prev

STRONG REBOUND WEEK IN MACAU

Macau seems to have bounced back last week following a disappointing 1st half of the month.  This past week posted average daily table revenues of $1.107 billion, up 43% over last year.  Our guess is that hold played at least some role but we have no confirmation of that.  We are upping our full month projection to HK$25.0-25.5 billion, up 6-8% YoY.  While that growth rate is probably disappointing given the favorable calendar shift of Chinese New Year (CNY) into February this year, on the margin, it’s better than the flattish growth expected just one week ago.

 

STRONG REBOUND WEEK IN MACAU - m1

 

Market shares have normalized somewhat with Wynn falling back to Earth and MPEL rebounding from low hold.  With limited rooms MPEL also seemed to have spread some of its VIP and Direct Play business beyond just the CNY period.  Consistent with a trend we foresee for the entire year, Sands China’s share continues to climb.

 

STRONG REBOUND WEEK IN MACAU - m22


Best Ideas Product Launch Part 2

Best Ideas Product Launch Part 2 - BestIdeas part2

 

Hedgeye Risk Management invites you to join us Wednesday, February 27th at 1:00pm EST for our Best Ideas Launch Part 2. This call will be a follow-up to the introductory call of our dynamic Best Ideas Product which was held on February 11th. The new dynamic Best Ideas Product will track, update and notify clients of important changes and additions to the Hedgeye Best Ideas list.

  

On the call we will highlight our highest conviction calls across Macro, Financials, Industrials and Energy, offering at least two high conviction and differentiated investment ideas from each vertical over an intermediate term duration.  

 

     

SPEAKERS WILL INCLUDE:

  • Macro- Daryl Jones
    • Sector Head at Brightpoint Capital. Founded the public investment effort at Onex Corporation, a leading private equity firm. Yale BA and Columbia MBA.
  • Financials- Josh Steiner
    • Part of the #1 ranked Institutional Investor and Greenwich Survey team at Lehman Brothers. Buy-side analyst at Amaranth Group & Millennium Partners.
  • Industrials- Jay Van Sciver
    • Co-Founder/Partner at Bishop & Carroll Capital Partners. 12 years as a financial analyst with buy-side coverage of the Industrials Sector. 
  • Energy- Kevin Kaiser
    • Covers the oil & gas sector with a focus on fundamental research on E&Ps, oilfield services, MLPs and refiners.  Princeton hockey alumnus.


CONTACT

Materials and dial-in information will be distributed the morning of the call. If you have any further questions please email .  


MONDAY MORNING RISK MONITOR: SURPRISINGLY QUIET AHEAD OF SEQUESTRATION

Takeaway: Europe shows very modest deterioration, while the U.S. holds up well. Sequestration's imminent threat seems not to be worrying US investors.

Key Takeaways:

 

* 2-10 Spread – Last week the 2-10 spread widened to 176 bps, 4 bps wider than a week ago. 

 

* Euribor-OIS Spread – The Euribor-OIS spread widened by 1 bps to 13 bps. 

 

* TED Spread Monitor – The TED spread fell 2.7 basis points last week, ending the week at 16.41 bps this week versus last week’s print of 19.11 bps.

 

* ECB Liquidity Recourse to the Deposit Facility – Deposits at the ECB liquidity facility rose 30 billion euros WoW. 

 

* Markit MCDX Index Monitor – Last week spreads widened 2 bps, ending the week at 92 bps versus 90 bps the prior week. 

 

 

Financial Risk Monitor Summary

 • Short-term(WoW): Positive / 5 of 12 improved / 3 out of 12 worsened / 5 of 12 unchanged

 • Intermediate-term(WoW): Positive / 8 of 12 improved / 3 out of 12 worsened / 2 of 12 unchanged

 • Long-term(WoW): Positive / 9 of 12 improved / 1 out of 12 worsened / 3 of 12 unchanged

 

MONDAY MORNING RISK MONITOR: SURPRISINGLY QUIET AHEAD OF SEQUESTRATION - 15

 

1. American Financial CDS -  US financials were, on average, tighter by 2 bps week-over-week. Morgan Stanley posted an 8 bps improvement (to 136 bps) while BAC worsened by 3 bps to 121 bps. Swaps tightened for 20 out of 27 domestic financial institutions.

