Todd Jordan (GLL):
Howard Penney (Restaurants):
We are hosting a call today at 1pm ET, titled, “An Insider’s Look Into Pricing And The Restaurant Industry”. Please find the materials, and the dialing instructions, for the call below.
Please CLICK HERE to access the slides for today’s call.
Participant Dialing Instructions:
TODAY’S S&P 500 SET-UP – February 20, 2013
As we look at today's setup for the S&P 500, the range is 15 points or 0.85% downside to 1518 and 0.13% upside to 1533.
SECTOR AND GLOBAL PERFORMANCE
CREDIT/ECONOMIC MARKET LOOK:
MACRO DATA POINTS (Bloomberg Estimates):
WHAT TO WATCH
COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)
The Hedgeye Macro Team
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The Macau Metro Monitor, February 20, 2013
GAMING REVENUE DOWN 3.9% IN CNY: REPORT Macau Business
Macau casinos recorded a 3.9% drop in gross gaming revenue during the Lunar New Year holidays in comparison with the same festive period one year before, Lusa news agency reports. Quoting unidentified sources in the gaming industry, Lusa reports that during the first seven days of the Year of the Snake (February 10 to February 16), Macau casinos recorded gross gaming revenue of MOP7.2 billion (US$900 million), down from the MOP7.5 billion recorded in the first seven days of the Year of the Dragon.
Gross gaming revenue dropped despite the city having recorded 937,000 visitor arrivals from February 9 to February 15 (including non-resident workers and students), marking a growth of 15.4% compared with last year’s holiday period, according to the Macau Government Tourist Office. Among those, close to 630,000 visitors came from the mainland, marking an increase of 25.5%.
MELCO CROWN'S PHILIPPINE UNIT PREPARES SHARE SALE Macau Business
Manila-listed Manchester International Holdings Unlimited Corp is raising its capital stock to P5.9 billion (US$1.16 billion) from P900 million, with a unit of MPEL subscribing to 2.85 billion shares or 56.9% out of the total increase. This is part of the move for Melco Crown to take control of the firm, as a vehicle for a backdoor listing in Manila and also as a vehicle for its planned investment in Belle Grande Manila Bay.
Manchester International Holdings has also announced it plans to further sell up to 1.2 billion shares. The company will also be renamed Melco Crown (Philippines) Resorts Corp.
MONTHLY BREAKDOWN OF PASSENGER MOVEMENTS Changi Airport Group
Singapore's Changi airport passengers rose 1.9% YoY in January to 4,325,530. The slower growth reflects the difficult comparisons from last year's Chinese New Year which occurred in January.
HAINAN CASINO BAR SHUT DOWN: REPORT Macau Business
“We have shut the entertainment bar. We are investigating it and, so far, it looks like they have violated their operating regulations,” Chen Guangfa, the deputy director of the Sanya Culture and Sports Bureau, told Reuters. “When we approved it, the regulations and the certificate said its operations would be entertainment in nature, but inside the bar there are some games, and they’ve gone beyond the scope of the regulations, so we closed it down,” the official said, without disclosing further details. The local police are now conducting an investigation.
The casino bar had 50 gaming tables with minimum bets from RMB20 (MOP26) to RMB100,000. The punters at the casino bar played with cash but could not win it back; they could only get points that could be used to pay for accommodation and luxury goods on sale at the resort.
“Let’s not make our mistakes in a hurry.”
-Dwight D. Eisenhower
The 34th President of the United States was a process guy. He was also a world class Risk Manager. Getting the US out of Korea, averting the French invitation to Vietnam (1953), and avoiding the ongoing threat of engaging China or Russia in nuclear war is his legacy now. If you are a Portfolio Manager in this game, your legacy is your track record – and it’ll be the mistakes you don’t make that matter most.
But what kind of team culture should you foster to ensure you aren’t missing something? Do you accept the blame for your team’s mistakes, or do you point fingers? Is there an open forum for people who report to you to disagree with your position? If they do so and have sloppy reasoning, do they expect to be taken to task in front of their peers in kind?
I’m an athlete who believes in transparency, accountability, and trust. I have biases. But they are based on experience. There are a lot of great players – and even more good teams. But only few Championship Teams can repeat. To do that, your players can’t be scared to make a mistake. At the same time, they have to be disciplined so that their mistakes don’t blow up everything the team has worked for.
Back to the Global Macro Grind…
Particularly when a market is in a Bullish Formation (Bullish on all 3 of our core risk management durations: TRADE, TREND, and TAIL), not getting squeezed (on the short side) can save the team from having a lot of losses.
If you accept that bullish and bearish formations (Gold is in a Bearish Formation, so is the Japanese Yen) can get immediate-term TRADE overbought and oversold, at a bare minimum you won’t be making the same mistakes over and over again in a hurry. You’ll wait.
It’s taken me at least 13-15 years to learn this the hard way. Getting squeezed is part of a short seller’s life. And guess what, I still have to re-learn the same lesson, weekly. This game isn’t easy. That’s why I try my best to make decisions on the signal now, instead of the noise.
To simplify what I mean by making high-probability decisions:
Or, as President Eisenhower used to tell his brother Milton, “Never get in a pissing match with the skunk.” (Ike’s Bluff, pg 57)
Yes, I am sure there are some really smart people out there who have found a way to not have to deal with process, real-time decision making , etc. But I can almost guarantee you that what they do ends up having a higher realized level of volatility than what we do.
To put some meat on this bone, here are some immediate-term TRADE overbought signals in our models this morning:
First, note that I have no immediate-term TRADE overbought signals to act on in any of our long Asian Equities positions. Singapore (EWS) has immediate-term upside, and so does China (which we bought via CAF on an immediate-term TRADE oversold signal yesterday).
Second, I am agnostic on the direction of the signal. It works the same way for both my longs and shorts. Yes, we like and are long of Fedex (FDX), but A) that’s not new (we bought it when we went bullish on US Equities in late November) and B) what is new is that it gave me its first immediate-term TRADE overbought signal in at least the last few weeks.
Third, using immediate-term TRADE overbought signals is another way to hedge market (beta) risk. So, I can be bullish on US Equities on my intermediate-term TREND duration and A) realize I might get an overbought signal in SPY this morning but B) not force myself to short something consensus like SPY, and stock and sector pick on a better signal instead (shorting XLP and KMB into yesterday’s close).
I am certain that there are better ways to do this – and I assure you that before I retire, I will find better ways. But for now, this is how my team rolls because this process is both repeatable and helping us not hurry mistakes.
Our immediate-term Risk Ranges for Gold, Oil (Brent), US Dollar, USD/YEN, UST 10yr Yield, and the SP500 are now $1 (Gold remains in a Bearish Formation but is immediate-term TRADE oversold), $116.51-118.71, $80.25-80.83, 92.63-94.49, 1.97-2.05% and 1, respectively.
Best of luck out there today,
Keith R. McCullough
Chief Executive Officer
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