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Playing The Debt Ceiling

The US Treasury is fast approaching its borrowing limit of $16.394 trillion; we expect the Treasury to hit that number within 35 calendar days or by December 17, 2012. While we're growing increasingly optimistic generally about the Financials post the Fiscal Cliff/Debt Ceiling, we think investors should have realistic expectations about what is likely to happen over the immediate/intermediate term. Based on the how things went in the last go-around, we would be positioned defensively in the short-term, and be looking to take advantage of the weakness once resolution if forthcoming.

 

Playing The Debt Ceiling - debtceiling1

 

Playing The Debt Ceiling - debtceiling2

 


Singapore Continues Bleeding

Things just aren’t getting better in Singapore as Q3 shows a decline in gaming metrics and gross gaming revenues hitting their lowest levels since Q2 2010. Q3 hold in Singapore was 2.27%, the lowest quarterly hold rate ever and way below Singapore’s historical hold rate of 2.99%. Hold in 3Q 2011 was 2.90%.

 

Singapore Continues Bleeding - singaporeGGR


Buying The Flush

Client Talking Points

Check Your Levels

Trading the market with a process means you’re equipped with one of the best weapons out there. If you stay within your range and levels and use your process to execute trades, chances are you’ll do well out there or at the very least, you won’t lose money. Our support in the S&P 500 is 1364 and we told you to buy the bounce off of  that level. Sure enough, the market can’t break through that level and heads upward. This is by no means a bullish call. When the S&P 500 is oversold and you’re nearing support, you watch and wait. If support holds, you buy that bad boy and ride it toward your next level of resistance.

Asset Allocation

CASH 61% US EQUITIES 6%
INTL EQUITIES 0% COMMODITIES 6%
FIXED INCOME 15% INTL CURRENCIES 12%

Top Long Ideas

Company Ticker Sector Duration
TCB

After a long downward slide, TCB has finally turned the corner. The margin has stabilized after the balance sheet restructuring. Loans are growing thanks to the equipment finance business. Non-interest income is more likely to go up than down going forward, a reversal from the past 18 months. Credit quality has a tailwind from a distressed housing recovery in TCB’s core markets: Minneapolis, Detroit and Chicago. On top of this, the CEO, Bill Cooper, is one of the oldest regional bank CEOs, which raises the probability that the bank will be sold. Expectations are bombed out at this point, so we think it’s time to move from bearish to bullish on TCB.

IGT

There is improving visibility on 20%+ EPS growth with P/E of only 11x with better content leading to market share gains. New orders from Canada and IL should be a catalyst. Additionally, many people in the investment community are out in Las Vegas at the annual slot show (G2E) and should hear upbeat presentations by management.

HCA

While political and reimbursement risk will remain near-term concerns, on the fundamental side we continue to expect accelerating outpatient growth alongside further strength in pricing as acuity improves thru 1Q13. Flu trends may provide an incremental benefit on the quarter and our expectation for a birth recovery should support patient surgery growth over the intermediate term. Supply costs should remain a source of topline & earnings upside going forward.

Three for the Road

TWEET OF THE DAY

“The Petraeus news cycle started as ‘tawdry affair,’ crossed into ‘freakout about national security’ and is now back to ‘tawdry affair.’” -@moorehn

QUOTE OF THE DAY

“The whole problem with the world is that fools and fanatics are always so certain of themselves, but wiser people so full of doubts.” -Bertrand Russell

STAT OF THE DAY

OCT ADVANCE RETAIL SALES: -0.3% V -0.2%E; RETAIL SALES LESS AUTOS: 0.0% V 0.2%E


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THE M3: CHUI COMMENTS ON SMOKING; VIP; TOUR/HOTEL DATA

The Macau Metro Monitor, November 14, 2012

 

 

CASINOS HAVE ENOUGH TIME TO IMPLEMENT BAN ON SMOKING Macau Business

Macau CEO Chui says he is confident gaming operators will be able to establish smoking areas before the forthcoming ban on smoking in casinos comes into effect on January 1.  Chui also admitted the private property market is “overheated” and prices are “high”. But he downplayed the situation, saying market fluctuations must be seen as something normal.  Chui also said preparation works for the new border checkpoint between Macau and the mainland continue and are “on schedule”. 

 

MOST OF THE VIP GAMBLERS ARE MAINLAND OFFICIALS Macau Daily News

Macau's media cited statistics from casinos that Mainland government officials accounted for a quarter of the high‐end players in Macau, while executives from state-owned enterprises accounted for almost a quarter.

