In preparation for BYD's 2Q earnings release tomorrow, we’ve put together the recent pertinent forward looking company commentary.



Peninsula Acquisition (May 16) 




  • "Economic fundamentals supporting our business are strengthening and we anticipate this trend will continue."
  • "Our business clearly continues to move in the right direction, and we expect this momentum to continue for the remainder of the year."
  • "The higher end of the database is certainly the area where we continue to see strength, I mean, that the customers we know the best they're obviously most entrenched with our brands and that segment continues to grow, I think at a very healthy pace."
    • Wholly owned EBITDA (post corporate expense): $90-$95 million
    • Borgata EBITDA: $33-$35 million
    • Adjusted EPS: $0.06 to $0.10 
    • Borgata's interest expense: $20 million/Q a quarter
    • Boyd interest expense: $162-$165 million
  • "The guidance we provided incorporates some expected impact of Revel along with some offsetting and marketing expenses, the new marketing programs that we would anticipate to make sure that our customers continue to visit the Borgata along with additional efficiencies that we have built in over the quarter so that we can continue to manage the business and not only create the best experience, but maximize the profitability of the property."
  • "A new competitor has opened in Atlantic City, and while it is early, I can tell you that we have yet to see a meaningful impact on Borgata. So far in April, we have seen year-over-year increases in guest counts, visitation, and rated slot win. Occupancy is higher as well running ahead of our expectations, and our cash room sales were up about 8% during the month. While April's performance is encouraging, we expect it will be several quarters before it is clear what impact this new competitor will have on the Borgata."
  • "We also continued to widen our leadership position in poker where revenue grew by about $1 million as we captured nearly half of the entire Atlantic City poker market. These top line gains were magnified on the bottom line as the property increased EBITDA margins by more than 330 basis points during the first quarter, a reflection of the Borgata team's commitment to driving further efficiencies in the business without compromising the property's first-class customer experience."
  • "We are seeing some positive factors as strip frequency from our customer base continues to grow and is now at the highest level in three years. Looking ahead, we expect steady EBITDA growth in our Local [LV] business."
  • "Looking ahead, there is a lot of excitement about the progress that has been made in Downtown Las Vegas in recent months. The overall gaming market is expanding and its long-term outlook is encouraging. The Smith Center for Performing Arts and the Mob Museum opened during the first quarter, giving people new reasons to come to the area. These are exciting times in Downtown Las Vegas and we expect to see steady growth in visitor traffic as the renaissance of Downtown continues.""Outside of Las Vegas, we certainly are starting to see some positive signs at the lower end as well that shouldn't be a surprise as recovery takes hold."
  • "In the months ahead, we will see further efficiencies from operational synergies contributing positively to EBITDA growth. And the rollout of B Connected next week will have a positive impact as well. At this point, the IP is exceeding our expectations and we see considerable additional upside for the property."
  • IP EBITDA Margin: "I think there is certainly some upside from the 25.9% that we posted. B connected...goes into play live there next week. We think that is a big, big plus from a customer experience perspective and customer reward perspective. The summer is the peak season in the Gulf Coast market....there is a small new player coming online here in the next month or so, which we don't think will have an impact on our business, but, nonetheless, will mix things up a little bit."
  • "We and certainly our competitors have gotten much better at putting loyalty cards in the hands of our customers, the group of unrated almost becomes a difficult group to find anymore."
  • "With respect to the Native American investment we have made, it's still kind of a work-in-progress, it was a small investment we made for a tribe in California that we're still working with to see if we can pull a deal together and make an announcement. We'll probably have something hopefully to report later in the year, but it's still I think it's a construction in progress, if you will, not literally, but just figuratively."
  • [Maryland Live impact] "We are not overly concerned with the impact from that operation. We have looked at our customers, where they are coming from, we're more focused on those properties kind of in the Philadelphia and the New York area. We're not expecting any impact really from that operation."
  • "Our next maturity of $216 million is April 2014 approximately two years from today. We would expect to refinance that debt sometime prior to April of next year."

European Banking Monitor: Spain and Italy Ban Short Selling

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:


* Spanish and Italian bank and sovereign swaps were wider week over. In contrast, German bank and sovereign swaps tightened


Expect markets to shake this week on the big news this morning of short selling bans across all equities in Spain and Italy. For Spain, the ban has a 3M target, whereas 1W for Italy.


As we've seen with previous short selling bans, we do not expect the measure to put a floor in equity prices, nor provide any confidence in the banking sectors of the respective countries. We expect sovereign yields to rise alongside the duration of bans. 


If you’d like to discuss recent developments in Europe, from the political to financial to social, please let me know and we can set up a call.


Matthew Hedrick

Senior Analyst





European Financials CDS Monitor Spanish and Italian banks widened across the board while German banks mostly tightened. 3 out of 4 French banks widened. Overall, 24 of the 39 European financial reference entities we track saw spreads widen last week.


European Banking Monitor: Spain and Italy Ban Short Selling - ccc. banks


Euribor-OIS spread – The Euribor-OIS spread tightened by 2 bps to 35 bps. 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. 


