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The Macau Metro Monitor, September 24, 2012



STUDIO CITY CAN APPLY FOR CASINO: GOV'T Macau Business, Macau Daily Times

According to Secretary Tam, Studio City can apply for a casino.  This was the first time a government official had said so, after a string of statements to the contrary.  Tam said the government had already agreed that Studio City could apply for a casino in 2006, when the original investors in the project requested it.  Tam also admitted that some of the new 2,000 live gaming tables to become available until 2023 under the 3% average yearly growth rate cap to be introduced next year, could go to Studio City.


Mr Tam added the information that “they were given the land already in 2003.  The question is whether or not this land can have casinos or not”, he stated. “At the time of the first request they did not include any projects for casinos. It must be evaluated.” According to the Secretary, “this can’t be done fast.” 


Also, the requested 400 gaming tables for the recently opened Sheraton Hotel in Sands Cotai Central will probably be approved “only next year”.  The government had originally agreed to this number of tables and 200 were approved already.  The Secretary also referred to Sands’ “little Paris” project saying, “This is no new project, as it had already been integrated into the Venetian and Four Seasons projects. It’s only the construction works that are divided into different phases.”



Visitor arrivals totaled 2,681,141 in August 2012, down slightly by 0.6% YoY.  In August 2012, the average length of stay of visitors stood at 1.0 day, down by 0.1 day YoY.  Visitors from Mainland China increased by 4.1% YoY to 1,635,080, with those travelling to Macao under the Individual Visit Scheme rising by 10.6% to 772,534.





Singapore's consumer prices rose at a slower pace in August, as costs of accommodation and services moderated.  The consumer price index (CPI) rose 3.9% from a year earlier, after rising 4.0% in July.  The CPI rose 0.6% in August from July, after a MoM rise of 0.2% in July.  The Monetary Authority of Singapore said core inflation, which excludes accommodation and private road transport costs, fell to 2.2% in August from 2.4% the previous month.

Elegant Outcomes

“Not everything I say is elegant.”

-Mitt Romney


For 5 straight weeks both Romney and the US Dollar took a public brow-beating from both Obama and Bernanke. We’ll see where the Hedgeye Election Indicator scores Romney tomorrow. For now, all I can tell you is that last week the US Dollar just had its 1st up week in six.


Can Policies To Inflate, deflate? Oil just did, fast. Gold, Silver, and US Stocks are on their way lower this morning too. Did last night’s 60 Minutes moment for Romney mark a short-term top for Obama? Intrade had him at a fresh new high of 70% last week. At a bare minimum, that has some short-term mean reversion risk heading into the 1st debate (October 3rd).


From Greenspan/Bernanke asset price bubbles (Internet stocks in 2000, Housing in 2007, and Commodities in 2012) to mean reversion and correlation risks, Macro hasn’t been elegant over the course of the last 15 years. Neither is writing about the truth.


Back to the Global Macro Grind


With 43 days to the #Election and 99 days to the #FiscalCliff, both the US Dollar’s direction and the Obama vs. Romney Spread matter to markets – big time. Causality (policy) is driving correlation in market pricing right now. When that changes, we’ll let you know.


Correlation Risk Update (30-day immediate-term USD correlations, across asset classes):

  1. Gold = -0.98
  2. Copper = -0.97
  3. Silver = -0.96
  4. Coffee = -0.84
  5. CRB Commodities Index = -0.82
  6. SP500 = -0.89

In other words, if Obama gets the Dollar right (down), he should be fine for the next 30 days. If he doesn’t, Dollar up may very well be read as Romney building momentum off his mid-September lows.


