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CHART DU JOUR: PRICELINE AND LV

Takeaway: MGM and PCLN commentary not matching up despite historical correlation

Priceline bookings closely correlate to Strip room rates 

 

 

  • Correlation between YoY change in Priceline's booked ADR and Strip ADR was 88% over the past 2 1/2 years
  • Despite Priceline's warning about Q3 bookings and ADR, MGM management cited a recent improvement in consumer trends
  • We remain skeptical of a Las Vegas Strip comeback this year and the long-term demographic picture may impede a return to peak metrics

 

CHART DU JOUR: PRICELINE AND LV - PCLN


Is The Manheim Index Signaling A Market Crash?

Takeaway: If correlations serve us correctly, we're due for a big drop in the S&P 500 rather soon.

The Manheim Index is a used car index that essentially values what used cars are worth. The company is the largest buyer of used cars in America, which it then auctions off. An index reading of 100 corresponds to January 1995.

 

If you look at the chart we’ve posted below, there appears to be a correlation with the S&P 500 vs the Manheim Index. In periods when the index went negative in terms of year-over-year growth (the black dips), the S&P 500 dropped hard and fast. This occurred back in 2001-2002 (dotcom bubble), 2007-2008 (credit crisis) and if we look at the chart now, it appears the S&P 500 is about to turn along with the index. This could be a sign that we’ve peaked at the 1400 S&P 500 level.

 

Correlations are just that, but we think this one has legs. It’s rarely discussed in the media and we think that it’s only a matter of time before stocks drop.

 

 

Is The Manheim Index Signaling A Market Crash?  - manheim SP500

 

 

Is The Manheim Index Signaling A Market Crash?  - manheim spx


Abysmal Volumes

Takeaway: It's tough being a broker. NYSE volumes have fallen off a cliff since July and continue to trend lower.

These days, a rally doesn't take much. Pump the bid a few times and you'll get whatever price you want. It's not secret that volume in the stock market has been awful, but just how awful is the question? The answer will blow your mind.

 

We continue to see massive drops in NYSE volume day after day and this chart clearly illustrates just how bad the situation has become. Since the end of July, volumes have fallen off a cliff. For the broker-dealers out there trying to make a buck of equities - it just isn't happening. And if the trend is any indication of what's to come, volumes are going to get even worse by year's end.

 

 

Abysmal Volumes - NYSE Volume


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UA: Going For Growth

Takeaway: UA international growth has slowed. The company needs to work extra hard to grow on a global scale.

Under Armour (UA) is a company that has enjoyed domestic growth over the last decade. The company hasn’t made inroads or attempted to penetrate international markets. International sales account for a low percentage of overall sales. Getting UA into the UK could prove even harder on news that Dick’s Sporting Goods (DKS) won’t be making a grand entrance into the UK via JJB Sports.  

 

UA will ultimately make it into the UK and will grow its business there but it will be costly and will take more time with Dick’s out of the picture. As you can see from the chart, growth has slowed year-over-year between 2010 and 2011. That trend could continue into 2012 without an international push from UA.

 

 

UA: Going For Growth - UA intl


Did We Mention Growth Is Slowing?

DID WE MENTION GROWTH IS SLOWING?

 

 

CLIENT TALKING POINTS

 

SLIGHT WORK, THE RIGHT WORK

Old Wall loves to spend its time forecasting earnings and pounding its chest about how great its calls are. That is, until they’re wrong. Then they get quiet or say something like “oh, but revenue doesn’t manner – only EPS does.”  That’s not a risk management process. In fact, that’s what  got us in trouble back in 2007. Value at Risk models and all that poppycock went out the door and the game was up. If you’re comfortable with a sellside report, you’ve got a tough stomach.

 

 

BACK TO THE VIX

We’re really biting our lip here with the VIX dropping below 14. Did you know the VIX hasn’t dropped below 14 since 2007? That’s scary. Every single asset manager is running around chasing beta and reallocating assets in an attempt to make some kind of return on their capital. We’re clearly overdue for a big drop in the market and with the VIX this low, it can’t be far off. NYSE volume continues to be abysmally low, but no matter. As long as the brokers have order flow coming their way, all is right in the world.

 

 

DID WE MENTION GROWTH IS SLOWING?

