The correlation between taxi trips and table play on the Strip


  • The correlation between the YoY change in taxi trips and non-baccarat table drop is 0.68 over the past 5 years
  • Since we get taxi and airport data 2-3 weeks before the state releases gaming stats and both are statistically significant variables in explaining gaming volumes, they are major inputs in our monthly projection model
  • August taxi trip data was released today and it was down 1.7%.  We don’t yet have the McCarran airport data but assuming no surprises, gaming revenues could be flat to slightly down with normal hold.


Hedgeye Heads to Houston: Hedgeye Energy Corporate Access Trip

Takeaway: Get an Edge in the Game, Talk to the Leaders

Hedgeye’s Director of Research, Daryl Jones, and Energy analyst, Kevin Kaiser, are traveling to the oil and gas capital of North America, Houston, TX to gain insight on the current energy environment from the leaders of top E&P and oilfield services companies.


Below is the current schedule, please email if you would like to be a part of this expedition or would like additional details.


Hedgeye Heads to Houston: Hedgeye Energy Corporate Access Trip - TX  Sch

Chinese Rebar Prices Rebound

Takeaway: Chinese rebar may have bounced but it'll be short-lived as it continues to drop in price heading into 2013.

We’ve examined the relationship between Brent crude oil and the price of Chinese rebar as the price of rebar fell nearly 50% over the last year. Though there is a significant bounce in September pricing, we believe it’s nothing but a dead cat bounce and that rebar prices will continue to fall.


The spot rebar price is +7% off the September 7 low, coinciding with the rip in most risk assets after the ECB announced its new bond-buying program.  That makes intuitive sense – Europe is China’s #1 export customer.  China likely has a bunch of steel it can’t get rid of or we’re not getting the entire picture.



Chinese Rebar Prices Rebound - china rebar

Attention Students...

Get The Macro Show and the Early Look now for only $29.95/month – a savings of 57% – with the Hedgeye Student Discount! In addition to those daily macro insights, you'll receive exclusive content tailor-made to augment what you learn in the classroom. Must be a current college or university student to qualify.

Industrial Indicator: NAV Losing Ground

Takeaway: $NAV's heavy discounting may not be sustainable with less efficient operations. An end to discount would help competitors, including $PCAR.


Trucks per Employee: NAV Losing Ground

  • Efficiency: Trucks per employee is an interesting measure of efficiency and capacity utilization.  On that measure, NAV is losing ground while PCAR is gaining.  Absolute numbers are impacted by the high percentage of smaller Class 5-7 vehicles produced by Navistar.
  • NAV Discounting Heavily: NAV’s product and regulatory issues have resulted in reduced market share, even with discounting to maintain sale volumes.  Lower sales rates relative to competitors can create negative feedback in the form of higher costs and increasing losses.  In turn, higher costs make NAV’s discounting more difficult.
  • Unsustainable: Customer perception of product quality and OEM financial stability is important for truck sales, in our view.  Navistar’s problems may not yet be over, particularly if Volvo and Daimler again sue the EPA over revised non-conformance penalties.

Industrial Indicator: NAV Losing Ground - truck per employee



Industrial Indicator: NAV Losing Ground - perf 9 18 12

UNH: Dealing With Rising Costs

Takeaway: The Affordable Care Act is putting pressure on managed care providers like $UNH who will undoubtedly deal with rising costs.


The future of managed care has an increasingly negative undertone in regards to the Affordable Care Act. UnitedHealth Group (UNH) will undoubtedly be affected by the Act and rising costs are cause for concern and have made us increasingly bearish on the stock. We expect cost trend to accelerate into 2013, with limited pricing leverage on either the premium or provider payments side to offset the risks to 2013 guidance.



UNH: Dealing With Rising Costs  - UNH chart1



Hedgeye’s Healthcare team has outlined two major drivers of increasing costs that directly affect UNH heading into the new year:


• Physician Utilization: Physician traffic represents roughly 30% of commercial cost trend for managed care, and we expect utilization to accelerate 2H12 and into 2013.  A physician visit leads the care continuum, so we expect incremental utilization to follow subsequent to a rise in physician utilization.


• Birth recovery: We expect births to recover as early as 4Q12 and into 2013.   Not only do births represent a considerable portion of commercial inpatient volumes (30%) and Medicaid inpatient volume (40%), but pregnancies  add additional physician utilization as pre-natal and post-natal populations carrying significantly higher than than average utilization.



