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THE M3: 200 MORE TABLES FOR SANDS; SANDS DIVIDEND; GONGBEI EXPANSION; UNEMPLOYMENT

The Macau Metro Monitor, January 28, 2013

 

 

SANDS CHINA GETS APPROVAL FOR 200 NEW TABLES: CEO WSJ, Macau Business

According to LVS CEO Edward Tracy, Sands China has already received official approval for 200 additional live gaming tables.  Tracy didn’t say if the tables would be made available on time for the Lunar New Year holiday, which starts on February 10.

 

Meanwhile, Mr Tracy also announced today that Sands China would soon raise salaries. But he didn’t provide details.

 

The second tower of the Sheraton Macao Hotel, located at Sands China’s Cotai Central casino resort, was officially completed today. The tower is however still waiting for government approval to start welcoming guests. Sheraton Macao managing director Josef Dolp, the property could be up and running as early as next month, ahead of the Lunar New Year, pending government approval.

 

SANDS CHINA ANNOUNCES INTERIM DIVIDEND Macau Business

Sands China declared on Friday an interim dividend of HK$0.67 (US$8.6 cents) per share, payable on or about February 28.

 

GONGBEI EXPANSION TO BE FINISHED SOON Macau Business

According to the mayor of Zhuhai, He Ningka, the Gongbei border checkpoint expansion could be ready in a few months.  The expansion will almost double the Gongbei checkpoint’s capacity.  It currently handles 260,000 to 300,000 travelers a day, but in the future it will be able to accommodate up to 500,000 crossings. The Gongbei expansion will cost RMB400 million (MOP513 million).

 

The Barrier Gate, its counterpart in Macau, through which travelers must pass before or after Gongbei, can already handle up to 500,000 people per day. 

 

EMPLOYMENT SURVEY FOR OCTOBER-DECEMBER 2012 DSEC

Macau unemployment rate for October-December held stable at 1.9% in comparison with the previous period (September-November 2012).  Total labor force was 357,000 and the labor force participation rate stood at 72.4%. Total employment reached 350,000, an increase of 500 over the previous period. 



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 80.33%
  • SHORT SIGNALS 78.51%

See and Show

“To see, and to show, is the mission now undertaken.”

-Henry Luce

 

Born in China to missionary parents, Henry Luce went on to graduate from Yale in 1920 and become one of the most influential multi-media content generators in world history.

 

In June of 1944 in Life magazine, Luce declared the following about America: “With the establishment of a firm lodgment on the continent, we are now the most powerful nation on earth.” (The Last Lion, page 847)

 

That’s one way to get Americans to like you. Another is calling it like it is. Now that central planners of the world have saved us from themselves (again), I wonder how Luce would characterize the new world order today.

 

Back to the Global Macro Grind

 

If there was another Luce born in China in the 21st century, she probably wouldn’t be able to publish what she really thinks about China’s role as a burgeoning super-power anyway. Power and influence have some ugly disclosures.

 

This morning China’s power-center is ticked-off (expressing it in their state controlled media) because the Japanese are adding 287 people to their military. That’s not a typo, 287. Since Japan’s armed forces number north of 225,000, what’s the point?

 

The point is that we are in a Currency War, and the Japanese continue to tick just about everyone from South Korea to China off. This isn’t going to end any time soon. Neither will the longstanding cultural differences between Japan and China. If we are right on how it ends for the currency debaucherers in Japan, the Chinese won’t be there to bail them out like they did Europe.

 

Last week, in what was nothing short of another fantastic one for US Equities (SP500 and Russell2000 up another +1.1% and +1.5% to fresh YTD highs, respectively), there were 3 major divergences in Global Equities:

  1. South Korea = KOSPI -2.1% (breaking TRADE and TREND support)
  2. Brazil = Bovespa -1.3% (holding TRADE and TREND support)
  3. China = Shanghai Composite -1.1% (holding TRADE and TREND support)

Now, when a market price snaps TRADE and TREND support in our model, we don’t buy-the-the-damn-dip. We wait and watch. When a market price holds TRADE/TREND support, we like buying those instead.

