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The Macau Metro Monitor, July 24, 2012




Macau raised its typhoon warning to Signal 9 at 2:15am, the first time it was used since 1999.  The Meteorological and Geophysical Bureau downgraded the storm warning at 5:00am.  More than 100 passengers were stranded at the Outer Harbor Ferry Terminal after failing to get onto the final ferry to Hong Kong, and some sources said over 1,800 passengers were grounded at the airport.  Ferry terminals for boats to Macau and China have been closed.



According to Shanghai Securities News, China's biggest four banks issued around CNY50 billion (US$7.9 billion) in new yuan loans in the first half of July, double that of the same period of last month.  The increase was due partly to banks starting to extend loans for some projects that are aimed at revitalizing economic growth.


The four banks--Industrial & Commercial Bank of China Ltd., China Construction Bank Corp., Bank of China Ltd. and Agricultural Bank of China Ltd --usually account for 30% of new yuan loans issued by China's whole banking system.  New yuan loans issued by China's whole banking system are expected to be around CNY650 billion in July.


Chinese financial institutions extended CNY919.8 billion in new yuan loans in June, up from CNY793.2 billion in May, in another sign of easing liquidity as policy makers try to boost economic growth.




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




  • "We expect to open, in full, L'Auberge Baton Rouge late August this summer."
  • "Our revenue per admission continues to grow across the portfolio and we remain extremely disciplined about how and when we spend resources in managing the business."
  • "It is our belief that there is material upside to our margins in 2012 and in future years."
  • [River Downs]  "We expect to begin work at some point this summer.... our ability to get a project off the ground this year and having that first phase that may open as early by the end of next year it's pretty high."
  • "At Ho Tram in Vietnam, the project is on track for an opening by the end of the first quarter of 2013."
  • [Retama] "Our total investment will be about $23 million of which $10 million has already been deployed. We expect the second phase of the transaction and remaining investment to close in the second half of 2012. Retama lost about $1.5 million last year on an EBITDA basis but we expect to improve this once we manage through operations and integrate the property into our portfolio. Obviously, should there be an expansion of gaming at racetracks in Texas – we will manage that operation as well."
  • [River City construction impact] "As the temperatures climb in the summer and that walk from further away gets to be more troublesome for folks, we may see a deeper impact. Our point here was that in the first quarter, we didn't see much of an impact at all out of that additional walk. So we'll see how things go as the summer progresses. We do expect the garage to be operational by the end of the year. So hopefully before the snow and winter come at the end of the year, we'll have that garage operational. So once that garage is finished, we will then break ground and build that hotel. And we believe we can have that hotel done by the end of 2013."
  • "The Houston market continues to be under penetrated and that's been our position for a long time. I think that market has been mostly capacity constraint and that's why it hasn't grown more. We have been focusing on trying to drive profitable revenue, so our top line has been driven mostly by adjustments that we've made both in marketing as well as some of the property improvements that came in and have been operational throughout the first quarter."
  • [New Orleans property] "It's something that's on all of our mind on a regular basis that we have seen declining revenues there. It's a variety of things, including competitive pressures in that market. We've pointed out that especially on the West Bank, there's a change because of what happened with the Deep Horizon disaster a couple of years ago. I don't want to use that as an excuse. We... can compete better than we are in that market, and we're focused on doing that through specific program changes at that property."
  • "We have spent considerable time putting together a marketing plan that will launch in the summer. It will be focused at the gaming customers, both in Baton Rouge and in the regional markets, and will also, of course, be communicated aggressively to Pinnacle customers who reside in Louisiana."
  • [1Q corp expense as run rate] "So, I think that is for purposes of your model, certainly a reasonable run rate."
  • [Loss from Vietnam investment] "We do expect it to ramp up as the year progresses. And, obviously, there is an expectation that this will turn profitable in 2013 following that opening."
  • [Baton Rouge opening] "I think you can expect to see that there will be a ramp-up. There will be some awareness that will need to occur in the first couple of quarters. I do think because of the shared services that we've put together and the investment we've made in our pre-opening team. We brought people on much earlier than what people would typically do to open up a property. I would expect if you were just to look at what normally happens in a market that this will be above that curve but you should expect that there will be a ramp-up for the first couple of quarters."
  • [AC discontinued ops]  "As it relates to the process itself, it's underway, it's early in that process."

UA: Great Early Read


Conclusion: A great print from UA. One of the few companies to up guidance without any mention of the words  economy’, ‘slowdown’ or ‘headwinds’. We were concerned about a potential CMG scenario headed into this print and hedged our positive TAIL exposure. That caution was misplaced.

