays execs lying on TV.

Ok, maybe these guys aren’t lying. Maybe they are just fibbing. Or, maybe, they aren’t lying to themselves as they (internally) attempt to define the difference between what Barclays Chairman, Marcus Agius, called the “difference between culpability and responsibility.”


You see, when deciding what ex-Barclays CEO, Bob Diamond, should be paid on the way out ($100M or $3M? What’s a few million, amongst friends?), you wouldn’t want things like the Sherman Act or a US criminal investigation to get in way of who has already greased whom in British politics.


Downward and upward we go.


Whether we are lying to ourselves or not that the bull case at this point isn’t bailouts, we have ourselves a classic Bull/Bear debate brewing that boils down to 1 very simple risk management question:


Is Global #GrowthSlowing fully priced into corporate earnings, or not?


From a long-term investor’s perspective, Kinesics (and a little probability based math) will help us start to answer this question. In trying to deduce the probability of whether or not the “earnings are great” bulls are lying to themselves, a picture will be more effective than prose.


In today’s Chart of The Day, our jedi Hedgeye mean reversion analyst from the Yale Shiller School of long-term cycles shows you all you need to know about where US corporate profit margins are in the context of long-term history.


In other words (sorry, had to use some words), if Global #GrowthSlowing continues, the longest of long-term corporate profit margin cycle peak is probably in.




If you are buying stocks based on the premise that they are “cheap” (based on the wrong sales, margins, and earnings expectations), you are lying to yourself. Cheap, when using the right numbers, gets a lot cheaper.


To be clear, I’m not calling everyone a liar. To the contrary, if Dr. Lightman is right (and if you read this far in 10 minutes), you could accuse me of lying at least 3 times already.


But just because most politicians get paid to Lie To Us, that doesn’t mean I’ve been lying to you about #GrowthSlowing too. My team has been storytelling about that, since March.


My immediate-term support and resistance ranges for Gold, Oil (Brent), US Dollar, EUR/USD, Spain’s IBEX, and the SP500 are now $1, $96.76-103.07, $82.49-83.47, $1.22-1.24, 6, and 1, respectively.


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Lie To Us - Chart of the Day


Lie To Us - Virtual Portfolio

Early Look

daily macro intelligence

Relied upon by big institutional and individual investors across the world, this granular morning newsletter distills the latest and most vital market developments and insures that you are always in the know.