The Macau Metro Monitor, October 22, 2012




Francis Tam, the Secretary for Economy and Finance, stressed that the government has yet decided on the allocation of gaming tables for new casinos, which will largely depend on the non-gaming business these gaming operators have.  Tam clarified that the number of gaming tables is just a target put forward to the authority by MGM for its Cotai project, but currently the government has yet to make a decision on the allocation of new gaming tables.  The Secretary also stressed that no new gaming tables will be allocated to casinos this year. 



Macau CPI for September increased by 5.69% YoY and 0.01% MoM. 



The Legislative Assembly passed the bill rising the entry age to casinos to 21 with effect from November 1, and the new law will apply to both gaming employees and casino visitors.


FL/FINL: Stealth Strength in Athletic Specialty FW

Takeaway: With a reacceleration in Oct-to-date sales and significantly stronger results in September, we are taking up our numbers for $FL & $FINL.


Concerns over slowing growth in the athletic specialty channel as reflected by weekly footwear figures has been overstated in recent weeks. The latest read on monthly sales by channel confirm that the Athletic Specialty channel significantly outperformed our expectations. Coupled with a reacceleration in October-to-date sales, we’re taking up our numbers for FL and FINL.

It’s important to keep these weekly figures in perspective because they represent sales in aggregate across ALL channels representing Athletic Specialty/Sporting Goods (~60% of sample), Shoe Chains (~20% of sample), and Dept/National Chain Stores (~20% of sample). As seen in the chart below, the continued underperformance in the other channels cause weekly sales to significantly understate performance in the Athletic Specialty channel. Such was the case in September, but to an even greater magnitude than usual due to considerable weakness in the Dept/National Chain Store channel.

  • Following a strong August (+9.2%), we were modeling September sales up +2% given weekly sales came in up +0.3% and reflecting the typical adjustment for athletic specialty channel outperformance.
  • September actually came in up +7.6% significantly better than we had estimated
  • Oct-to-date weekly sales are tracking +3.3% sequentially stronger than Sept by 3pts.
  • Based on the reacceleration in October sales reflecting several new basketball launches, we are modeling October sales in the athletic specialty channel to be running up +9%.
  • In addition, we’ve seen a modest reacceleration in apparel sales month-to-date as well.
  • In looking at FL’s 3Q, it’s important to note sales contribution by month which are front-end loaded to August (~42%) compared to September (~35%) and October (~23%).
  • As such, we have good visibility on how domestic sales are shaping up easing concerns of incremental weakness in what has been one of the strongest multi-year trends in retail.

All in, we’re taking our FL comp for quarter up to +9.5% from +7.5% and EPS to $0.59 vs. $0.54E and remain 3% and 7% above consensus estimates for this year and next at $2.52 and $2.90. We are modeling a +8% comp for FINL and EPS of $0.12 vs. $0.11E (we have SG&A a bit higher) and are +6% and +8% Street estimates with EPS of $1.78 and $2.05 in (Feb) FY13 and FY14 respectively.

We remain positive on both stocks. Given relative underperformance of FINL due to investor concern over the potential of incremental costs related to Macy’s (we see as a shift in timing, but not dollars), we favor FINL over FL at these prices. We are also incrementally more positive on NKE, which is one of our top ideas.

FL/FINL: Stealth Strength in Athletic Specialty FW - MoFWChan


FL/FINL: Stealth Strength in Athletic Specialty FW - FL Comps


FL/FINL: Stealth Strength in Athletic Specialty FW - FINL Commps


FL/FINL: Stealth Strength in Athletic Specialty FW - FW Mo YY Cat





Today we shorted the WisdomTree Japan Hedged Equity Fund ETF (DXJ) at $31.96 a share at 3:32 PM EDT in our Real Time Alerts.




Japan had a mean reversion bounce this week that has yet to fully correct and Keith thinks it will. Japan’s current economic situation remains deteriorated and the ongoing land dispute with China is far from over.


The Economic Data calendar for the week of the 22nd of October through the 26th 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.



Dial-In Information: "View From the Battleground States"


Dial-In Information: "View From the Battleground States" - Invite


"Based on our forecasting model, it becomes clear that the president is in electoral trouble"

-Ken Bickers     


On Wednesday, October 24th at 1:00pm EST, the Hedgeye Macro Team and Healthcare Team will be hosting a View From the Battleground States Expert Call with Professor Kenneth Bickers of the University of Colorado. Bickers and his colleague, Michael Berry, have created an economic forecasting model that has accurately predicted the outcome of the last eight presidential elections.


