prev

LVS: SINGAPORE “CONCERNS”

Is Singapore really as bad as the shorts say?

 

 

There has been some concern in the investment community recently surrounding next year’s performance by MBS.  Management has apparently been conservative, telling some that EBITDA may be flattish in 2013.  To this we say the following:  1) current Street consensus already reflects that assumption and 2) EBITDA will likely grow in 2013 despite management’s assertions.

 

It looks like Street consensus for MBS EBITDA is below $1.7 billion for 2013 on top of an estimated $1.6 billion for 2012.  That looks pretty flattish to us.  Following a disappointing Q2 in Singapore, Street expectations have come down.

 

It’s probably prudent for management to rein in the aggressive analysts.  The new IR function at LVS seems to be more conservative overall:  a longer and formal quiet period, limited access to property level managers, and a less aggressive tone.  The truth is, management probably has limited precision when it comes to projecting 2013 EBITDA.

 

We may not have perfect precision either but here is why we think EBITDA will grow next year.  Given the valuation and investor concerns, we think EBITDA growth at MBS will be a positive catalyst on the margin:

  • The locals business may indeed be flat or slightly down in 2013 but that represents 30% of visitation and likely less of revenues.  We’d be shocked if international visitors do not more than make up the slack.  It would likely take an Asian recession for that to happen.
  • Even if the market is flat next year, MBS should gain share.  Genting has greater exposure to the locals business.
  • MBS retail and room rates should be up significantly next year.
  • MBS should also continue to benefit from increased visitation to their Marina Bay area, resulting from:
    • MRT station: Opened in January right by the property (should benefit MICE)
    • Gardens By The Bay in Marina Bay: A $1 billion project that ppened 6/29/12
    • Deep water cruise terminal: Opened in early June of 2012

Down With Gold!

DOWN WITH GOLD!

 

 

CLIENT TALKING POINTS

 

DOWN WITH GOLD!

Gold sold off hard late yesterday and is continuing to fall this morning. When news hit the wire that Draghi wouldn’t be attending the Federal Reserve meeting at Jackson Hole, people got scared. Keith is bullish on the dollar and is of the belief that if you get the dollar right, you get a lot of other things right. That appears to be the case right now: dollar up, gold down. And if the Fed doesn’t save the world like Bruce Willis in the movie Armageddon, then gold is poised to fall a lot lower. That last point will be emphasized should Romney pick up some momentum at the Republican National Convention this week.

 

 

CENTRAL PLANNERS RUN AMOK

Sometimes, people get confused. It happens to the best and the worst of us and it can’t be helped at times. In the world of central planning, however, clarity is needed. It appears that some of them are of the belief that inflation is equal to growth. Nope. That’s simply not true. Take Venezuela’s intrepid leader Hugo Chavez for example. The stock market is up +153% year-to-date! That being said, their currency has been devalued to hell and back – that’s no fun for anyone, is it? Asset price inflation is not growth. Your head of lettuce going for $10.50 a pop and $50 a gallon gas is not growth.

 

 

MORE DOLLAR DEBAUCHERY

Courtesy of Keith, we’d like to point out the effects of beating up on the US dollar and how that’s affected stocks and commodities. See below:

 

“Here’s the update on what US Dollar Debauchery has done for this 30-day bull run in stocks and commodities (inverse correlations between USD Dollar Index and the big stuff people are speculating on)”

 

1.                    Gold = -0.85

2.                    Silver = -0.87

3.                    Oil (WTIC) = -0.81

4.                    CRB Index = -0.74

5.                    CRB Raw Industrials Index = -0.79

6.                    SP500 = -0.83

 

_______________________________________________________

 

ASSET ALLOCATION

 

Cash:               Flat

 

U.S. Equities:   DOWN

 

Int'l Equities:   Flat   

 

Commodities: Flat

 

Fixed Income:  Flat

 

Int'l Currencies: UP  

 

 

_______________________________________________________

 

TOP LONG IDEAS

 

NIKE INC (NKE)

Nike’s challenges are well-telegraphed. But the reality is that its top line is extremely strong, and the Olympics has just given Nike all the ammo it needs to marry product with marketing and grow in the 10% range for the next 2 years. With margin pressures easing, and Cole Haan and Umbro soon to be divested, the model is getting more focused and profitable.

  • 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

“Look at those long term charts today, what do you see? Read some interesting metrics about Cyclically Adjusted Price/Earnings ratios (CAPE)” -@jackstone104

 

 

QUOTE OF THE DAY

“If at first you don't succeed, failure may be your style.”–Quentin Crisp

                   

 

STAT OF THE DAY

Credit Agricole’s quarterly profit dropped 67% year-over-year thanks to troubles in its (drum roll, please) Greek and Italian businesses. It posted second-quarter net profit of €111 million compared with €339 million a year earlier.

