Rob Campagnino (Consumer Staples):
Kevin Kaiser (Energy):
Brian McGough (Retail):
Todd Jordan (GLL):
The Macau Metro Monitor, January 29, 2013
ACS: HOCHTIEF STARTS WORK ON ITS BIGGEST PROJECT IN ASIA Eleconomista.es, Macau Business
Hochtief has started construction of Wynn Cotai, according to the company controlled by ACS. This is the largest project that the German construction group has achieved so far in Asia. The company has been awarded the work and implemented through its subsidiary Leighton Asia.
The project is set to be completed in 2016. The contract value is AUD$222 million (MOP1.85 billion), Bloomberg reports today. Among the Macau projects in which Leighton has been involved are Wynn Macau, Wynn Encore, Macau Fisherman’s Wharf and City of Dreams.
NO REQUEST FROM SANDS TO SET UP NEW TABLES: GOVT Macau Business
The head of the Gaming Inspection and Coordination Bureau, Manuel Joaquim das Neves, says he has not yet received any request from Sands China to set up 200 additional tables. Neves said, “The operator has to inform us where it is going to put the tables and when the tables will open. Afterwards, we will conduct an inspection.”
Yesterday, Sands CEO Edward Tracy said some of the new tables would be made available in time for the Lunar New Year holiday, which starts on February 10.
THE PARISIAN BUDGET UP TO US$2.8 BILLION: CEO Macau Business
The cost of the French-themed casino resort The Parisian, the next Sands China Ltd project planned for Cotai Parcel 3, is likely to be at least US$2.8 billion (MOP22.4 billion), Sands CEO Edward Tracy said yesterday. This figure is up from the September estimate of US$2.5 billion given by Michael Leven, the president and COO of LVS.
He added that construction on The Parisian is likely to start in the second quarter of this year, and would take about 36 months to construct and complete.
In the meantime, Tracy also said that LVS has hired three former FBI agents to strengthen its fight against money-laundering, one of them has already been working in Macau for about one month.
Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.
“The world is not the way they tell you it is.”
That’s easily one of the top opening sentences to any book in my library (The Money Game, by George Goodman). And oh how true does it ring about the game so far in 2013.
You see, so far 2013 is all about you. “You – your identity, anxiety, and money” – that’s what Goodman (under the pseudonym of “Adam Smith”) titled Part I of Chapter 1 in 1968. So what I am about to write this morning is not new. It’s just put another way.
“The successful investors I know do not hold to the way it ought to be, they simply go with what is.” (page 19)
Back to the Global Macro Grind…
Now maybe people write these sorts of things at all-time highs in markets (the Russell2000 made another all-time closing high yesterday at 906 = +6.7% YTD). Maybe they write them at the lows too. I’d just as soon as think about them all of the time.
One way to contextualize behavior is by using math across multiple-factors and durations. Internally (and at hedge funds I have built and traded portfolios for), we call them STYLE FACTORS.
If you punch in style factors on either Amazon or Wikipedia, you’ll get a promo for the “Otterbox Commuter Series Hybrid Case” (iPhone4) or something about the “Seven Factors of Enlightenment” (Buddhism). So, while I think most quantitatively oriented risk management platforms consider these factors standard, they are far from Jeremy Siegel’s view of portfolio theory.
Style Factors are what are moving your portfolio now – here are some big ones that are outperforming YTD:
I can also slice and dice your portfolio across geographic, sector, and size (market cap) factors. And I do for our clients who ask us for this custom advisory and risk management work, but for your general reading purposes this morning I guess the bottom line is to take my word for it – it works.
Why does it work? Particularly when you overlay it with a multi-duration (TRADE/TREND/TAIL) price/volume/volatility model, it basically tells you what the machines are chasing. If you can front-run the machines, you are one step ahead of your competition. And that may not sound like what we all learned at school, but it’s the way that today’s game is.
If you own something like Netflix (NFLX):
Combined with a little storytelling from the management team and a catalyst on top (the recent quarter and conference call), that makes for a tasty YTD return. It also drives the fundamentalist who thinks the stock is “expensive” right nuts.
“If thinking of this fascinating, complex, n-person process as a Game helps, then perhaps that is the way we should think. It helps rid us of the compulsions of theology.” (George Goodman)
In other words, don’t play the game you want – play the game that’s in front of you. Modern day math, machines, and real-time signals help augment your go-to-moves. They also help you realize when it’s a good time to just get out of the way.
Yesterday was the 1st down day in the SP500 in the last 8 trading days. Within minutes of the market going down, my contra-stream (I built it on Twitter for my own behavioral observation) lit up like we were about to see the apocalypse. *Note: we didn’t.