 

If you bought China on Friday (we’re long Taiwan via EWT), nice job. This morning, Chinese stocks ripped a fresh new YTD high, closing up another +2.4% at 2364 in Shanghai. That’s what bull markets do – they correct and climb.

 

South Korea’s stock market didn’t do that however. The KOSPI saw follow through selling overnight, down another -0.36% to immediate-term TRADE oversold within its freshly established bearish intermediate-term TREND (1961 = resistance).

 

Since the KOSPI is an important leading indicator in our multi-factor Global Macro model, what is this signal telling us?

 

In any risk management model with Chaos Theory at its core, the 1st answer to an early signal is ‘I don’t know.’ That might not sound as smart as someone who allegedly knows something about everything, but over the years the limits of my thick hockey skull remain readily apparent – so I’ll stick with Embracing Uncertainty.

 

The other big question you should be asking yourself is could we see a 6% handle on the US unemployment rate in 2013?

 

Remember, expectations of the Fed getting out of the way matter more than them actually doing so. Looking at this week’s Macro Catalyst Calendar, there will be plenty of data to consider on that front:

  1. Monday – Pending Home Sales and Durable Goods are both released for the USA
  2. Tuesday – Case Shiller Home Prices and US Consumer Confidence
  3. Wednesday – PMI (JAN), Q412 GDP, and the Fed’s decision/commentary on rates
  4. Thursday – US weekly Jobless Claims (and month end)
  5. Friday – US Employment Report (JAN) and the ISM report for January

And, as usual, the market has already front-run some of these considerations via its own expectations:

  1. US Treasury Bonds (10yr Yield) continued lower again last week, with the 10yr rising to 1.95% from 1.84%
  2. Gold continued lower last week, closing down another -1.7% in a broadly bullish Global Equity tape
  3. CRB Commodities Index continued to make a series of lower-highs, closing down -0.6% last week

Now I know some people are calling for both epic levels of inflation and the end of the world – but the good news is that we have neither of those two things, yet. Nor do we expect them before you have to report results to your investors at month-end.

 

What we have so far (and for the last 2 months really) is a Growth Scare, and it’s to the upside. How else can you explain another all-time high in the Russell2000 of 905 (all-time is a long time) and confirmed 5-yr lows in US Equity Volatility (VIX)?

 

To see and show our Top 3 Global Macro Themes (#GrowthStabilizing, #HousingsHammer, and #QuadrillYen) as they are happening helps illustrate that Global Macro A) works both ways and B) is interconnected. This is our mission, undertaken.

 

Our immediate-term Risk Ranges for Gold, Oil (Brent), US Dollar, EUR/USD, USD/YEN, UST 10yr Yield, and the SP500 are now $1, $111.75-114.28, $79.62-80.14, $1.32-1.34, 89.55-91.11, 1.88-1.98%, and 1, respectively.

 

Best of luck out there this week,

KM

 

Keith R. McCullough
Chief Executive Officer

 

See and Show - Chart of the Day

 

See and Show - Virtual Portfolio


Simpletons & Dunderheads

This note was originally published at 8am on January 14, 2013 for Hedgeye subscribers.

“Our affairs are not conducted entirely by simpletons and dunderheads.”

-Winston Churchill

 

Per the Urban Dictionary, a “dunderhead” is, amongst other things, an idiot, dunce, numskull, or bonehead. With public opinion of him falling in early 1942, Churchill was irritated. Losing the war was one thing; being chastised by Ivory Tower academics was entirely another.