 

Tightened the most WoW: ACE, MET, MS

Widened the most WoW: AON, MMC, BAC

Tightened the most WoW: RDN, HIG, MET

Widened the most MoM: MMC, AON, SLM

 

MONDAY MORNING RISK MONITOR: SURPRISINGLY QUIET AHEAD OF SEQUESTRATION - 1

 

2. European Financial CDS - The median European financial widened 6 bps WoW, while the worst EU financial was Credit Agricole at +11 bps (to 167 bps). Greek banks were the best performing group on the week.

 

MONDAY MORNING RISK MONITOR: SURPRISINGLY QUIET AHEAD OF SEQUESTRATION - 2

 

3. Asian Financial CDS - Asian banks were mostly tighter WoW with China's Export-Import Bank the worst performer at +6 bps.

 

MONDAY MORNING RISK MONITOR: SURPRISINGLY QUIET AHEAD OF SEQUESTRATION - 17

 

4. European Sovereign CDS – Sovereign swaps, with the exception of a modest widening in Italy, were largely unchanged last week. 

 

MONDAY MORNING RISK MONITOR: SURPRISINGLY QUIET AHEAD OF SEQUESTRATION - 18

 

MONDAY MORNING RISK MONITOR: SURPRISINGLY QUIET AHEAD OF SEQUESTRATION - 3

 

MONDAY MORNING RISK MONITOR: SURPRISINGLY QUIET AHEAD OF SEQUESTRATION - 4

 

5. High Yield (YTM) Monitor – High Yield rates were up nominally last week (+0.5 bps), ending the week at 6.08%.

 

MONDAY MORNING RISK MONITOR: SURPRISINGLY QUIET AHEAD OF SEQUESTRATION - 5

 

6. Leveraged Loan Index Monitor – The Leveraged Loan Index rose 2.2 points last week, ending at 1771.3.

 

MONDAY MORNING RISK MONITOR: SURPRISINGLY QUIET AHEAD OF SEQUESTRATION - 6

 

7. TED Spread Monitor – The TED spread fell 2.7 basis points last week, ending the week at 16.41 bps this week versus last week’s print of 19.11 bps.

 

MONDAY MORNING RISK MONITOR: SURPRISINGLY QUIET AHEAD OF SEQUESTRATION - 7

 

8. Journal of Commerce Commodity Price Index – The JOC index fell -3.7 points, ending the week at 7.47 versus 11.2 the prior week.

 

MONDAY MORNING RISK MONITOR: SURPRISINGLY QUIET AHEAD OF SEQUESTRATION - 8

 

9. Euribor-OIS Spread – The Euribor-OIS spread widened by 1 bps to 13 bps. The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. 

 

MONDAY MORNING RISK MONITOR: SURPRISINGLY QUIET AHEAD OF SEQUESTRATION - 9

 

10. ECB Liquidity Recourse to the Deposit Facility – Deposits at the ECB liquidity facility rose 30 billion euros WoW. The ECB Liquidity Recourse to the Deposit Facility measures banks’ overnight deposits with the ECB.  Taken in conjunction with excess reserves, the ECB deposit facility measures excess liquidity in the Euro banking system.  An increase in this metric shows that banks are borrowing from the ECB.  In other words, the deposit facility measures one element of the ECB response to the crisis.  

 

MONDAY MORNING RISK MONITOR: SURPRISINGLY QUIET AHEAD OF SEQUESTRATION - 10

 

11. Markit MCDX Index Monitor – Last week spreads widened 2 bps, ending the week at 92 bps versus 90 bps the prior week. The Markit MCDX is a measure of municipal credit default swaps. We believe this index is a useful indicator of pressure in state and local governments. Markit publishes index values daily on six 5-year tenor baskets including 50 reference entities each. Each basket includes a diversified pool of revenue and GO bonds from a broad array of states. We track the 16-V1. 

 

MONDAY MORNING RISK MONITOR: SURPRISINGLY QUIET AHEAD OF SEQUESTRATION - 11

 

12. Chinese Steel – Steel prices in China rose 2.0% last week, or 76 yuan/ton, to 3866 yuan/ton. We use Chinese steel rebar prices to gauge Chinese construction activity, and, by extension, the health of the Chinese economy.

