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MACAU: BLOWOUT START TO MARCH

March is off to a bang with average daily table revenues (ADTR) up 34% YoY for the first 10 days.  The numbers are skewed higher a little because the period contains 2 weekends of data.  We are upping our full month forecast from 10-15% growth to +12-17%.  Our initial growth projection was based on historical sequential seasonal patterns and an easy hold comp over last year.

 

MACAU: BLOWOUT START TO MARCH - maa2

 

The word around town is that hold percentage is likely running higher than normal.  We had received reports last week that traffic on the Mass floors was a little light.  ADTR is likely to moderate the rest of the month.

 

SJM outperformed to start the month mostly at the expense of Wynn.  The other operators are tracking fairly close to recent trend. 

 

MACAU: BLOWOUT START TO MARCH - maa


Morning Reads From Our Sector Heads

Todd Jordan (GLL):

 

-Hotel chains boost loyalty point requirements to book a free room (via LA Times)

 

Rob Campagnino (Consumer Staples):

 

-Vietnam Coffee Harvest May Drop 30% on Drought, Vicofa Says (via Bloomberg)

 

Kevin Kaiser (Energy):

 

-Oil sands firms move on cutting costs (via Globe and Mail)

 

Howard Penney (Restaurants):

 

-$DRI is back with its 2 for $25 Italian Dinner 3 Courses/2 People/Just $25 - and this is going to help traffic? (via Olive Garden)


Strong Dollar

Client Talking Points

Just Pump It Up

Having a strong US dollar is one of the most important things for our country right now. Why? Because having a strong dollar will ultimately help stocks. Now while that may seem to be the opposite agenda, a strong dollar helps drive down commodity prices like crude oil. Low oil prices and lower commodity prices help increase consumption among consumers when they visit places like the gas station and the grocery store. An increase in consumption is an increase in growth and growth helps everyone in the long run.

Asset Allocation

CASH 22% US EQUITIES 24%
INTL EQUITIES 24% COMMODITIES 6%
FIXED INCOME 0% INTL CURRENCIES 24%

Top Long Ideas

Company Ticker Sector Duration
ASCA

We believe ASCA will receive a higher bid from another gaming competitor. Our valuation puts ASCA’s worth closer to $40.

FDX

With FedEx Express margins at a 30+ year low and 4-7 percentage points behind competitors, the opportunity for effective cost reductions appears significant. FedEx Ground is using its structural advantages to take market share from UPS. FDX competes in a highly consolidated industry with rational pricing. Both the Ground and Express divisions could be separately worth more than FDX’s current market value, in our view.

HOLX

HOLX remains one of our favorite longer-term fundamental growth companies given growing penetration of its 3D Tomo platform and high leverage to the 2014 Insurance Expansion from the Affordable Care Act.

Three for the Road

TWEET OF THE DAY

"New week!! Go get 'em!!!" -@TheKillir

QUOTE OF THE DAY

"In politics, absurdity is not a handicap." -Napoleon Bonaparte

STAT OF THE DAY

10-year Treasury hits a six-month high this morning of 2.05%.


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 – March 11, 2013

 

As we look at today's setup for the S&P 500, the range is 37 points or 1.49% downside to 1528 and 0.89% upside to 1565.                

 

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: 1.70 from 1.69
  • VIX  closed at 12.59 1 day percent change of -3.60%

MACRO DATA POINTS (Bloomberg Estimates):

  • 11am: Fed to buy $1.25b-$1.75b notes in 2036-2043 sector
  • 11:30am: U.S. to sell $35b 3-mo. bills, $30b 6-mo. bills
  • Weekly rates agenda

GOVERNMENT:

    • House, Senate in session
    • Treasury may report $205b deficit for Feb.: Bloomberg
    • CSIS, Natl Assn of Manufacturers hold forum on APEC, 8am
    • Washington Week Ahead