European Banking Monitor: Spain and Italy Ban Short Selling - ccc. euribor


ECB Liquidity Recourse to the Deposit Facility – The sharp drop from two weeks earlier reflects the ECB's deposit rate change to 0.0%. Since that time, the index has been roughly flat. 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.  


European Banking Monitor: Spain and Italy Ban Short Selling - ccc. facility


Security Market Program – For the nineteenth straight week the ECB's secondary sovereign bond purchasing program, the Securities Market Program (SMP), purchased no sovereign paper for the latest week ended 7/20, to take the total program to €211.5 Billion.


European Banking Monitor: Spain and Italy Ban Short Selling - ccc. SMP

Retail: Back to School Goes Online

As the summer begins to wind down, children all over the country are gearing up to go back to school. And in this digital age, brick and mortar stores aren’t the only place parents are going for notebooks, folders and binders. According to a study from the National Retail Federation (NRF), 40% of people intend to do their back to school shopping online, up from 32% last year. That’s a 42% increase from the 21% survey that came in during 2007.



Retail: Back to School Goes Online - BACK2SCHOOL



This is hugely important for retail. As we’ve stated before, we like companies that aim high for e-commerce sales even if they’re a bit unrealistic. You can’t just hope for 8-10% of your sales to come from a website and be OK with that. We’re living in a digital age and people are moving full speed ahead without ever looking back.


Hedgeye’s Managing Director of Retail Brian McGough sums up what this growth in e-commerce means for everyone:


“Flying in the face of a deceleration in sales out of eBay’s GSI Commerce yesterday, the NRF released its back-to-school survey with surprising results. We usually take many of the National Retail Federation’s surveys and statistics with a grain of salt, but this one is tough to ignore. Per its latest survey, 39.6% of consumers intend to shop online for back-to-school supplies and clothes. While that’s a big number in itself, it is nearly an 8% acceleration from the 31.7% ‘intent to purchase online’ surveyed exactly one year ago. The rate was 21.4% back in 2007. Translation – ecommerce is accelerating meaningfully.”


If the above chart is any indication of the things to come, e-commerce is clearly more important than ever.

Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

"Great" Expectations







Once again, Europe is in trouble. Funny how every time the EU is thrust into the limelight, it’s always something worse than before. This time around, Spanish and Greek equities are getting the crud kicked out of them and Italy isn’t even positive that Germany will be able to bail them out on September 12. Throw in the joke known as a “ban” on shorting Italian bank stocks from Italy’s regulator and you can kind of guess how quickly the country has gone to hell in a hand basket.



The flight to safety known as “buying the 10-year Treasury” continues to pick up speed. Last night, the 10yr hit an record low yield of 1.44%. This morning it’s at 1.41%. Do you see the trend here? People aren’t confident that our capital markets can perform well. As we always say: get the US dollar right, you’re going to get a lot of other things right; that includes the slope of growth.



Another arbiter of hope for the market was the Q2 earnings season. After all, if one company could offload some debt to a SPV and beat the Street, everything would be OK in the end. Not the case, though. With almost 200 of 500 companies in the S&P 500 having reported, at least 50% of them have already missed on revenue expectations (worst quarter since 2008).


Somewhere, Charles Dickens is rolling over in his grave right now.




Cash:  Down                 U.S. Equities: Flat


Int'l Equities: Up          Commodities: Flat


Fixed Income: Flat         Int'l Currencies: Flat





This company is transitioning from cash burn to $75mm annual free cash flow generation thanks to completion of a reimaging program and refranchising of JIB units. Qdoba is the leverage; a maturing and growing store base will bring higher margins. We see 8.5% upside over the next 6-9 months.







SS volume accelerated in 1Q12 and employment remains a tailwind to both admissions & mix. We expect acuity to stabilize and births and outpatient utilization to accelerate out of 1Q12, while supply cost management continues as a margin driver and acquisition opportunities remain a source for upside.







The company continues to control its own destiny through investments in all the right areas. We think 30%+ top line and EPS growth for 5+ years. One of its failures, however, has been in penetrating markets outside the US. That will happen. But for now, its failure is a competitive advantage in the face of a strengthening dollar. We like it in sympathy with a LULU sell-off.










Quote of the Day: “In great affairs men show themselves as they wish to be seen; in small things they show themselves as they are.” –Nicholas Chamfort


Stat of the Day: $15.1 billion in CASH. The price China-based Cnooc Ltd. paid for Canadian oil-and-gas producer Nexen Inc. It is the largest overseas acquisition for a Chinese company to date.                                                                                                                                                                                                                                                                                                               


The Macau Metro Monitor, July 23, 2012




Wynn Macau last week completed a US$2.3 billion (MOP18.4 billion) loan, a person familiar with the matter told Bloomberg.  The facility is split into a US$1.55 billion five-year revolving portion and a US$750 million six-year term loan. The company originally sought a US$1.5 billion loan, but it raised the stakes after positive responses during the first stage of syndication.  Wynn Macau will use proceeds from the loan to finance its new project in Cotai, estimated to cost around US$4 billion.