 

MONDAY MORNING RISK MONITOR: SURPRISINGLY QUIET AHEAD OF SEQUESTRATION - 12

 

13. 2-10 Spread – Last week the 2-10 spread widened to 176 bps, 4 bps wider than a week ago. We track the 2-10 spread as an indicator of bank margin pressure.

 

MONDAY MORNING RISK MONITOR: SURPRISINGLY QUIET AHEAD OF SEQUESTRATION - 13

 

14. XLF Macro Quantitative Setup – Our Macro team’s quantitative setup in the XLF shows 1.3% upside to TRADE resistance and 1.7% downside to TRADE support.

 

MONDAY MORNING RISK MONITOR: SURPRISINGLY QUIET AHEAD OF SEQUESTRATION - 14

 

Joshua Steiner, CFA


investing ideas

Risk Managed Long Term Investing for Pros

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 HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – February 25, 2013


As we look at today's setup for the S&P 500, the range is 28 points or 0.90% downside to 1502 and 0.95% upside to 1530.          

                                                                                                                     

SECTOR AND GLOBAL PERFORMANCE


THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

THE HEDGEYE DAILY OUTLOOK - 3

 

THE HEDGEYE DAILY OUTLOOK - 4

 

EQUITY SENTIMENT:


THE HEDGEYE DAILY OUTLOOK - 10


CREDIT/ECONOMIC MARKET LOOK:

  • YIELD CURVE: 1.73 from 1.71
  • VIX  closed at 14.17 1 day percent change of -6.90%

MACRO DATA POINTS (Bloomberg Estimates):

  • 8:30am: Chicago Fed Nat Activity Index, Jan (prior 0.02)
  • 10:30am: Dallas Fed Manf. Activity, Feb. (prior 5.5)
  • 11am: Fed to buy $2.75b-$3.50b notes in 2020-2023 sector
  • 11:30am: Treasury to sell $35b 3-mo. bills, $30b 6-mo. bills
  • 1pm: Treasury to sell $35b 2Y notes
  • 7pm: Fed’s Lockhart speaks on economy in Knoxville, Tenn.

GOVERNMENT:

    • Senate may consider $110b plan to delay federal spending cuts, incl. tax increases
    • Cnooc/Nexen deal expected to close this week
    • Bipartisan Policy Center to release proposals for scaling back govt role in mortgage finance
    • Karzai orders U.S. special forces out of key Afghan province
    • EU levy on U.S. bioethanol to curb competition takes effect
    • ITC judge to release findings in Cypress Semiconductor vs GSI Technology patent case
    • WASHINGTON WK AHEAD: Sequestration Cuts Set to Begin March 1

WHAT TO WATCH

  • Sinopec to buy 50% of Chesapeake’s Mississippi asset for $1.02b
  • Knight said to agree to sell debt brokerage to Stifel
  • Barnes & Noble founder said to offer to buy bookstore unit
  • Mozilla boosts partners for Firefox smartphone debut in ’13
  • Takeda, Affymax voluntarily recall anemia treatment Omontys
  • Royalty Pharma offers to buy Elan Corp. for $11/shr
  • Abe preparing to name Kuroda as next Bank of Japan governor
  • Japan to sell $10.3b Japan Tobacco stake
  • U.K. loses Aaa status at Moody’s; Osborne keeps austerity
  • RBS said to plan IPO for U.S. Citizens Financial Group unit
  • BHP says cost cuts a priority as mineral demand growth ebbs
  • China manufacturing expands at slower pace, HSBC PMI shows
  • China prepares for govt shuffle as Zhou stays PBOC chief
  • Italy elects new govt, voting ends at 3pm CET
  • ‘Identity Thief’ is top NA wknd film with $14m in sales
  • ‘Argo’ Wins Best Picture Oscar; ‘Zero Dark Thirty’ Shunned
  • U.S. manufacturing probably grew for third month: Weekly ECO preview
  • U.S. Weekly Agendas: Finance, Industrials, Energy, Health, Consumer, Tech, Media/Ent, Real Estate, Transports
  • North American M&A Agenda
  • Canada Weekly Agendas: Energy, Mining
  • Bernanke, China Manuf., Hagel: Wk Ahead Feb. 25-March 1

EARNINGS:

    • Lowe’s (LOW) 6am, $0.23 - Preview
    • Allied Nevada Gold (ANV) 6:30am, $0.19
    • Donaldson Co (DCI) 7am, $0.38
    • Kosmos Energy Ltd (KOS) 7am, $0.06
    • Arbitron (ARB) 7am, $0.66
    • CommonWealth REIT (CWH) 7am, $0.86
    • Impax Laboratories (IPXL) 7am, $0.19
    • Cooper Tire & Rubber Co (CTB) 7:30am, $0.85
    • Ariad Pharmaceuticals (ARIA) 7:35am, $(0.35)
    • Hecla Mining Co (HL) 8am, $0.03
    • 3D Systems (DDD) 8:15am, $0.39
    • FirstEnergy (FE) 8:24am, $0.79
    • Ship Finance International Ltd (SFL) 8:24am, $0.32
    • Dendreon (DNDN) 8:30am, $(0.54)
    • Caesars Entertainment (CZR) 4pm, $(1.66)
    • Tower Group (TWGP) 4pm, $(1.24)
    • Amsurg (AMSG) 4pm, $0.51
    • Rosetta Resources (ROSE) 4pm, $0.93
    • Autodesk (ADSK) 4:01pm, $0.49
    • Solar Capital Ltd (SLRC) 4:01pm, $0.60
    • Stone Energy (SGY) 4:03pm, $0.60
    • ONEOK (OKE) 4:05pm, $0.45
    • ONEOK Partners (OKS) 4:05pm, $0.62
    • URS (URS) 4:05pm, $0.97
    • Stifel Financial (SF) 4:05pm, $0.61
    • Dealertrack Technologies (TRAK) 4:05pm, $0.29
    • General Cable (BGC) 4:10pm, $0.28
    • Hertz Global Holdings (HTZ) 4:11pm, $0.31
    • Legacy Reserves (LGCY) 4:27pm, $0.37
    • Oasis Petroleum (OAS) 4:30pm, $0.46
    • Eagle Rock Energy Partners (EROC) 4:30pm, $0.03
    • Chemtura (CHMT) 4:36pm, $0.31
    • Titan International (TWI) 4:57pm, $0.47
    • Mindray Medical (MR) 5pm, $0.51
    • Health Care REIT (HCN) 5:01pm, $0.84
    • Vivus (VVUS) 5:15pm, $(0.44)
    • Aqua America (WTR) Post-Mkt, $0.28

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • CME Said to Approach Deutsche Boerse to Consider Talks on Merger
  • Gold Bets Cut by Most Since ’07 as Sugar Bears Grow: Commodities
  • Brent Crude Trades Near Four-Day High Before Iran Nuclear Talks
  • Wheat Falls to Eight-Month Low as Plains Snow May Ease Drought
  • Gold Gains in New York as Central-Bank Buying Counters ETP Drop
  • Aluminum Trades Unchanged at $2,048 a Ton in London, Erases Drop
  • Sugar Reaches Two-Week High on Record Bearish Bets; Coffee Rises
  • Russia, Kazakhstan Expand Gold Reserves for Fourth Month
  • Wilmar Says China Crushers Cut Soy Stocks Before Brazil Harvest
  • U.S. Gasoline Price Rises to $3.795 a Gallon in Lundberg Survey
  • BHP Says Cost Cutting Tops Agenda as Mineral Demand Growth Wanes
  • Rebar Declines to One-Month Low as China Plans Property Controls
  • Silicon Valley Shifting to Power Grid After Solar Sours: Energy
  • Oil May Fall to $91 After Double-Top Breach: Technical Analysis

THE HEDGEYE DAILY OUTLOOK - 5

 

CURRENCIES


THE HEDGEYE DAILY OUTLOOK - 6

 

EUROPEAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - 7

 

ASIAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - 8

 

MIDDLE EAST


THE HEDGEYE DAILY OUTLOOK - 9

 

 

The Hedgeye Macro Team

 

 

 

 



Emotion Sellers

“We live by emotion, prejudice, and pride.”

-Dwight D. Eisenhower

 

That’s what President Eisenhower wrote in a letter to Winston Churchill in the early 1950s after the Korean War. He added: “It is remarkable how little concern men seem to have for logic, statistics, and even, indeed, survival.” (Ike’s Bluff, pg 105)

 

Sounds a lot like risk managing the 2013 Global Macro market to me. So far, with the underpinnings of real (inflation adjusted) global economic growth stabilizing (instead of slowing), the best way to survive the game has been to be long growth, not gold.

