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MACAU: A SOLID NOVEMBER

As you know, Macau GGR increased 8% YoY despite a tough hold comparison.  VIP hold appeared slightly below normal in November 2012 but well below November 2011.  Once again, Mass revenue led the way, up 33% while VIP revenue declined slightly (less than 1%) for the 2nd consecutive month and the last 4 out of 5 months.  VIP chips (volume) was up a solid 7%, however.  Overall, November was a decent month and we expect December to be even better.  However, we remain concerned about the upcoming smoking restrictions, potential junket crackdown, the weak performance of the SSE, and stabilizing Mass hold %. 

 

We will post a more detailed analysis later today but LVS was the clear winner this month, on many fronts.  Here are some company-specific analysis:

 

 

Sands China

  • Market share was a strong 20.8%, up from 15.6% last year and in-line with October’s strong showing.  We continue to believe that Sands will post fairly consistent share improvement over the next 12 months on a hold adjusted basis.
  • Mass share was equally impressive at 27.7%, 2nd highest in last 3 years.
  • Not surprisingly, Sands YoY GGR growth of 44% led the market but more impressively, its Mass business grew a whopping 75%.
  • VIP hold was slightly below normal and well below last year making the VIP growth even more impressive

 

Wynn

  • Wynn struggled again this past month with GGR down 2% and Mass only up 6%.
  • Market share was in-line with its 12 month average but only because Wynn held well above normal albeit slightly below November 2011
  • Mass share fell to 7.5%, an all-time low

 

MPEL

  • Overall a solid month for MPEL:  GGR share was slightly above the 12-month average but Mass share grew to 12.9%, an all-time high
  • GGR grew 15% YoY and Mass increased 40% YoY
  • VIP hold was well below normal and last November’s hold so the month could’ve been even better for MPEL

 

MGM

  • Market share rebounded from October’s abysmal 8.9% but was still lower than the 12 month average
  • Mass share was only 6.9%, near an all-time low
  • MGM GGR fell for the 2nd straight month – not good
  • MGM did get hit in the hold side, however – well below normal and last year.  VIP volume growth did lag the market though.

 

MACAU: A SOLID NOVEMBER - 2222


JOBLESS CLAIMS: SANDY EXITS THE DATA / TAILWINDS SET TO RESUME

Takeaway: While there may be a small amount of further renormalization, the bulk of the post-Sandy distortion is behind us.

Back to Normal / Tailwinds Ahead

Initial claims are now essentially back to pre-Sandy levels. We show this in the first chart below. For the last few weeks we've been looking at state level claims data for NY, NJ and PA. State level data is released on a one-week lag relative to the national data. Two weeks ago, NY, NJ and PA accounted for 20.3% of total jobless claims, while accounting for 13.0% of the population. That difference, 7.3%, is down from 12.4% in the previous week. If we adjust the claims number from two weeks ago, 393k, for this over-representation we find normalized claims should be around 366k (393k / 1.073). This morning's print of 370k is consistent with that estimation. 

 

We expect that claims should start to resume their normal behavior in the coming weeks. As a reminder, we continue to expect a seasonality-driven tailwind to benefit the data through the end of February. This, combined with our bullish view on housing, should provide an ongoing top-down tailwind for the sector.

 

The Numbers

This week initial jobless claims fell 23k to 370k from 393k. The prior week's number was revised up by 2k to 395k. Incorporating this upward revision,  claims were lower by 25k. Rolling claims, meanwhile, rose 2.25k WoW to 408k and non-seasonally adjusted claims rose 140k to 499k. The rolling series, both SA and NSA, are obviously reflecting the Sandy distortion on a lag. We expect that one month from now they will fully normalized.

 

JOBLESS CLAIMS: SANDY EXITS THE DATA / TAILWINDS SET TO RESUME - Hurricane Sandy

 

JOBLESS CLAIMS: SANDY EXITS THE DATA / TAILWINDS SET TO RESUME - Initial Claims Rolling NSA YoY

 

JOBLESS CLAIMS: SANDY EXITS THE DATA / TAILWINDS SET TO RESUME - State Claims

 

JOBLESS CLAIMS: SANDY EXITS THE DATA / TAILWINDS SET TO RESUME - Raw

 

JOBLESS CLAIMS: SANDY EXITS THE DATA / TAILWINDS SET TO RESUME - Rolling

 

JOBLESS CLAIMS: SANDY EXITS THE DATA / TAILWINDS SET TO RESUME - NSA

 

JOBLESS CLAIMS: SANDY EXITS THE DATA / TAILWINDS SET TO RESUME - NSA rolling

 

JOBLESS CLAIMS: SANDY EXITS THE DATA / TAILWINDS SET TO RESUME - S P

 

JOBLESS CLAIMS: SANDY EXITS THE DATA / TAILWINDS SET TO RESUME - Fed

 

JOBLESS CLAIMS: SANDY EXITS THE DATA / TAILWINDS SET TO RESUME - YoY NSA

 

JOBLESS CLAIMS: SANDY EXITS THE DATA / TAILWINDS SET TO RESUME - Initial Claims recession

 

JOBLESS CLAIMS: SANDY EXITS THE DATA / TAILWINDS SET TO RESUME - Rolling Linear

 

Yield Spreads

The 2-10 spread fell 1 basis point WoW to 135 bps. 4QTD, the 2-10 spread is averaging 1.41%, which is up 4 bps relative to 3Q12.   