  • Great, clean quarter from UA – definitely did not pull a CMG or NKE, which was a distinct possibility.
  • Revenue was in-line with our estimate of 28% growth – 600bp better than the Street.
  • To our surprise, there were literally no cautionary statements thrown out by management about economic headwinds. In fairness (and in irony), part of UA’s resilience is due to its own failure to penetrate International markets to date. But regardless, the lack of any form of caution is clearly noteworthy. International remains only 5.6% of sales, down slightly from 1Q and up 80bps from ly.
  • Direct to consumer revenue is up to 29%. Nike is drooling over this staggering statistic. This is a stealth part of this story that people are not focused enough on.
  • The company is maintaining its 300bp-500bp estimate for EBIT growth above revenue growth – but on a 200bp-300bp better top line growth rate (22%-24%).
  • UA took up the year by $20mm in revenue guidance, despite beating 2Q by $12mm. Granted, it did not provide this 2Q guidance. So for all we know the consensus simply printed a number below a conservative plan. But still, this delta is notable.
  • Footwear came in guardedly positive. Top-line growth was 44%, but the 2-year comp accelerated by 16 points to 37%.
  • The balance sheet clearly improved, with the sales/inventory spread poking its head in positive territory for the first time in 7 quarters, which is gross-margin bullish for 2H.
  • Tough to poke holes in this one.


UA: Great Early Read - UA SIGMA


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Lie To Us

This note was originally published at 8am on July 10, 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 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 $1551-1599, $96.76-103.07, $82.49-83.47, $1.22-1.24, 6675-7361, and 1330-1359, respectively.


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer




Lie To Us - Virtual Portfolio


TODAY’S S&P 500 SET-UP – July 24, 2012

As we look at today’s set up for the S&P 500, the range is 25 points or -1.45% downside to 1331 and 0.41% upside to 1356. 











  • ADVANCE/DECLINE LINE: on 07/23 NYSE -1601
    • Down versus the prior day’s trading of -1007
  • VOLUME: on 07/23 NYSE 742.90
    • Decrease versus prior day’s trading of -25.90%
  • VIX:  as of 07/23 was at 18.62
    • Increase versus most recent day’s trading of 14.44%
    • Year-to-date decrease of -20.43%
  • SPX PUT/CALL RATIO: as of 07/23 closed at 1.23
    • Down from the day prior at 1.99 


  • TED SPREAD: as of this morning 36
  • 3-MONTH T-BILL YIELD: as of this morning 0.09%
  • 10-Year: as of this morning 1.43%
    • Unchanged from prior day’s trading
  • YIELD CURVE: as of this morning 1.22
    • Unchanged from prior day’s trading

MACRO DATA POINTS (Bloomberg Estimates):

  • 7:45am/8:55am: ICSC/Redbook retail sales
  • 8:45am: Fed’s Bernanke speaks to the Children’s Defense Fund National Conference on early childhood education via prerecorded video
  • 10am: Markit US PMI Preliminary, July, est. 52 (prior 52.9)
  • 10am: Richmond Fed Manuf Index, July, est. -1 (prior -3)
  • 10am: FHFA House Price Index M/m, May, est. 0.4% (prior 0.8%
  • 11am: Fed to purchase $1.5b-$2b notes due 2/15/36-5/15/42
  • 11:30am: U.S. to sell 4-wk, 52-wk bills
  • 1pm: U.S. to sell $35b 2-yr notes
  • 4:30pm: API inventories 


    • House, Senate in session
    • Senate hearing on consumer impact of broadcast-cable disputes: CBS, TWC
    • Senate Judiciary holds hearing on super PACs, 2:30pm
    • Senate Energy holds hearing on natural gas and transportation, 10am
    • House Energy hears from Chairman Allison Macfarlane, three NRC commissioners at oversight hearing, 10am
    • House Financial Services’ Consumer Credit subcommittee hearing on legislation to create a federal charter for non- depository lenders, 10am
    • House Financial Services Insurance Subcommittee hearing on Dodd-Frank Act’s impact on insurance industry, 2pm
    • Senate Banking Subcommittee on Financial Institutions and Consumer Protection holds hearing “Private Student Loans: Providing Flexibility and Opportunity to Borrowers;” Sallie Mae President Jack Remondi to testify, 2:30pm
    • NHTSA hearing on proposal to mandate anti-rollover technology in heavy-duty trucks, 10am
    • U.S. Chemical Safety Board releases preliminary findings from the investigation into BP’s 2010 Macondo well explosion in the Gulf of Mexico, 9:05am
    • International Swaps and Derivatives Association holds a Dodd-Frank Transaction Reporting Conference to review requirements’ impact on participants in the $648t global swaps market, 8:15am in New York
    • CFA exam level I & II results are e-mailed after 9am 