Hey, it may sound like a broken record at this point, but that IS the point. Growth is slowing and you’re stuck with it. Keynesian economics has worked real well for us thus far, hasn’t it? All this bailing out and printing of money and you’ve got a 1400 S&P 500. Buying anything here with the SPX this high and the VIX at 14 is maniacal. What do you think is going to happen? Are you that confident that we can pull off 1500 by year’s end? That’s wishful thinking for sure.

 

_______________________________________________________

 

ASSET ALLOCATION

 

Cash:                  UP

 

U.S. Equities:   Flat

 

Int'l Equities:   Flat   

 

Commodities: Flat

 

Fixed Income:  DOWN

 

Int'l Currencies: Flat   

 

 

_______________________________________________________

 

TOP LONG IDEAS

 

JACK IN THE BOX (JACK)

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.

  • TRADE:  LONG
  • TREND:  LONG
  • TAIL:      LONG            

 

FIFTH & PACIFIC COMPANIES (FNP)

The former Liz Claiborne (LIZ) is on the path to prosperity. There’s a fantastic growth story with FNP. The Kate Spade brand is growing at an almost unprecedented clip. Save for Juicy Couture, the company has brands performing strongly throughout its entire portfolio. We’re bullish on FNP for all three durations: TRADE, TREND and TAIL.

  • TRADE:  LONG
  • TREND:  LONG
  • TAIL:      LONG

 

LAS VEGAS SANDS (LVS)

LVS finally reached and has maintained its 20% Macau gaming share, thanks to Sands Cotai Central (SCC). With SCC continuing to ramp up, we expect that level to hold and maybe, even improve. Macau sentiment has reached a yearly low but we see improvement ahead.

  • TRADE:  LONG
  • TREND:  NEUTRAL
  • TAIL:      NEUTRAL

  

_______________________________________________________

 

THREE FOR THE ROAD

 

TWEET OF THE DAY

“Everytime I meet somebody who laughs at my trading methods or my rules, I sleep easy.” -@persist2end

 

 

QUOTE OF THE DAY

“The only function of economic forecasting is to make astrology look respectable.” – John Kenneth Galbraith

 

 

STAT OF THE DAY

NYSE volume was only down -42% versus our intermediate-term TREND duration average yesterday.

 

 


THE M3: NEVADA LVS INVESTIGATION; PACKAGE TOURS & OCCUPANCY

The Macau Metro Monitor, August 14, 2012

 

SHELDON ADELSON'S LAS VEGAS SANDS CORP INVESTIGATED FOR BRIBERY Reuters

Nevada regulators are investigating whether LVS's dealing in mainland China violated bribery laws. The Nevada investigation of LVS adds to the existing investigations by the SEC and DOJ. 

 

The Nevada authorities recently obtained a detailed but preliminary report by an outside law firm for the Sands board's audit committee, which concluded that under previous management, the company's controls on executive actions were too weak. While the document, did not find conclusive evidence of corrupt payments it did question a series of deals on the mainland dating from before Jacobs' stint at the company.  

 

PACKAGE TOURS AND HOTEL OCCUPANCY RATE FOR JUNE 2012 DSEC

Visitor arrivals in package tours increased by 8.4% YoY to 662,109 in June 2012. Visitors from Mainland China (465,860) up 3.8%, with 167,266 coming from Guangdong Province; those from Taiwan, China (58,971); Hong Kong (28,649); the Republic of Korea (23,808); and Japan (22,225) increased by 66.2%, 23.4%, 22.1% and 25.8% respectively. In the first half year of 2012, visitors in package tours totalled 4,082,895, up by 25.9% year-on-year to account for 30.1% of the total visitor arrivals.

 

At the end of June, Macau had 66 hotels and 33 guest-houses with a total of 24,268 guest rooms, an increase of 2,592 rooms (+12.0%) YoY. 5-star hotels accounted for 61.1% of the total supply.  In June 2012, the average length of stay decreased by 0.16 night to 1.3 nights. Total Occupancy stood at 80.2%, down by 2.3%; hotel occupancy was 80.8%, with 4-star hotels leading at 86.7%. Number of guests increased by 12.2% year-on-year to 4,476,310 in the first half year of 2012 while occupancy stood at 81.6%, down by 0.4% YoY.


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