Topics will include: 

  • Electoral College vote set-up, impact and the importance of swing states 
  • Discuss Forecasting Model Factors: including state and national unemployment figures and changes in real per capita income
  • Factors that will make this election different 
  • Voter expectations and turn out
  • Economic impacts following the election (healthcare, fiscal cliff) 

Please dial in 5-10 minutes prior to the 1:00pm EST start time using the number provided below and presentation materials will be distributed prior to the call:

  • Toll Free Number:
  • Direct Dial Number:
  • Conference Code: 496674#


Bickers' Background

  • Joined faculty at CU Boulder in 2003
  • Received his Ph.D. from the University of Wisconsin-Madison and his BA from TCU in Fort Worth
  • Published articles in numerous journals, including the American Journal of Political Science, Journal of Politics, Public Choice, Administration and Society, and the Journal of Conflict Resolution
  • Current research includes;
    • The consequences of devolution of federal policy activities to states and local communities
    • Local Government Elections Project, an ongoing investigation of the recruitment and campaigns of local office holders who populate local and state offices
    • Exploration of the relationship between residential mobility and local politics 


Takeaway: The first stop on the road to 1600 Pennsylvania Avenue is in Ohio, which favors Obama.

“Tin soldiers and Nixon coming, we’re finally on our own.”

                -Neil Young, “Ohio”


On Wednesday October 24th we are doing a call on the Battleground States with Professor Ken Bickers from the University of Colorado. (Materials and dial in will be circulated.)  Bickers and his colleague, Professor Michael Berry, have put together a fascinating projection for the Presidential race based on bottom up state based economic analysis.  The key drivers of their model are both unemployment levels, state and national, and state level income levels.


According to their analysis, President Obama is currently slated to win 208 electoral votes.  This is far short of the 270 he would need to retain the Presidency.  This is an extreme outlier from other current Electoral College projections which generally show Obama winning.   To their credit, the Bickers and Berry model has accurately predicted every Presidential election going back to 1980.  The two wildcards this year may be the unpopularity of the challenger (with approval ratings below 50%) and the fact that the stock market has done well, even as the real economy has struggled.


On the last point, our Hedgeye Election Indicator (HEI) still has Obama at a more than 60% probability of being re-elected.  This analysis is based on real time economic indicators, such as equities, so this makes sense.  The dichotomy between the strength of risk asset prices and economic data released by the federal and state governments is a point that we will be pushing Bickers on in our call.


On a national level, Romney appears to be holding his narrow lead since the first debate.  Based on the average of the last seven major polls, Romney is up +0.7.  This also includes a Gallup poll that has Romney up +7 and is a clear outlier.  Rasmussen who has been the most accurate nationally in the last two Presidential races, has the race has a tie.  So, Romney has a slight edge, but basically it is too close to call.


Historically, races don’t shift much with only a few weeks to go, so we think it’s fair to say that this race will go into election night in a very tight range with no clear advantage in national polls.  It will then of course come down to the a few key states with Ohio, similar to 2004, likely being the key state.  In fact, Nate Silver, who in our view is one of the best political statisticians in the game, ranks the “Tipping Point States” and has the top five as: Ohio 46.9%, Wisconsin 10.2%, Virginia 9.4%, Colorado 7.6%, and Nevada at 6.8%.   So, Ohio has a 1 in 2 probability of being the deciding state, which might not be good for Republicans.


For starters, Romney has and continues to struggle in Ohio polls.  In the last seven Ohio polls, Obama has led in five of them and Romney has led in two. Of the two that Romney has led, it has only been by +1 point.  On average of all the polls released in October, Obama is up +2.4.  In 2008 Obama won Ohio by +4.6 and Bush won it by +2.1.  No Republican has ever won the Presidency without winning Ohio.


From an economic perspective, Ohio also has a few things going in Obama’s favor.  First, the Ohio unemployment rate, of 7.0%, is below the national average.  This is well below the level of 8.6% when Obama took office.  Second, personal incomes have actually been on the rise in Ohio under Obama, which makes sense given the decline in the unemployment rate.


No surprise for a state with such critical importance, early voting has already started in Ohio with more than 1.4 million people having requested a ballot or already voted.  Currently both parties are claiming early victory.  For example, in Cuyahoga County 250,000 absentee ballots have been requested, 80,000 have been returned, and those numbers favor Democrats by a ratio of 3:1.  Meanwhile, in another key area of Ohio, Franklin County, Republicans account for 16.5% of registered voters and have made up 28.6% of early voting so far.


In general, it is probably premature to read much into early voting.  But we should be very clear- the road to the Presidency goes directly through Ohio.  With Ohio’s relatively positive economic performance and Obama’s current lead in most Ohio polls, the road looks bumpy for the Republican Party. (In the table below, for your reference on election night we’ve posted congressional district results for Ohio.  Romney will have to outperform McCain meaningfully to win.)



Daryl G. Jones

Director of Research



Ohio! - 1

Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.46%
  • SHORT SIGNALS 78.35%