Visitor arrivals totaled 2,106,696 in June 2012, down by 3.4% YoY.  In June 2012, the average length of stay of visitors decreased by 0.1 day YoY to 1.0 days.  Overnight visitors and same-day visitors stayed 1.8 days and 0.2 day respectively.  Visitors from Mainland China increased slightly by 1.8% YoY to 1,220,846, with those travelling to Macau under the Individual Visit Scheme rising by 11.3% to 517,935.





4,402,693 passengers passed through Singapore's Changi Airport in June, up 9.7% YoY.





Three murders in the past two weeks in Macau have raised fears that violent crime, for years a rarity in the world's gambling capital, is growing more common at the same time as the island's casino operators are struggling with slower growth. According to security experts and Macau residents, the recent outbreak of extreme violence in June and July has its roots among the junkets.  Junket operators recently have taken part in more aggressive debt-collecting tactics.  Many of the smaller junket firms are struggling to stay in business.



According to the Department of Statistics, Singapore CPI rose to 5.3% YoY in June, exceeding expectations of a 5.1% increase.  MAS Core Inflation, which excludes the costs of accommodation and private road transport, was unchanged at 2.7% for the third straight month.


Farmers Fight

This note was originally published at 8am on July 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.

“Farmers are good fighters but poor politicians.”

-Victor Davis Hanson


I spent last week with my family up on the big lake they call Gitchee Gumee. It was a much needed vacation where I was finally able to dig into a book that has been recommended to me multiple times, The Soul of Battle, by Victor Davis Hanson.


The first part of the book focuses on a Theban general Cicero called “The First Man of Greece” (Epaminondas) and the epic story of how he led a bunch of Boeotian farmers to crush the Spartans. These were not King Leonidas’ warriors from the movie “300” who held Thermopylae in 480BC. These were the tired and passionless troops of 371BC Sparta who fought for politicians.


Since introducing our Q2 Global Macro Theme of The Last War: Fighting The Fed, we have been pounding our pitchforks into the keyboards reminding you that an end to a politicized US Dollar could bring about the return of the King. Since April, that King has been Cash. The People who use US Dollars as their currency will continue to fight alongside us.


Back to the Global Macro Grind


Last week’s highlight in the Global Macro matrix was the US Dollar’s charge to fresh YTD highs. This is a currency war, so the other team (Europe’s currency) losing matters. With the Euro down -3.2% on the week, the USD Index closed up +2.1% to $83.38.


Strong Dollar Deflates The Inflation – some of us who like to buy things on red enjoy that. It allows us to invest some of our hard earned Dollars at better prices. With the US Dollar up last week, here’s how some of the week-over-week price deflation looked:

  1. WTIC Oil = -0.9%
  2. Gold = -1.3%
  3. Silver = -1.8%
  4. Copper = -2.2%
  5. Cotton = -1.9%
  6. SP500 = -0.5%

Behold, a 50 basis point deflation in the US stock market. Call in the cavalry, we need Qe5!


Let’s get real here folks. If the US stock market can’t sustain taking a few shots from the only thing that will save her in the end (a strong and credible currency backed by conservative fiscal and monetary policy), America will be looking just like Europe in no time.


That’s the long-run. In the shorter-run, given the US equity market’s manic depressive state, we can’t assume that Strong Dollar = Stronger US Consumption and Stronger/Sustainable Growth at the flip of a switch. Getting people off the Qe4 expectation drugs will take time; so will deflating food and energy prices.


In the meantime, the market has to deal with 3 very big things aligned with economic gravity this week:

  1. US Growth Slowing (both ISM reports and the unemployment update last week were terrible)
  2. China Growth Slowing (all of the June and Q2 data due this week)
  3. Q2 Earnings Season

Ah, the ole earnings season – what will the “fundamentals” bring?


It wasn’t long ago (March-April) that the bull case for US stocks was “growth is back, earnings are great, and stocks are cheap.” Therefore, assuming the bull case isn’t solely based on bailouts, it stands to reason that we should wait and watch for the reaction to #GrowthSlowing, earnings deteriorating, and stocks being valued on the right (instead of hopeful) numbers.


What’s already been discounted? I do not know.


Do you?


All I can tell you is what I have been telling you since we shorted Industrials on March 12th – you do not want to be buying pro-cyclical Sectors (Industrials, Energy, Basic Materials) at the top of another cycle.


Industrials (XLI) are already down -1.3% for July (versus the SP500 -0.55%), so I am not going to be willfully blind to the idea that some of the slowdown hasn’t already been priced in. But neither am I going to blindly accept forecasts from politician like CEOs that today’s outlook hasn’t changed dramatically from the conference calls they hosted in April.


Farmers Fight about the weather forecast too. But sometimes it’s pretty clear that everyone is getting wet while it’s raining.


My immediate-term support and resistance ranges for Gold, Oil (Brent), US Dollar, EUR/USD, and the SP500 are now $1551-1587, $96.90-103.02, $82.42-83.49, $1.22-1.25, and 1346-1360, respectively.


Best of luck out there this week,



Keith R. McCullough
Chief Executive Officer


Farmers Fight - Chart of the Day


Farmers Fight - Virtual Portfolio