 

PACKAGE TOURS AND HOTEL OCCUPANCY RATE FOR SEPTEMBER 2012 DSEC

Macau visitor arrivals in package tours increased by 21.9% YoY to 749,496 in September 2012.  Visitors from Mainland China (538,178) increased by 23.7%, with 222,914 coming from Guangdong Province.  There were 100 hotels and guesthouses operating in September 2012, providing 26,083 rooms, an increase of 3,704 (+16.6%) YoY, of which guest rooms of the 5-star hotels accounted for 63.9% of the total.  The average length of stay decreased by 0.18 night to 1.3 nights.

 



Collective Enlightenment

“The only thing that makes sense is to strive for greater collective enlightenment.”

-Elon Musk

 

I was on a plane to Austin, Texas yesterday, grinding through my reading pile, and came across that excellent thought leadership quote in Businessweek from the Founder/CEO of Pay Pal and current Chairman of Tesla, Space X, etc. – Elon Musk.

 

Then I came across another quote from Amazon’s Founder/CEO, Jeff Bezos: “We don’t want to do me-too things. The people we’ve attracted over time to Amazon want to be pioneers. They want to be inventors. They want to do new things.” (All Things Digital)

 

And I couldn’t help but do what I should probably do every day in this business – stop everything I am doing that has to do with regressive broken sources and just think about more and more ways to collaborate, innovate, and create. That’s progress.

 

Back to the Global Macro Grind

 

What was not progressive was seeing so many people get sucked into buying September’s top. While I am fine with sending you “Buy The Flush Notes” as our long-term TAIL line of 1364 SP500 support holds, I am far from fine with where the bull case goes from here.

 

It’s not like the risk management signals in September/October haven’t been obvious. Seasoned veterans of going to cash like Baupost’s Seth Klarman (went to 33.5% cash at the time of his note) wrote as recently as October 23rd in his client letter:

 

“The overall market environment seems increasingly risk to us… US corporate earnings are expected to be lower this quarter. Higher markets in the face of eroding fundamentals can be a toxic combination.”

 

Obvious is as obvious does, in hindsight.

 

US Corporate Margins coming off an all-time peak and Bernanke’s Bubbles (commodities) popping are long-term cycle risks. Going off (or saving us from) the #KeynesianCliff that politicians perpetuated in the first place won’t change that.

 

So where do we go from here? I don’t know. All I know is that we are observing a non-linear and dynamic market ecosystem that gives us an opportunity to change our mind about that, daily.

 

In the meantime, conditional probabilities give us clues. If, if, then. If a market is bearish TRADE, TREND, and TAIL, then don’t buy it. If a market is bearish TRADE and TREND, but bullish TAIL, then you don’t play hero – you take your time.

 

With that decision making process in mind, here are some US centric risk management signals to consider, across our core durations (TRADE, TREND, and TAIL):

  1. SP500 = down -6.2% from the Bernanke Top is bearish TRADE and TREND (1419) with long-term TAIL support of 1364
  2. Russell2000 = down -8.8% from the Bernanke Top bearish TRADE, TREND (846) and TAIL (797)
  3. Nasdaq = bearish TRADE, TREND (3069), and TAIL (2937)
  4. Financials (XLF) = bearish TRADE and TREND ($15.58); bullish TAIL ($14.93)
  5. CRB Commodities Index = bearish TRADE, TREND (305), and TAIL (312)
  6. Oil (WTIC) = bearish TRADE, TREND ($88.35), and TAIL ($92.86)
  7. Gold = bearish TRADE (1748); bullish TREND (1704)
  8. Copper = bearish TRADE, TREND (3.61), and TAIL (3.91)
  9. US Equity Volatility (VIX) = bullish TRADE and TREND (16.02); bearish TAIL (19.58)
  10. US 10yr Treasury Yield = bearish TRADE, TREND (1.72%), and TAIL (1.91%)

Global markets reflect our Collective Enlightenment. It will be a great day in this business when best in class risk management and research processes do too.

 

Our immediate-term risk ranges for Gold, Brent (Oil), US Dollar, EUR/USD, UST 10yr Yield, Copper, and the SP500 are now $1, $105.02-109.41, $80.56-81.34, $1.26-1.28, 1.56-1.69%, $3.41-3.51, and 1, respectively.

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Collective Enlightenment - Chart of the Day

 

Collective Enlightenment - Virtual Portfolio


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 80.30%
  • SHORT SIGNALS 78.51%
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