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THE M3: JUNKET OVERSIGHT; PHILIPPINE CASINOS EXCLUSION FROM LAUNDERING LAW

The Macau Metro Monitor, February 7, 2013

 

 

GOV'T STRENGTHENS OVERSIGHT OF JUNKETS Macau Daily Times

Secretary Tam said that the government is stepping up its inspection on the gaming industry and imposing stricter examination on the backgrounds of the casino junkets in order to “purify” the industry.  “It’s been the government’s established policy to maintain a stable and healthy development of the gaming industry,” Tam said, “should we find any illegal activities in the sector, we won’t turn a blind eye to it, nor take no action against such activities.  The junket system has been operating in Macau for many years, during which we have been optimizing the system with all kinds of adjustments, and reinforcing our supervision of the system. Junket operators need to register with the authority and get a license before they can do business here and we’re planning to exercise stricter examination of their registration. The government is reviewing its current practice in this respect in order to have a closer check on their qualifications, particularly whether or not they have criminal records."

 

CASINOS GET A PASS IN LAUNDERING LAW Inquirer

Philippine casinos were excluded from the amendments passed on stronger money-laundering controls. Senator Teofisto Guingona said casinos and Internet gaming were excluded at the request of the House and of the state regulator Philippine Amusement and Gaming Corp.  “(They) excluded casinos from coverage because (House members) warned it would deter investors. That’s the number one reason. And number two, Pagcor,” Guingona said.

 

The Senate’s passage of the law came five weeks before the opening of Entertainment City, a $4 billion Manila casino complex.


 

 



Skinning Bears

This note was originally published at 8am on January 24, 2013 for Hedgeye subscribers.

“The skin of the bear must not be distributed until the bear has been killed.”

-Sir Winston Churchill

 

That’s what Churchill said after the Allies invaded Italy at Salerno in late 1943. If you’ve ever thought about trying to skin a bear yourself, locals from my neck of the woods would suggest you make sure it’s dead first too.

 

Risk management lessons in markets and in life tend to rhyme – if you practice common sense, that is. Some people get all religious about this stuff. Others practice some “technical” form of voodoo. I’m more into Churchillian-style strategic thinking myself.

 

During WWII, Churchill’s strategy was “to assign a larger importance to opportunism and improvisation, seeking rather to live and conquer in accordance with the unfolding event than to aspire to dominate often by fundamental decisions.” (The Last Lion, page 708)

 

Back to the Global Macro Grind

 

If your risk management strategy is to A) Embrace Uncertainty and B) react to changing probabilities based on time and price, you’ll be satisfied doing a whole lot of nothing sometimes. Waiting and watching is a risk managed choice.

 

That’s what we did heading into Apple’s (AAPL) earnings event. Since we didn’t have any fundamental “edge” on the quarter, and our risk management signal (Bearish Formation, TAIL RISK $561) said to stay away, any other decision would have been a gamble.

 

That doesn’t mean today’s reactions to AAPL (down -8%) or Netflix (up +30%) don’t present opportunities. And that’s the point. The great goals in my life have been scored when preparation meets opportunity. Patience is a virtue.

 

With the SP500 up for 6 consecutive days (up +4.8% YTD and +10.4% from its mid-November 2012 fiscal cliff freak-out closing low), plenty a stock market bear’s bum has been skinned – but has The Bear been killed?

 

If your answer to that is yes, you and I (and the T Bay locals) need to have a little chat about wild animals.

 

To review, there are 2 core components to what we do:

  1. Quantitative Risk Management (Signals, Factoring, etc.)
  2. Fundamental Research

On both, there are a few chinks in the bull’s growth horns this morning.

 

Quant Signals:

  1. KOSPI (-3.3% correction now from its YTD high) broke TRADE line support of 1985
  2. CHINA (Shanghai Comp), down -0.8% overnight, broke its immediate-term TRADE line of 2308
  3. JAPAN (Yen vs USD) failed to overcome 87.71 resistance again and is trading down hard, -1.2%
  4. Implied volatility in both the Yen and Japanese Equities is rising, fast
  5. Overbought signals across European Equities are being confirmed by lower immediate-term highs
  6. CRB Commodities Index failed at its long-term TAIL risk line of 306 (should snap 300 again today)
  7. Gold failed fast at intermediate-term TREND resistance of $1692
  8. Oil remains sticky, testing a TAIL duration breakout in both Brent and WTIC
  9. Copper, immediate-term TRADE overbought at $3.72/lb is making a series of lower long-term highs
  10. SPX overbought at 1496 and VIX oversold at 12.16 are what they are until they aren’t

Fundamental Research:

  1. Spain’s unemployment hits a higher-high at 26.02% (#PoliticalClass gets paid before The People)
  2. Japanese Exports fall another -5.8% y/y in DEC, despite setting their currency on fire!
  3. France printed a nasty Manufacturing PMI report for JAN, 42.9 (vs 44.9 in DEC)

Of course there are bullish Fundamental Research data points in this morning’s macro grind as well (imagine there wasn’t?). Chinese PMI of 51.9 in JAN was a little better than 51.5 in DEC; Germany’s Manufacturing PMI for JAN came in at 49.8 vs 46 last month, and the US economic data that’s pending (jobless claims today; New Home Sales tomorrow) continues to be bullish.