UNH: Dealing With Rising Costs  - UNH chart3

No More

This note was originally published at 8am on September 04, 2012 for Hedgeye subscribers.

“And so he urged his countrymen: No more.”

-Hampton Sides (Blood and Thunder)


That’s what the head of the Navajo warriors, Manuelito, said to his people before ultimately succumbing to General Sherman’s troops. Maybe we’re going down versus the Fed’s Bailout Beggars too, but it won’t be without one heck of a fight.


Last week ended with a Draghi bagging the Jackson Hole meeting and Ben Bernanke doing nothing that resembled what he was allegedly going to do only 2 weeks prior. Rumor versus reality is a widening spread.


“What is the truth (Ray Dalio)?” Stocks continue to make lower-highs as bonds continue to make higher-lows. I urge all of you to join me in calling for No More of what has not worked. Otherwise, you’ll have $130-150 Oil and 1970s stagflation all over again.


Back to the Global Macro Grind


Both US and Global Equities were down again last week (2 consecutive down weeks for the SP500, 1 month lows for Asia). Both Treasury Bonds and Commodities were up. The latter perpetuates #GrowthSlowing expectations in the former.


But no worries. Everyone who drives to work, eats food, and sends their kids to school this week understands the very basic P&L problem associated with cost of living rising as nominal wages are falling:

  1. American median incomes = down -5% since 2009
  2. US Dollar = down -5% since January 20, 2009
  3. Oil (WTIC) = +150% since January 20, 2009

Almost everyone, that is…


Mostly everyone else understands the concept of long-term lower-highs (stocks) and higher-lows (bonds) as well.  Here’s what’s happened in the last 2 weeks as we setup for risk managing September:

  1. US Stocks (SP500) = down -0.85% (from 1418) to 1406 on Friday
  2. European Stocks (Eurostoxx600) = down -1.8% (from 272) to 267 this morning
  3. Chinese Stocks (Shanghai Comp) = down -3.5% (from 2118) to 2043 this morning

All the while:

  1. US Equity Volatility (VIX) = up +30% from its YTD closing low (2wks ago)
  2. Commodities (CRB Index) = up +1.9% (from 303) to 309 this morning
  3. US Treasury Yields (10yr) = down -14% (from 1.81%) to 1.55% this morning

So, who on God’s good earth profits from this economic model? If you bought bonds, volatility, and commodities 2 weeks ago, you did. But what % is that of the global population? Did higher prices in those 3 things perpetuate economic growth, or slow it?

If you bought Gold 2 weeks ago (we didn’t because we didn’t think Bernanke would go to Qe4 – and he didn’t), that’s up +4.8%. Great trade! But what does that mean? It means that the purchasing power of US Dollars continues to be debauched.


Are institutional investors long Gold? You bet your Madoff they are – and with headlines dominating your every day like this: “Gold, Near 5mth High, Seen Gaining on Prospects for More Stimulus” (Bloomberg), why shouldn’t they be?


Weekly CFTC data implies Gold buyers ramped bets on Bernanke right back up to where they were before they started falling in March (+19% wk-over-wk to almost 132,000 contracts).


Those are called expectations. Instead of jobs and economic growth, that’s what Bernanke really stimulates and, in doing so, perpetuates the US growth slow-down via commodity inflation.


This is why our Global Macro Model continues to nail  #GrowthSlowing calls at these shortened economic cycle turns well ahead of consensus. Our models adjust, real-time, for Dollar Debauchery and Oil Inflation.


How long can inflation of market prices be masked as “economic growth”? Not for long. Each and every one of these Qe experiments gives markets shorter-term pops and more volatile reversals.


So, if you bought Gold (or Commodities) at the month-end markup of February 2012, or if you bought it there at lower-highs on Friday, the probability just went straight up (like the asset price did) that they will now come down again.


That’s called Deflating The Inflation. And while Bernanke wants you to believe that you’ll have no more of that (maybe ever), I’ll repeat what we all can’t afford any more of – policies to inflate asset prices that, in turn, slow growth.


My immediate-term support and resistance ranges for Gold, Oil (Brent), US Dollar, EUR/USD, 10yr UST Yield, and the SP500 are now $1665-1696, $113.69-116.57, $81.11-81.91, $1.24-1.26, 1.55-1.64%, and 1399-1417, respectively.


Best of luck out there this week,



Keith R. McCullough
Chief Executive Officer


No More - Chart of the Day


No More - Virtual Portfolio

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.