  • Germany pushes back after Moody’s lowers rating outlooks
  • Goldman Sachs, Bain Capital and Carlyle urged federal judge to dismiss lawsuit accusing largest investment banks, P/E firms of conspiring to rig bids on leveraged buyouts
  • Treasury Secretary Timothy Geithner said President Obama “absolutely committed” to letting tax cuts for wealthiest Americans expire as scheduled, in interview on “Charlie Rose” show yesterday
  • Apple lost Dusseldorf appeals court bid to ban sales of Samsung Electronics’s Galaxy 10.1N tablet computer
  • Rosneft starts talks with BP on buying stake in Russia venture
  • Compensation consultant to Best Buy’s board quit after company awarded more than 100 managers retention bonuses without tying them to performance
  • China manufacturing gauge shows slowdown may be ebbing
  • Spain’s borrowing costs rise at 3-mo. bill auction
  • Home values posted first Y/y increase since 2007 in 2Q as U.S. property market began to lift off bottom, Zillow said
  • Apple plans to send security manager to Black Hat USA 2012 to discuss iPhone, iPad, making first appearance at one of the hacking world’s largest conferences
  • U.S. Chemical Safety Board releases preliminary results from BP/Macondo investigation 


    • Spirit Airlines (SAVE)  5:45am, $0.47
    • RF Micro Devices (RFMD) 4pm, $0.01
    • Whirlpool (WHR) 6am, $1.69
    • Total System Services (TSS) 4pm, $0.32
    • EI du Pont de Nemours (DD) 6am, $1.46
    • FMC Technologies (FTI) 4pm, $0.48
    • Polaris Industries (PII) 6am, $0.91
    • Edwards Lifesciences (EW) 4pm, $0.65
    • Synovus Financial (SNV) 6am, $0.02
    • Buffalo Wild Wings (BWLD) 4pm , $0.68
    • Centene Corp (CNC) 6am, $(0.10)
    • Panera Bread (PNRA) 4pm, $1.43
    • NorthWestern (NWE) 6am, $0.29
    • Hatteras Financial (HTS)  4pm, $0.89
    • Potlatch (PCH) 6:45am, $0.09
    • Robert Half International (RHI) 4pm, $0.35
    • Rogers Communications (RCI/B CN) 6:47am, C$0.86
    • Norfolk Southern (NSC) 4:01pm, $1.53
    • Altria Group (MO) 6:58am, $0.57
    • Nabors Industries (NBR) 4:01pm, $0.37
    • Reynolds American (RAI) 6:58am, $0.76
    • Illumina (ILMN) 4:01pm, $0.37
    • EMC (EMC) 7am, $0.39
    • American Campus Com. (ACC) 4:01pm, $0.49
    • Simon Property Group (SPG) 7am, $1.81
    • Ezcorp (EZPW) 4:01pm, $0.62
    • Biogen Idec (BIIB) 7am, $1.56
    • Questcor Pharmaceuticals(QCOR) 4:02pm, $0.65
    • Lexmark International (LXK) 7am, $0.88
    • Thoratec (THOR)  4:02pm, $0.44
    • Penn National Gaming (PENN) 7am, $0.64
    • TripAdvisor (TRIP) 4:03pm, $0.41
    • Western Union (WU) 7am, $0.43
    • Broadcom (BRCM) 4:05pm, $0.67
    • Ametek (AME) 7am, $0.46
    • Netflix (NFLX) 4:05pm, $0.05
    • Regions Financial (RF) 7am, $0.14
    • Juniper Networks (JNPR) 4:05pm, $0.16
    • Husky Energy (HSE CN) 7am, $0.36
    • Tempur-Pedic International (TPX) 4:05pm, $0.38
    • Under Armour (UA) 7am, $0.05
    • Riverbed Technology (RVBD) 4:05pm, $0.21
    • Pentair (PNR) 7am, $0.80
    • Polycom (PLCM) 4:05pm, $0.20
    • Waters (WAT) 7am, $1.16
    • Aflac (AFL) 4:07pm, $1.61
    • AT&T (T) 7:25am, $0.63
    • Compuware (CPWR) 4:13pm, $0.07
    • Rockwell Collins (COL) 7:30am, $1.15
    • Aaron’s Inc (AAN) 4:15pm, $0.47
    • Domino’s Pizza (DPZ) 7:30am, $0.46
    • CH Robinson Worldwide (CHRW) 4:15pm, $0.71
    • Anixter International Inc (AXE) 7:30am, $1.50
    • International Game Tech. (IGT) 4:15pm, $0.29
    • FirstMerit (FMER) 7:30pm, $0.28
    • Altera Corp (ALTR) 4:15pm, $0.39
    • PrivateBancorp (PVTB) 7:30am, $0.16
    • Cymer (CYMI) 4:25pm, $0.04
    • Lockheed Martin (LMT) 7:30am, $1.91
    • WR Berkley (WRB) 4:29pm, $0.61
    • United Parcel Service (UPS) 7:45am, $1.17
    • Apple (AAPL) 4:30pm, $10.37
    • Ryder System (R) 7:55am, $0.93
    • Unisys (UIS) 4:30pm, $0.51
    • Illinois Tool Works (ITW) 8am, $1.10
    • Trustmark (TRMK) 4:30pm, $0.44
    • Sigma-Aldrich (SIAL) 8am, $0.97
    • Linear Technology (LLTC) 5pm, $0.45
    • Paccar (PCAR) 8am, $0.81
    • Ctrip.com (CTRP) 5pm, $0.20
    • Peabody Energy (BTU) 8am, $0.53
    • Range Resources (RRC) 5pm, $0.06
    • Six Flags Entertainment (SIX) 8am, $0.73
    • Bell Aliant (BA CN) 5pm, $0.43
    • Gentex (GNTX) 8am, $0.29
    • Acadia Realty Trust (AKR) 5pm, $0.24
    • Lennox International (LII) 8am, $0.96
    • Valmont Industries (VMI) 5:30pm , $2.16
    • Liberty Property Trust (LRY) 8am, $0.63
    • Cabot Oil & Gas (COG) 5:31pm, $0.06
    • Wabtec (WAB) 8:05am, $1.23
    • Suncor Energy (SU CN) After-mkt, $0.73
    • Avery Dennison (AVY) 8:30am, $0.54
    • Community Bank System (CBU) Aft-mkt, $0.50
    • Neogen (NEOG) 8:45am, $0.26
    • Newfield Exploration (NFX) Aft-mkt, $0.64
    • Carlisle (CSL) Bef-mkt, $1.28
    • UMB Financial (UMBF) Aft-mkt, $0.69
    • Jarden Corp (JAH) Bef-mkt, $1.10
    • Rock-Tenn (RKT) Aft-mkt, $1.02 