 

We all have our investment-style prejudices. We all have plenty of emotion too. The hardest thing to do is keep that all checked at the door before we turn on our screens every morning. The Behavioral side of this game has never been so important.

 

Back to the Global Macro Grind

 

Admittedly, I was all fired-up covering shorts and getting longer (equities) during last week’s 2-day correction. Was I being emotional? Or were the sellers? Now I’m questioning whether I got Bullish Enough?

 

At Augusta in 1954 the legendary Sam Sneed told Ike, “you’ve got to stick your butt out more, Mr. President” (Ike’s Bluff, pg 115). While Eisenhower didn’t like having other people tell him what to do, he listened. Sneed’s advice wasn’t from some local pro.

 

When I stick my old hockey bubble-butt out and make a market call, I don’t ask a local pundit for permission. It’s always based on two very important things that we are trying to hammer home with clients – they are both critical to our process:

 

1.       The Risk Management Signal

2.       The Team’s Research Views


Note which one of the two comes first. Indeed, it is the signal I prioritize over what can often become research noise. All that said, when both are aligned, I’m learning to get over how I look - and I just do it (stick out my butt).

 

When you boil down the difference between our bullish Research View on growth versus competitor views, it’s quite simple:

  1. Our view is Dollar centric: Strong Dollar = Down Commodities (deflation) = Stronger Consumption
  2. Their view is Commodity centric: they are either calling for inflation OR thinking deflation is a bearish leading indicator

Irrespective of your research team’s view, this is what Mr. Market’s signals think:

  1. Strong Dollar = up another +1.1% last week; up for 3 consecutive weeks on a +3% run
  2. Commodity Deflation = down another -1.7% last week; down for 3 consecutive weeks (-3.9% all in)

No, the world’s economies and stock markets didn’t end on that. In fact, despite Oil prices reacting late relative to Gold (Brent Oil finally down -2.9% last wk), the two key US consumption demand points we care on (US employment growth and housing) held up quite well. The question now is how well do they react to prices at the pump falling, instead of rising?

 

If you Embrace Uncertainty at the core of your process, the simple answer is usually going to be ‘I don’t know.’ You’ll know when market prices and high-frequency economic data either refute or support your thesis. Advice: don’t marry your thesis.

 

If you were buying commodities futures and options contracts since the Bernanke Top (September 2012), the CRB Commodities Index is one of the worst places you could have been invested (down -9% from there to here). And finally, in the last few weeks of Commodity Deflation, the net long (CFTC futures/options position) has capitulated to its lowest level since DEC 2011:

  1. Copper contracts crashed last week, down -51%! to +11,413 (lowest since NOV 2012)
  2. Gold contracts crashed (again) last week, down another -40% to 42,318 (lowest since JUL 2007)
  3. Farm Goods contracts capitulated too, down -44% last week to 190,892 (lowest since March 2009)

Farm Goods still has the biggest net long position because food prices were the last of the commodities to put in their all-time tops. Corn’s all-time high was in August of 2012. Corn prices are now on the verge of crashing (greater than 20% peak-to-trough decline) from that all-time top and net long contracts in corn were down -48% last week to +65,303.

 

Are falling food prices good for you? Do you eat? If you don’t (or someone in Washington buys all your meals with our tax “revenues”), you can safely assume, with no emotion or prejudice, that the rest of the world does.

 

Hedgeye reiterates our 0% asset allocations to both Commodities and Fixed Income this morning. Sure, we will take down these equity asset allocations when the signals tell us too. But we didn’t get those signals at Thursday’s lows. Emotional sellers did.

 

Our immediate-term Risk Ranges for Gold, Oil (Brent), Copper, US Dollar, USD/YEN, UST 10yr Yield, and the SP500 are now $1, $112.61-115.15 (Oil is bearish TRADE now), $3.51-3.65 (Copper is back in a Bearish Formation), $80.57-81.71 (USD = Bullish Formation), 92.72-94.41 (we re-shorted Yen last wk), 1.96-2.05% (Bond Yields = Bullish Formation), and 1, respectively.

 

Best of luck out there this week,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Emotion Sellers - Chart of the Day

 

Emotion Sellers - Virtual Portfolio


Attention Students...

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.

next