Partisan people may not like this analysis, but the math is quite elegant when you show it in bullet point form. With the US Dollar Index up +0.6% last week, here’s what Big Macro data did:

  1. CRB Commodities Index = down -3.8%
  2. Oil = down -6.2%
  3. Copper = down -1.6%
  4. Coffee = down -4.1%
  5. SP500 = down -0.34%
  6. Russell2000 = down -1.0%
  7. Chinese stocks = down -4.6%
  8. Italian stocks = -3.8%
  9. Russian stocks = -3.8%
  10. Gold = +0.2%

Yes, Gold prices diverged from the rest of reality last week – but they aren’t this morning. That’s an interesting callout, if only because Gold was the last holdout in Bernanke’s Bubble (Commodities) to not make higher all-time highs.


The all-time high (not pricing it in rice beans or Thai Baht) in nominal Gold was established in February of 2012. And if you really want to think bubbly, it makes sense for it to potentially have topped before Bernanke printed to “Infinity & Beyond.” After all, Gold has been up for 12 consecutive years, discounting something, no?


What’s next?


If the US Dollar falls again from here and Gold recovers this morning’s losses to make higher-all-time-highs, I’ll likely cover my short position in GLD. If it doesn’t, well, I guess that’s not going to be my problem.


Within the weekly CFTC futures/options contract data, Gold is as frothy right now as Corn was in mid-August (Corn, by the way, is down -11% since then, in a straight line):


Here’s the update on Commodity speculation within that CFTC data:

  1. Total contracts finally fell wk-over-wk (-1.7%) after hitting their February 2012 highs of 1.33M contracts last week
  2. Gold contracts ripped another +8% wk-over-wk (up 5 weeks in a row with USD down) to a February high of 178,426 contracts
  3. Oil contracts made higher YTD highs into and out of Bernanke = +6% wk-over-wk to 214,647 contracts

All the while, Commodity speculation on Farm Goods (corn, wheat, soy, etc.) dropped -7% wk-over-wk, AFTER corn prices fell, not before. Super secret: hedge funds chase commodity beta high and sell it low (they’ll sell oil today, watch) – that’s why these prices whip around so much within the construct of Bernanke’s broken promise of “price stability.”


In other Contrarian Signal news, Fund Flows may be negative in Equities (ex-ETFs, Equity Fund outflows were another -$1.9B last wk), but they dog-piled into Raw Material/Commodity funds last week at +$2.36B (per EPFR data), and Goldman just upped their “Commodities” forecast to another +18% from here!


If Goldman and Obama are right, I’ll be wrong on Gold and Oil highs for 2012 being in the rear-view mirror. And the USA will probably be in a recession within 6-12 months. Don’t take my word for it on that - ask the bond market. Policies To Inflate slow growth. To Keynesians advising Bush and Obama, that hasn’t been an elegant economic outcome either.


My immediate-term risk ranges in Gold, Oil (Brent), US Dollar, EUR/USD, UST 10yr Yield, and the SP500 are now $1, $107.60-111.44, $78.69-79.96, $1.28-1.30, 1.69-1.79%, and 1, respectively.


Best of luck out there this week,



Keith R. McCullough
Chief Executive Officer


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Express Carriers: Getting Interesting

Takeaway: While early, we are getting interested in $UPS & $FDX on the long side. FDX may pull capacity. Lucrative USPS contract up for grabs.

Express Carriers: Getting Interesting

  • Express Carriers Long Out of Favor:  We have covered Fedex and UPS for a really long time and have not been interested in them for a really long time.  However, recent underperformance (i.e. valuation improvement) and a better cyclical set up is starting to make the group look more promising.
  • Capacity Reductions?:  Fedex appears to have added excess express capacity after the financial crisis and may announce its withdrawal at its October analyst meeting.  That capacity reduction, among other factors, could be a help to industry utilization and margins.
  • USPS Contract Up:  We also note that the Fedex USPS contract is up for grabs now.  UPS has a bid in.  It’s a ~$1 billion in revenue with above average margins, so it moves the needle – down for FDX if it loses the business.

Express Carriers: Getting Interesting - 2




The Economic Data calendar for the week of the 24th of September through the 28th is full of critical releases and events. Attached below is a snapshot of some (though far from all) of the headline numbers that we will be focused on.



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.