OIL – bearish TREND; bullish TRADE; we’ll stay short it with a wall of TREND line resistance up at $108.37 Brent. The only thing that can get US and Chinese Growth back on track is a sustainable drop in Brent back below $90. With Qe drug addictions in this market’s whisper, good luck with that. 

  • Europe Heat Wave Wilting Corn Adds to U.S. Drought: Commodities
  • China Ousts U.S. in Canada Oil Market With Bid for Nexen: Energy
  • Investors Plow Cash Into Crops as Gold Jilted: Chart of the Day
  • Crude Trades Near One-Week Low on Worsening European Crisis
  • Copper Seen Rising as China Factory Contraction May Be Slowing
  • Corn, Soybeans Tumble on European Risk, Forecast for Some Rains
  • LNG Goes Extra 9,800 Miles as Europe Spurs Record Rates: Freight
  • Cocoa Climbs on Speculation El Nino Will Cut Output; Sugar Falls
  • U.S. Gas Futures Near Seven-Month High on Warm Weather Forecasts
  • U.K. Natural Gas for Today Advances as Norwegian Imports Decline
  • Illinois Corn, Soy Yields Drop From 2011, Doane Crop Tour Shows
  • South Korea Buys 6,000 Tons of High-Grade Aluminum in Tenders
  • Cocoa Usage Seen Falling as Processors Erode World Butter Glut
  • Copper Gain Seen as New-Home Sales Spur Demand: Chart of the Day
  • Gold Set to Decline in London as Europe Concern Bolsters Dollar
  • Morgan Stanley Increases 2012 U.S. Gas Price Forecast by 14% 










GERMANY – for once we actually agree with a Moody’s move on the margin; Germany’s #GrowthSlowing slope has accelerated on the downside in the last 6 weeks, and that matters. This morning’s PMI print of 43.3 for July in Germany is an absolute bomb (45.0 in June) – German GDP growth could easily go negative y/y in Q3 (consensus has it up +0.5%).






HANG SENG – nasty 2-day 4% drop in a major leading indicator in our model that certainly trumps whatever flash there was in the made-up HSBC PMI print of 49.5; Hang Seng, like KOSPI, is now back into a Bearish Formation (both of these indexes have led the SP500 and German DAX since March, so watch them both closely – Asian Growth is Too Big to Bail).











The Hedgeye Macro Team


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