  

JOBLESS CLAIMS: SANDY EXITS THE DATA / TAILWINDS SET TO RESUME - 2 10

 

JOBLESS CLAIMS: SANDY EXITS THE DATA / TAILWINDS SET TO RESUME - 2 10 QoQ

 

Financial Subsector Performance

The table below shows the stock performance of each Financial subsector over multiple durations.

 

JOBLESS CLAIMS: SANDY EXITS THE DATA / TAILWINDS SET TO RESUME - Subsector Performance

 

JOBLESS CLAIMS: SANDY EXITS THE DATA / TAILWINDS SET TO RESUME - Companies

 

Joshua Steiner, CFA

 

Robert Belsky


Diving Into Energy

If we analyze the energy sector to see what investors are piling into, we find that the top performing stock factors in energy over the last three months are: low margin, low short interest and large cap. The safety trade remains popular.

 

Diving Into Energy - facro normal


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Double Trouble

Client Talking Points

What's Left For Us?

The political class of America loves to take, take take. Between widespread commodity inflation, a devalued currency and unsustainable debt limits, we really have it made here, don’t we? The Republicans and the Democrats are fighting each other over every little detail of a resolution to the fiscal cliff, so the odds of a deal actually happening are very slim. Think about it: how many politicians do you really trust? Do you think they’re looking out for you in the long run or themselves? 

Mining Away

Mining stocks took a hit yesterday with Freeport-Macmoran (FCX) getting a baseball bat to the head like no other. And this morning, gold is down significantly in addition to gold mining stocks. Our intermediate-term TREND line of $1711 is broken for gold. Hedge funds are shedding their holdings related to gold miners and the commodity. Ignore brash comments from people saying that the “super cycle isn’t ending” in commodities. It has already ended and we can go a lot lower here on out.

Asset Allocation

CASH 52% US EQUITIES 12%
INTL EQUITIES 6% COMMODITIES 0%
FIXED INCOME 18% INTL CURRENCIES 12%

Top Long Ideas

Company Ticker Sector Duration
YUM

New unit openings in China and strength in YRI and US should offset China weakness in 1H13. China SRS growth is sensitive to the economy but new unit growth and ROIIC are likely to be supported by continuing growth of the consuming class in China. Looking at operating income by geography for YUM/MCD/SBUX, we can see that YUM is the most geographically diverse. This is manifest in YUM’s more stable EPS growth and price performance over the last 10 years.

SBUX

Uncertainty in US from a macro perspective (jobless claims uptick) gives us pause from TRADE perspective although coffee prices will serve as a tailwind going forward. Company is becoming more complex, taking on risk as it acquires new brands. Longer-term, we view Starbucks, along with YUM, as one of the most attractive global growth stories in our space.

ASCA

We believe ASCA is greatly undervalued due to its potential to follow a OPCO/PROPCO model like PENN in two years or so. A high FCF yield and a healthy balance sheet make this gamer an attractive investment.

Three for the Road

TWEET OF THE DAY

“Diamondback liquidation confirmed. Investors pull $520MM. Fund to close down” -@Zerohedge

QUOTE OF THE DAY

“It is a waste of energy to be angry with a man who behaves badly, just as it is to be angry with a car that won't go.” -Bertrand Russell

STAT OF THE DAY

Standard Chartered to pay $330 million in fines to US regulators for dealings with Iran.


THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – December 6, 2012


As we look at today's setup for the S&P 500, the range is 15 points or 0.37% downside to 1404 and 0.69% upside to 1419.       

                                                                                                                                                        

SECTOR AND GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

THE HEDGEYE DAILY OUTLOOK - 3

 

THE HEDGEYE DAILY OUTLOOK - 4

 

EQUITY SENTIMENT:


THE HEDGEYE DAILY OUTLOOK - 10


CREDIT/ECONOMIC MARKET LOOK:

  • YIELD CURVE: 1.34 from 1.35
  • VIX closed at 16.46, 1 day percent change of -3.86%

MACRO DATA POINTS (Bloomberg Estimates):

  • 7am: Bank of England interest rates announcement
  • 7:45am: ECB interest rate announcement
  • 7:30am: Challenger Job Cuts Y/y, Nov. (prior 11.6%)
  • 8am: RBC Consumer Outlook Index, Dec. (prior 48.9)
  • 8:30am: Initial Jobless Claims, Dec. 1 est 380k (prior 393k)
  • 8:30am: ECB’s Draghi holds news conference
  • 9:45am: Bloomberg Consumer Comfort, Dec. 2 (prior -33)
  • 11am: U.S. Treasury to announce plan for auctions of 1Y bills, 3Y notes, 10Y notes, 30Y bonds
  • 11am: Fed to purchase $1.5b-$2.25b notes due 2/15/36 11/15/42
  • 12pm: Household Change in Net Worth, 3Q (prior -$322b)
  • 2:00pm: Fed to purchase $4.25b-$5.25b notes due 12/31/18 11/15/20