 

Singapore fell on February 15 (1942). It was death foretold – too few defenses, a weak commanding general, a demoralized garrison, and too savvy an enemy … Churchill had no need to resort to hyperbole… he informed Roosevelt that the fall of Singapore was the greatest disaster in our history.” (The Last Lion, page 484-485)

 

While the 113th United States Congress has yet to prove that it is the worst in free-market history (the 112th is a tough compare), it still has time. I’m just elated that these economic dunderheads of the #PoliticalClass have been out of this market’s way for the last few weeks. Geithner leaving and Congress being out of the way definitely helped the Russell2000 close last week at an all-time high.

 

Back to the Global Macro Grind

 

This is the first Global Macro morning that I can remember where the names Boehner and Reid aren’t in the Bloomberg’s “Most Read.” Today it’s all about Chinese growth (acceleration) and Japanese currency (debauchery).

 

Neither of those macro stories are new. That’s the point about consensus macro – by the time it becomes this newsy, the big moves in the related markets have already occurred.

 

From their intermediate-term troughs/peaks in November 2012 (as global growth stopped slowing):

  1. Chinese stocks (Shanghai Composite) are up +18%
  2. Japanese Yen (vs the US Dollar) is down -11%

Especially in the context of the SP500 and US Dollar Index being +8.7% and -2.1% from their respective November 2012 lows/highs, respectively, those are massive moves in Asian markets.

 

The move in Japanese Equities has been even more powerful than China’s. Since November 13th, the Nikkei225 is +25%! Krugman/Bernanke Playbook 101: burn your currency at the stake, admit nothing about it publicly, and point at the daily closing price of stocks.

 

How will what Jim Rickards coined the Currency War end? I don’t know. But it probably won’t end well. So, as you ride the bull of higher-lows and higher-highs in stocks out there, just keep that in mind. Remember, in Chaos Theory, our daily objective is to embrace uncertainty.

 

CONSENSUS WATCH: On Friday I highlighted the massive shift from bearish to bullish we have seen in US Equity market sentiment in the last two months. Today, it’s worth reminding you that the sentiment in Commodities has done almost the exact opposite.

 

Last week’s CFTC (futures and options) net long commodities figures revealed the following realities:

  1. Total net long positions down another -5.4% wk-over-wk to 654,443 contracts (down -51% from all-time highs in SEP 2012)
  2. Gold’s net long position dropped another -13% wk-over-wk to 92,115 (lowest level since August 2012)
  3. Corn’s net long positioned dropped another -15% wk-over-wk to 115,113 (lowest since June 2012)

In other words, when it comes to risk managing the Commodities Bubble, you are best served doing the exact opposite of what the hedge fund community is doing. This may be the most glaring intermediate-term example of BUY HIGH, SELL LOW I have seen in a decade.

 

Both Gold and Corn prices went up on that last week. What better bull case do you need other than consensus dunderheads who call themselves “smart” getting bearish? While we have deflated the inflation in commodity prices (CRB Index -8% from its SEP 2012 lower long-term high) for the last 3 months, that certainly doesn’t mean they can’t re-flate.

 

With the US Dollar Down hard last week (-1.2%), here’s where the beta-juice was to Down Dollar:

  1. Platinum +4.8%
  2. Corn +4.2%
  3. Coffee +4.1% 

At the same time, we saw some of the widest global equity market divergences (by geographic region) that we have seen in some time. Europe saw Germany down -0.8% on the week, but Italy was +3.2%. In Asia, Vietnam was +8.6% versus Indonesia -2.4%.

 

What do we simpletons do with all of this? We stay with the research and risk management process; we do our best to incorporate all of the real-time economic data and price changes (across multiple factors and durations) in our models;  and we keep moving.

 

Our immediate-term Risk Ranges for Gold, Oil (Brent), Copper, US Dollar, EUR/USD, UST10yr Yield, and the SP500 are now $1642-1671, $109.98-111.48, 3.64-3.75, $79.39-79.98, $1.31-1.33, 1.84-1.97%, and 1459-1485, respectively.

 

Best of luck out there this week,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Simpletons & Dunderheads - Chart of the Day

 

Simpletons & Dunderheads - Virtual Portfolio


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