 

There’s always bulls and bears somewhere. Our daily service isn’t to be either – it’s to be objective and opportunistic when risk/reward changes (in any market or security) on the margin.

 

On the margin, was the Russell2000 making a lower-high yesterday a signal or was it noise? How about the US stock market’s breadth (advancers 46% vs decliners 50%) being negative on an up SP500 day? Why was there no volume (down 9% vs my TREND avg)? Channeling my inner-Churchill, inquiring risk management minds should never, ever, ever, give up asking questions.

 

Our immediate-term Risk Ranges for Gold, Oil (Brent), Copper, US Dollar, USD/YEN, UST 10yr Yield, AAPL, and the SP500 are now $1662-1692, $110.23-112.27, $3.65-3.71 $79.79-80.14 (USD bullish, Yen bearish), 80.71-90.41, 1.81-1.87%, $464-506 (Apple = immediate-term TRADE oversold in the post), and 1479-1496, respectively.

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Skinning Bears - Chart of the Day

 

Skinning Bears - Virtual Portfolio


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This indispensable trading tool is based on a risk management signaling process Hedgeye CEO Keith McCullough developed during his years as a hedge fund manager and continues to refine. Nearly every trading day, you’ll receive Keith’s latest signals - buy, sell, short or cover.

TRADE OF THE DAY: DAL

Today we shorted Delta Air Lines (DAL) at $14.38 a share at 3:18 PM EDT in our Real-Time Alerts. Airline bulls are all looking for the same catalyst that A) may not happen (US Air deal) and B) won't change Hedgeye Industrials Sector Head Van Sciver's Industry call that this time it's not different. Shorting Delta at immediate-term TRADE overbought with oil down.

 

TRADE OF THE DAY: DAL - TOTD


IDEA ALERT: BUYING MPEL

Takeaway: Long MPEL for a trade on today's weakness

Keith added MPEL to our list of Real Time Positions at $19.40.  The TRADE risk range is $19.21-$21.31 with TREND support at $16.85.

 

 

An MPEL selloff on today's beat on earnings wasn't surprising.  Investors were already already expecting a beat and the London Times story on a junket crackdown didn't help.  However, a 6% sell-off looks overdone and we expect the sell side to be defending the stock and downplaying the Times article tomorrow.  We actually think the article has some teeth but we won't find out until after Chinese New Year (2/10/13) if that is the case.  In the meantime, we expect the stock to recover fairly quickly.

 

IDEA ALERT: BUYING MPEL - mpel2


Expert Call; An Insider's Look into Pricing and the Restaurant Industry

Expert Call; An Insider's Look into Pricing and the Restaurant Industry - restaurant call pricing

 

We will be hosting an expert call titled "An Insider's Look into Pricing and the Restaurant Industry". The call, featuring Leslie Kerr of Intellaprice, will offer expert analysis on current industry trends as well as an opportunity to explore pricing power as we move through Q1 2013.  

 

OBJECTIVE:

  • The aim of this call is for us and our clients to develop a better understanding of companies' view of pricing as a strategy to absorb inflation in operating expenses over the next couple of years. 

 

The call will be held Wednesday, February 20th at 1:00pm EST. Please dial in 5-10 minutes prior to the 1:00pm EST start time using the number provided below. A link to the presentation will be distributed before the call, if you have any further questions email .

  • Toll Free Number:
  • Direct Dial Number:
  • Conference Code: 946362#

 

KEY TOPICS WILL INCLUDE:

  • How brands define pricing power
  • Methods companies typically use to measure traffic sensitivity to pricing
  • Macroeconomic factors that are worth monitoring to ascertain pricing power of the industry or a given company
  • Personnel within a restaurant company that are typically charged with making pricing decisions
  • The pitfalls of using test markets to measure pricing power
  • Any standard calculations that our expert or companies use in measuring pricing power

 

ABOUT LESLIE KERR

  • President & founder of Intellaprice, a pricing advisory firm for the restaurant industry
  • Built the pricing function for Dunkin' Donuts, formerly Allied Domecq Retailing US
  • While at Allied Domecq, she also held roles in strategy, finance, and brand management for Baskin-Robbins
  • Previously held roles in operations at PepsiCo Restaurant Services Group and in finance for Disney Consumer Products
  • Worked with Customer Relationship Management at Berkeley Enterprise Partners
  • Gained pricing and research experience at Coopers and Lybrand's Compensation Consulting practice
  • Earned her bachelor's degree in marketing and entrepreneurial management from the University of Pennsylvania's Wharton School
  • Earned her MBA at Duke University's Fuqua School of Business

 

Howard Penney

Managing Director

 

Rory Green

Senior Analyst

 


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

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