 


President Obama’s Reelection Chances

With the Republican National Convention underway, President Obama’s chances of being reelected continue to climb which has been the trend for several weeks now. His odds increased 0.2% to 60%, the highest his odds have been since our readings in late April and fast approaching the all time high of 62.3%, which was achieved back on March 23rd, 2012.

 

It appears President Obama is on the fast track to another four years in the White House according to the latest results from the Hedgeye Election Indicator (HEI). President Obama’s reelection chances jumped 80 basis points (0.8%) to 59.8% and is fast approaching his peak of 62.3% that occurred back in March. No one knows what the catalyst is, but several weeks of consecutive gains indicate Mitt Romney has his work cut out for him going into September.

 

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


GET THE HEDGEYE MARKET BRIEF FREE

Enter your email address to receive our newsletter of 5 trending market topics. VIEW SAMPLE

By joining our email marketing list you agree to receive marketing emails from Hedgeye. You may unsubscribe at any time by clicking the unsubscribe link in one of the emails.

2007 Redo

This note was originally published at 8am on August 14, 2012 for Hedgeye subscribers.

“This book isn’t based on academic theories. It’s based on our experience.”

-David Heinemeir Hansson

 

What a difference the last 5 years makes. Or did it? The aforementioned quote comes from the introduction of one of my favorite leadership and innovation books. Some of you already have it on your bookshelf. I’ve cited it often since founding the firm – REWORK, by Jason Fried and Victor Heinemeier Hansson.

 

If you are jammed for time into summer’s end, I read this book in 12 minutes to our team at a workshop meeting – lots of pictures. We like pictures. We’ll show you one of our risk management favorites in today’s Chart of The Day.

 

Re-work, Re-think, Re-do. Sadly, when it comes to Old Wall Street’s forecasting and risk management processes, there hasn’t been much of that going on in the last 5 years. Instead, broken sources keep re-cycling the same old stuff that sucked people in during Q3 of 2007.

 

Back to the Global Macro Grind

 

2007? Pardon? Weren’t we talking about Q308 similarities? Or was it the 1930s? 1987?

 

Here are 3 Big Macro things that are precisely like 2007:

  1. SALES: GDP Growth led Corporate Revenue Growth Slowing; by Q307, companies were right confused
  2. MARGINS/EARNINGS: stocks were “cheap” if you used peak margins and peak earnings assumptions for 2008
  3. VOLATILITY: US Equity market Volatility got slammed by “rumors” of Bernanke bailouts, rate cuts, etc.

Fast forward to Q3 of 2012:

  1. SALES: Same pattern – but Global GDP growth slowing faster now than it did then (China especially)
  2. MARGINS/EARNINGS: perma-bulls are still using peak margins and prior 2007 all-time high in EPS to justify “cheap”
  3. VOLATILITY: yesterday marked the 1st time since 2007 since the VIX dropped below 14

Since the VIX dropped below 14 eighty nine (89) times throughout 2007, the good news is that you probably have plenty of time to get out of stocks before everyone else has to. There are only 30,000 funds chasing beta at this point.

 

One question on that: after the shorts have all covered how, precisely, is that going to happen without volume? Probably just a silly risk management question; NYSE volume was only down -42% versus my intermediate-term TREND duration average yesterday. That’s gotta be bullish for someone. Just not Tommy Joyce.

 

Enough about price, volume, and volatility already – who cares about 3-factor risk when simple 1-factor Fisher Price point and click 50-day moving averages tell us all we need to know in the rear-view mirror?

 

Let’s deal with my personal baggage instead…

 

Not that I took it personally, but since I got fired for being “too bearish” in October 2007, I do remember the proceeding birth of my 1st son and the vision for Hedgeye quite vividly. So do the perma-bulls. The SP500 dropped -4.4% in November 2007.

 

And, that was it.

 

That was it for the storytelling. That was it for the “world is awash with liquidity” thing. That was it for the academic theory that “shock and awe” rate cuts to zero were going to free we centrally planned beasts from the shackles of our own thoughts.

 

Where to next?

 

The only thing I can predict, with 100% certainty, from here is that this is not 2007. This is 2012. And next year will be 2013.

 

What will get #GrowthSlowing to stop slowing? Will it be a bird or a plane? Or will Keynesian Economics finally provide the long lasting elixir of life that its group-thinkers have so often promised (growth) but never delivered?

 

I don’t know.

 

What I do know is that if you are buying US stocks at lower long-term highs (-10.3% versus October 2007 and -1.1% versus April 2012) at anything < 14 VIX, you either think 1990s growth is coming back and/or that this all ends well.

 

My immediate-term support and resistance ranges for Gold, Oil (Brent), US Dollar, EUR/USD, Spain’s IBEX, and the SP500 are now $1601-1624, $110.36-115.42, $81.76-82.59, $1.23-1.24, 6943-7199, and 1393-1406, respectively.

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

2007 Redo - Chart of the Day

 

2007 Redo - Virtual Portfolio



Correcting All Of This

“My government, will correct all of this.”

