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THE M3: CHANGI EXPANSION

The Macau Metro Monitor, February 11, 2013

 

 

SINGAPORE AIRPORT TO GET BILLION-DOLLAR TERMINAL BOOST Reuters

Singapore's Changi Airport said it will boost passenger handling capacity by around 25% with a fourth terminal that will cost an estimated S$1.28 billion ($1.03 billion).  Completion date is expected in 2017.



MACAU: JANUARY PROPERTY DETAIL

As you already know, Macau GGR grew 7% YoY to HK$26.1 billion or US$3.364 billion.  We’ve now got the property detail and the Mass/VIP mix.  Mass once again drove most of the YoY gain and although slower than the last 4 months, still grew 29%.  December’s 16% VIP revenue growth may have been an anomaly as January VIP was almost exactly flat YoY.  VIP hold was slightly lower than last year but still slightly higher than normal.  VIP volume eked out a 2% gain.  Surprisingly, slot revenue grew only 1%, the slowest pace in 3 ½ years.  Remember that the Chinese New Year celebration occurred in January of last year but in February of this year.

 

 

Here are some individual company commentary:

 

Sands China (LVS)

  • For the first time in 6 months, LVS didn’t lead the market in growth as MPEL was the top dog.  LVS did manage YoY GGR growth of 18%, good for 2nd place.
  • Mass revenue grew 55%, which was the highest in the market
  • VIP hold was modestly below normal and last year was modestly above normal
  • Market share dipped to its lowest level since September 2012 due in part to lower hold

Wynn

  • Wynn GGR fell for the 4th consecutive month, down 4% YoY
  • VIP hold Wynn was slightly above normal but well below last year
  • Wynn’s Mass business did grow slightly YoY but at a rate (+5%) that was the slowest in the market
  • VIP volume fell a whopping 15%
  • Market share grew sequentially but was in-line with recent trend

MPEL

  • Another strong month for MPEL, leading the market with 20% YoY GGR growth
  • However, Mass grew “only” 20%, trailing the market
  • VIP hold was a little above normal but in-line with the prior year
  • VIP volume was very strong with market leading 24% YoY growth
  • Market share was good driven by VIP – Mass share was disappointing 

Galaxy

  • Galaxy grew in-line with the market but better in Mass and worse in VIP
  • Hold was modestly above normal and above last year
  • Market share of 18.6% was solid and sequentially better than the last few months

MGM

  • Tough month for MGM due somewhat to low hold as Mass revenue growth was in-line with the market
  • VIP hold % was well below normal (last year was also well above normal)
  • VIP volume was up a solid 9% although some of that may have been induced by players winning at a better rate
  • Market share dipped 170bps sequentially (high hold to low hold) and Mass share was the lowest in almost a year

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See and Show

This note was originally published at 8am on January 28, 2013 for Hedgeye subscribers.

“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 $1654-1678, $111.75-114.28, $79.62-80.14, $1.32-1.34, 89.55-91.11, 1.88-1.98%, and 1485-1508, 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



Dangerous Theories

“For a theory is a very dangerous thing to have.”

-Nassim Taleb

 

I just got back from an island in the Bahamas and I’m flying to London this morning. As a result, February will be a very productive month of reading. I just finished grinding though both The Last Lion and Antifragility. I’m digging into Ike’s Bluff next.

 

The problem with self-education is that the more you read, the less you know. This helps contextualize how clueless the people who are trying to centrally plan your life actually are. Particularly when it comes to economic policies, I agree with Taleb that their “theories are superfragile.”

 

He also goes on (and on and on) to differentiate between social and hard sciences: “Physics is privileged; it is the exception, which makes its imitation by other disciplines similar to attempts to make a whale fly like an eagle.” (Antifragility, pg 116)

 

Back to the Global Macro Grind

 

After closing up for the 6th consecutive week, the US stock market is flying like something – and it’s not the London Whale. On almost no volume on Friday (down -21% from my YTD average for market up days), the Russell2000 made yet another all-time high.

 

As we like to say at Hedgeye, all-time is a long time… but now we’ve been writing about all-time for a pretty long time too. For perma-bears, this has to be leaving a mark. Last week’s II Bull/Bear Sentiment Survey saw Bears capitulate to a fresh new YTD low of 21.1%.

 

Other than playing with my kids in the Bahamian sun, what did I like about last week?

  1. STRONG DOLLAR – the US Dollar moved back into a Bullish Formation, closing up +1.4% wk-over-wk at $80.25
  2. DEFLATING THE INFLATION – the CRB Index (19 commodities) closed down another -1.3% on the week at 301
  3. I discovered a tasty new beach beer, Kalik Light

I know some of our competitors keep talking about the risk of raging inflation – but that’s a Dangerous Theory to have if the US Dollar continues to make a series of long-term (40 year) higher-lows.

 

We’re not theorizing that Bernanke’s Bubbles (Commodities) will continue to pop from their all-time highs (2008-2012). They are already popping. Oil topped in 2008; Gold and the CRB Index stopped going up in 2011; and Food Prices put in their all-time highs in 2012.

 

If your theory was that the Fed would print to infinity and beyond and you bought Gold, Silver, etc. on that in 2008-2009, great call. But what happens to your theory if employment and housing #GrowthStabilizes in 2012-2013 and the Fed gets out of the way?

 

What didn’t I like about last week?

  1. TREASURIES – US Treasury Yields stopped rising (10yr yield down 6bps wk-over-wk to 1.95%)
  2. YIELD SPREAD – 10yr yield minus 2yr yield stopped expanding (down 5bps wk-over-wk to +170bps wide)
  3. GLOBAL EQUITIES – both European and Emerging Market stocks closed down on the week

Since everything that matters in our macro model happens on the margin, what we call negative divergences (they do bad things when the US stock market headlines are doing good things) really matter.

 

Some clean-cut negative divergences vs the SP500 closing at its YTD high (1517) were as follows:

  1. Friday’s highs came on down volume (you want expanding volume on the way up, not flailing volume)
  2. Friday’s highs came on an immediate-term TRADE signal in the VIX for a higher YTD low of 12.42 (you want lower-lows)
  3. Global Equities were down wk-over-wk = Emerging Markets -1.1%, MSCI World Index -0.4%, EuroStoxx600 -0.3%

Then, in terms of positive divergences (US Equities), some of the Bullish Style Factors we have been bulled up about got as extended as they have been versus the SP500’s +6.4% YTD return:

  1. High Short Interest Stocks = +9.2% YTD
  2. High Beta Stocks = +9.2% YTD
  3. Top Earnings Growth Stocks (top 25%) = +9.1% YTD

Since A) I have extension (immediate-term TRADE overbought) in our most bullish factors and B) I’ve finally been issued some fairly broad based negative divergences across asset classes, my decision late last week was to take down Global Equity exposure and raise Cash.

 

That’s not theorizing. That’s doing it in real-time and holding ourselves accountable to explaining the decisions we make. I guess that probably makes us dangerous too. But that’s just a theory.

 

Our immediate-term Risk Ranges for Gold, Oil (Brent), CRB Index, US Dollar, USD/YEN, UST 10yr Yield, and the SP500 are now $1, $116.38-118.83, 299-303, $79.79-80.39, 92.67-94.41, 1.93-2.01%, and 1, respectively.

 

Best of luck out there this week,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Dangerous Theories - Chart of the Day

 

Dangerous Theories - Virtual Portfolio


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