WHAT TO WATCH

  • SEC denies Goldman request to drop indep. chairman proposal
  • Disney’s “Oz” has yr’s best NA opening wknd at $80m
  • China to revamp railway, energy, food-safety ministries
  • Japan’s machinery orders tumbled 13% in Jan.
  • Kuroda says Bank of Japan will consider buying derivatives
  • Korean-American Bank Hanmi’s talks w/ rivals said to stall
  • AT&T may buy >25% of Reliance Jio Infocomm: Times of India
  • Oaktree buys Wells Fargo-leased offices for $240m
  • 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
  • U.S. Retail Sales, Samsung, EU Summit: Wk Ahead March 11-16

EARNINGS:

    • Dick’s Sporting Goods (DKS) 7:30am, $1.07
    • Casey’s General Stores (CASY) 4pm, $0.47
    • Urban Outfitters (URBN) 4pm, $0.57
    • Scientific Games (SGMS), 4pm, $0.05
    • Heckmann (HEK) 4:01pm, $(0.02)
    • Synageva BioPharma (GEVA) 4:05pm, $(0.60)
    • Analogic (ALOG) 4:15pm, $0.90
    • Home Inns & Hotels (HMIN) 5pm, $0.44
    • CVR Energy (CVI) After-mkt, $0.89
    • CVR Refining (CVRR) After-mkt, $0.63

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • Brent Oil Drops for Second Day as China Industrial Output Slows
  • Hedge Funds Cut Bets to ’09 Low as Goldman Says Buy: Commodities
  • Zinc Declines for a Second Day on Chinese Industrial Production
  • Corn Climbs as Livestock-Feed Demand Keep U.S. Inventories Low
  • Gold Swings as Investors Weigh U.S. Growth Against Europe Crisis
  • White Sugar Gains as Demand Leaves Limited Supply; Cocoa Falls
  • Fukushima Seeks Revival in Radiation-Free Farms With No Soil
  • Rebar Falls as China Industrial Output Shows Weaker Start to ’13
  • Vietnam Coffee Harvest May Drop 30% on Drought, Vicofa Says
  • Nuclear Industry Withers in U.S. as Wind Pummels Prices: Energy
  • Palladium May Extend Gains to Test 2011 Peak: Technical Analysis
  • Shell Seeks Fujairah Crude Tanks as U.A.E. Port Plans Berths
  • Bat-Killing Fungal Disease Has U.S. Lumber Firms Fighting States
  • Cooking Oil Imports by India Seen Advancing for a Third Month

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

 

 

 

 

 

 


THE M3: FRANCIS LUI COMMENTS; CHINA NEW LOANS; IVS

The Macau Metro Monitor, March 11, 2013

 

 

FRANCIS LUI CONFIDENT GALAXY MACAU WILL GET ENOUGH TABLES Macau Business

Galaxy chairman Francis Lui says he is confident the gaming operator will get enough live gaming tables for the upcoming phases of its Galaxy Macau casino resort, in Cotai.  According to figures previously released, Galaxy Macau’s phase two will have around 500 live gaming tables, phase three around 600 and phase four another 400.  He added that currently no gaming operator in Macau is really short of tables, but stressed the tables could be more evenly distributed among the six concessionaries.

 

CHINA FEB NEW LOANS AT 620 BLN YUAN, M2 UP 15.2% YoY Reuters

China's M2 measure of money supply grew 15.2% in February from a year earlier, in line with market expectations of a 15.1% rise and down slightly from the previous month's 15.9% rise, central bank data showed on Sunday.  Chinese banks also made 620 billion yuan worth of new loans in February, down from market forecasts of 750 billion yuan.

 

INDIVIDUAL VISA NEEDS OPTIMIZATION: LIAISON OFFICE Macau Business

The director of the Central People's Government Liaison Office in Macau, Bai Zhijian, said that Macau should focus on how to optimise the individual visitor scheme for mainland Chinese tourists, but should not tighten the policy.  Bai said the city should “strive for a balance” in serving both residents and visitors.  His comments came after the government’s think tank announced it will carry out a study to assess the effect of the mainland’s individual visa scheme on the city’s economic development.


Emotion Sellers

This note was originally published at 8am on February 25, 2013 for Hedgeye subscribers.

“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 $1548-1611, $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 1502-1530, 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


Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.64%
  • SHORT SIGNALS 78.57%
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