-Stephen W. Kearny

 

General Stephen Watts Kearny was one of the central figures in mid 19th century Western American history. Albeit for very brief periods of time, he was the Military Governor of both New Mexico (1846) and California (1847).

 

The aforementioned quote comes from Chapter 12 of the most recent book I’ve been reading on the conquest of the American West, Blood and Thunder, where “On August 14th, 1846, two days after the Navajo raid on Las Vegas, General Kearny marched with his Army of the West into the town’s central plaza…” and proclaimed his mystery of ill-fated central planning faith.

 

Within 6 months (January of 1847), Kearny’s “government” was nowhere to be found as the dead (scalped) body of the Governor he put in place in New Mexico (Charles Bent) “lay naked on the floor in a congealed pool of blood.” (page 221) The risk management lesson here is one that is never the same, but usually rhymes – beware of short-term government promises.

 

Back to the Global Macro Grind

 

Stock and commodity markets appear to have been promised that European and American central planners are once again going to provide them the elixir of a no-volume but “up year-to-date” life in Jackson Hole, Wyoming this weekend.

 

That’s all good and fine, until it isn’t. Super Mario Draghi just cancelled his trip to the central planning summer play-land of the modern American West, and the Gold price doesn’t seem to be pleased by that turn of events this morning – not one bit.

 

As a refresher on how the market’s game of front-running both the Fed and ECB works, both political pandering entities are charged with keeping market prices up through money printing, bailout promises, and currency debasement.

 

Here’s the update on what US Dollar Debauchery has done for this 30-day bull run in stocks and commodities (inverse correlations between USD Dollar Index and the big stuff people are speculating on):

  1. Gold = -0.85
  2. Silver = -0.87
  3. Oil (WTIC) = -0.81
  4. CRB Index = -0.74
  5. CRB Raw Industrials Index = -0.79
  6. SP500 = -0.83

European and Global Equities alike get even more pop on the Fed’s Qe rumoring with 30-day USD inverse correlations for the EuroStoxx600 and MSC World Equity indices currently running at -0.88 and -0.86, respectively.

 

So, your “governments” are going to “correct all of this” by attempting to convince you that asset price inflation (commodities in particular, because that’s what’s driven the beta of the equity indices) is growth.

 

*note to real-world consumer self: inflation is not growth.

 

Maybe that’s why old Chavez is having such a tough time in the Venezuelan national polls, falling behind Radonski for the first time in a long time by a fairly wide margin (47.7% to 45.9%) despite the Venezuelan stock market being up +153% YTD!

 

Pardon? You mean people aren’t as stupid as politicians think they are? You mean the stock market being “up year-to-date” doesn’t reflect the fully bought and paid-for political messaging of the common man’s economic health?

 

Venezuela, by the way, devalued its currency in the last year. See Darius Dale’s Chart of the Day for what looks suspiciously Weimar Republic, 1920s style.

 

Maybe I have this wrong. Maybe Americans are truly as dumb as the politicians who are making these short-term broken promises of “price stability, full employment, and economic growth”…

 

Maybe I don’t.

 

Now that 2 of the world’s Top 4 economies (China and Japan) have guided down their GDP growth expectations this month (Japan did last night), maybe someone sane out there is starting to figure this out too. The US Treasury Bond market certainly just did.

 

Looking at what’s happened to market prices in the last week isn’t the end of this story, but it’s certainly instructive:

  1. US Treasury Yields have dropped -13% in basically a straight line (from 1.89% to 1.64% on the 10yr this morning)
  2. US Stocks (the SP500 and Russell2000) have fallen from their mid-August highs to make lower-highs versus March
  3. US Equity Volatility (VIX) = +22% “off the lows” (in a week), bouncing hard off our 14-15 TAIL risk zone
  4. Asian Equities: China made a fresh YTD low yesterday (-16.5% since May); Japan = -12% since the March top
  5. European Equities: DAX, CAC, IBEX – pick your index have all made lower-highs on lower and lower volumes
  6. US Dollar Index = down -3% in August, from its top to bottom

I know, I know. This whole Currency Correlation thing doesn’t fit the Bernanke/Geithner narrative because someone in their group-thinking Keynesian business schools told them “correlation is not causality.”

 

Someone better tell that to the entire market that’s keying off the causality that is the latest rumor about what Bernanke does next then, because US Dollar bets (CFTC contracts) just went from +311,000 on the bull side in June to -132,000 on the bear side pre Jackson Hole.

 

Correcting All of This will be abrupt. What started as a localized grievance against money printing (late 2007) and bank bailouts (2008-2009) now moves to a national debate about the stability of your hard earned currency and long-term (inflation adjusted) economic health.

 

Our immediate-term risk ranges of support and resistance for Gold, Oil (Brent), US Dollar, EUR/USD, 10yr Treasury Yields, and the SP500 are now $1, $112.28-114.26, $81.11-82.01, $1.23-1.25, 1.63-1.76%, and 1, respectively.

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Correcting All Of This - Chart of the Day

 

Correcting All Of This - 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.

next