GOVERNMENT:

    • Obama, first family attend National Christmas Tree lighting
    • Obama, Romney presidential campaigns file last spending reports
    • Senate Judiciary to vote on collection of location data from companies such as Apple, Google
    • FedEx CEO Frederick Smith speaks at Economic Club of Washington
    • Recreational marijuana legalized in Washington state

WHAT TO WATCH

  • Euro area pushed into recession as trade slows, spending drops
  • France sells bonds at record-low yields
  • HTC to make quarterly royalty payments to Apple based on vol.
  • Zynga files with Nevada to operate online games w/ real money
  • UPS said to offer remedies in 13 countries to save TNT deal
  • FTC says Motorola Mobility shouldn’t get injunction in patent suit against Apple
  • Carl Icahn reports lowered stake in Oshkosh
  • Garmin to replace R.R. Donnelley on S&P 500
  • Boeing says 787 Dreamliner didn’t lose power during generator failure
  • Intel CEO says favors internal candidate to take over top spot
  • Apple may try to get ban on future Samsung smartphone products; patent infringement case to be heard by judge today
  • China Mobile says Apple must discuss benefit sharing on IPhone
  • SAC’s Steinberg said to be unindicted co-conspirator at trial

EARNINGS:

    • Canadian Imperial Bank of Commerce (CM CN) 5:35am, C$1.99
    • Smithfield Foods (SFD) 6:00am, $0.43
    • Toronto-Dominion Bank (TD CN) 6:30am, C$1.81
    • H&R Block Inc (HRB) 7:00am, $(0.41)
    • Lululemon Athletica (LULU) 7:15am, $0.37
    • Dollarama Inc (DOL CN) 7:30am, C$0.70
    • National Bank of Canada (NA CN) 7:30am, C$1.93
    • Uti Worldwide (UTIW) 8:00am, $0.24
    • Esterline Technologies Corp (ESL) 4:00pm, $1.59
    • Cooper Cos (COO) 4:01pm, $1.55
    • Forest City Enterprises (FCE/A) 4:02pm, $0.01
    • Palo Alto Networks (PANW) 4:05pm, $0.03
    • Harry Winston Diamond (HW CN) 5:00pm, $0.12

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

 

OIL – both Brent and WTIC continue to make lower-highs on low volume rallies – and both remain in Bearish Formations in my model. We expanded our Commodities Bubble short positioning yesterday to US Energy stocks (XLE) and Russia (RSX); the sell side’s top rated Sector is still Energy “because it’s cheap”, using the wrong commodity prices of course.

 

GOLD – not good. My intermediate-term TREND line of $1711 is now broken and being confirmed on the downside. Gold Miners getting hammered as they remain over-owned by funds seeing redemptions.

  • World Food Prices Fell a Second Month in November on Oils, Grain
  • Russian Wheat Facing Coldest Winter in Two Decades: Commodities
  • Copper Declines on Concerns About Global Economic Growth
  • Oil Trades Near One-Week Low as U.S. Distillate Supplies Surge
  • Freeport’s Oil-Gas Bet Prompts Biggest Slump in 4 Years: Energy
  • Morgan Stanley Backs Gold, Corn, Soybeans as Best Picks in 2013
  • Sugar Falls on Mounting Speculation of Oversupply; Coffee Climbs
  • Gold Declines for Third Day Toward One-Month Low as Dollar Gains
  • Palm Oil Reserves in Malaysia Seen Holding Near Highest Ever
  • Mississippi Water Level Buoys Odds of Keeping River Open Longer
  • Japan Buys Most Milling Wheat in Four Months From U.S., Canada
  • OPEC’s Biggest Cut Since 2009 Looms Next Year: Energy Markets
  • Gold Set to Return to Run of Records Next Year: Chart of the Day
  • Soybeans Gain as USDA May Report Lower South American Outlook

THE HEDGEYE DAILY OUTLOOK - 5

 

CURRENCIES


THE HEDGEYE DAILY OUTLOOK - 6

 

EUROPEAN MARKETS


GERMANY – who cares what the Dow is “up YTD” when you could be up +28% YTD owning the German DAX, powering past the September closing highs? With the SP500 -4.4% from the Bernanke SEP Top, this +1.1% move this morning in Germany is definitely the macro move of the morning.


THE HEDGEYE DAILY OUTLOOK - 7

 

ASIAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - 8

 

MIDDLE EAST


THE HEDGEYE DAILY OUTLOOK - 9

 

 

The Hedgeye Macro Team

 

 

 



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