I’m as leery about buying high as anyone, but through making many mistakes I’ve taught myself to use the risk of the range (within the context of all aforementioned factors) as my guide instead of my gut.
For the SP500 itself, here are some important Risk Ranges to contextualize and consider:
In other words, go with what is, until it isn’t. The high-probability hand you keep playing is that US stocks make higher-highs as equity volatility makes lower-lows. If and when that changes (it will, and maybe abruptly), Mr. Market will let you know.
Our immediate-term Risk Ranges for Gold, Oil (Brent), US Dollar, USD/YEN, UST 10yr yield, VIX, and the SP500 are now $1, $112.28-114.62, $79.61-80.14, 89.69-91.14, 1.89-2.01%, 12.04-14.36, and 1, respectively.
Best of luck out there today,
Keith R. McCullough
Chief Executive Officer
This note was originally published at 8am on January 15, 2013 for Hedgeye subscribers.
“We are what we repeatedly do. Excellence, then, is not an act, but a habit.”
American, European, and Japanese governments have a habit – it’s called tax-payer funded spending. In order to finance this habit, they A) tax you and B) issue debt. Try part B) at home - levering yourself up to pay your political bills typically doesn’t end well.
I know. I know. ‘This time is different’, ‘print the damn coin’, ‘America voted for this’ – blah, blah, blah. This is what Big Government Interventionists of the 21st century repeatedly do. Obama, sadly, is no different than Bush on this score. They both needed to perpetuate a class struggle in order to sell it to their respective Keynesian economic constituencies.
My quibble isn’t political; politics are now about economics. The French have been arguing about this since at least the early 19th century. As one of the 1st economic historians, Adolphe Blanqui, wrote in 1837: “In all the revolutions, there have been but two parties confronting each other; that of the people who wish to live by their own labor, and that of those who would live by the labor of others.”
Back To The Global Macro Grind…
No matter what your politics, you do have to make real-time decisions out there. What else are you supposed to do when politicians are changing the rules of the game on the fly? For the last decade, one of the main risks to growth has been government.
The outgoing Timmy Geithner says the timing of the #DebtCeiling D-Day is “mid-February.” At the latest, my research team has it in early March (coincidentally, March 1st is also when sequester kicks in). Now that it’s mid-January, that means this game of risk is on.
A game? Sadly, yes - a high-stakes game of political chess (they are playing with your money) that will likely require you to do up your chinstrap. Buying stocks in mid-January is hardly as easy as it was buying them in mid-November. Everything in markets has a time and price.
How is risk priced today versus 2-months ago (November 15th)?
Back then (seems like forever ago you could have been long, no?):
Those were some pretty tough times! And today what?
And on and on and on the cycle of Big Government Interventionist policy goes….
But this should surprise no one at this point. This is what Keynesian Policy makers repeatedly do:
A) They Shorten Economic Cycles
B) They Amplify Market Volatility
Can you imagine what The Rest of Us will do if the #PoliticalClass just top ticked another market move at an all-time high in the Russell2000? What will The People do if their money manager jammed them into equities at the top of the “fund flows” news cycle?
On a cheerier note, Global Growth hasn’t slowed (yet) and by the looks of Lennar’s (LEN) backlog numbers this morning, our bullish call on US Housing remains intact. Risk never stops moving – it moves both ways.
We’ll corner all angles of this real-time risk debate on our Q1 2013 Global Macro Themes call today at 1PM (email Sales@Hedgeye.com if you’d like to join). Our Q113 Themes are:
The first two themes won’t sound new to any of you who read what we write every day. Our process is dynamic – as market prices, economic data, and risk management signals change, we try to. It’s never easy – but neither is excellence.
Our immediate-term Risk Ranges for Gold, Oil (Brent), Corn, US Dollar, EUR/USD, USD/YEN, UST 10yr Yield, and the SP500 are now $1644-1689 (covered our GLD short yesterday during the Obama speech), $110.32-112.82 (bullish breakout in Oil), $7.08-7.26 (shorted CORN yesterday), $79.29-79.98, $1.31-1.34, $87.43-89.41 (Yen oversold yesterday), 1.84-1.94%, and 1454-1475, respectively.
Best of luck out there today,
Keith R. McCullough
Chief Executive Officer
Get The Macro Show and the Early Look now for only $29.95/month – a savings of 57% – with the Hedgeye Student Discount! In addition to those daily macro insights, you'll receive exclusive content tailor-made to augment what you learn in the classroom. Must be a current college or university student to qualify.