Despite one less Saturday, air passenger traffic through Las Vegas's McCarran Airport declined "only" 11.8%.  I say only because this is the smallest decline since August of 2008.  Are we calling a turn?  Not yet, but a positive second derivative is a start.  The real takeaway here is that lower room rates are having an impact.  Demand is elastic and only time will tell if the incremental customer swayed by rate will gamble enough to be profitable.




Based on our regression analysis and assumptions regarding drive-in traffic and table and slot spend per visitor, we think total gaming revenue may decline by "only" 12%.  The last drop smaller than 12% occurred way back in September of 2008.  Similar to February, slot win should outpace table win, assuming normal hold percentages.


BEST LV AIRPORT DATA IN MONTHS - Strip march estimates 


LVS will likely be the first Vegas centric casino company to report EPS.  We continue to believe LVS was the standout in Las Vegas.  We are less confident in the MGM and WYNN Q1 performance.

QSR – Analyst ratings dispersion

BKC is down 23% over the past week and now MCD is down 2.4% on the day it reported earnings.

YUM is next and SBUX is next week!

We are long SBUX!

QSR – Analyst ratings dispersion - qsr


Squeezy's Got Hang Time: SP500 Levels, Refreshed...

Higher lows are tough for short sellers to deal with. Higher highs are what brings the bulls out to chase. Can Squeezy The Shark snap at the consensus short sellers above this rally's prior high? That remains, THE question...


Another important question is: what do February 9th and April 17th of 2009 have in common? Both of those days were the prior closing highs of their respective months, and both of those SP500 closing prints were 869. While the January 6th closing high of 934 is the YTD high (and an intermediate line of resistance that you should bake into your risk management plan), I think a close above that 869 line is plenty higher a high to be paying acute attention to...


The most impressive part about this +27% rally from the March 9th low, is how unimpressive some of the performance numbers have been in this marketplace. While some of our clients are absolutely crushing it right now, I hear plenty of returns in the hedge fund industry for April are below average at best. Anyone who took John Mack's market view is getting squeezed.


I am now establishing a buying range (shaded green waters that Squeezy is jumping out of in the chart below) of 832-853. For the immediate term TRADE, we'll be overbought at 875 - on the way up, understand the game that's being played here, and get hedged. This is as trade-able a range as I have seen since 2003.



Keith R. McCullough
Chief Executive Officer


Squeezy's Got Hang Time: SP500 Levels, Refreshed...  - shark

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Ugly Macro Factors Converge on the UK

POSITION:  Consistently negative bias this year and recently covered our short via the EWU


The pain is rising in the UK from a macroeconomic standpoint, with new data out today and Chancellor of the Exchequer Alistair Darling's downward forecast on GDP. Britain will likely not see modest growth until well into 2010. 


We've had a consistently negative view on the UK; just yesterday we covered our short position via EWU for a modest gain. The budget deficit is set to hit an estimated 11% of GDP this year and the trade gap in the fiscal year through March tripled to 90 Billion Pounds ($117 Billion). Also, jobless claims rose 73,700 in March to 1.46 million, the most since 1997. The FTSE is down -9.1% YTD. This is miserable absolute performance, never mind awful relative to countries socializing like the USA and Japan.


Today in his budget speech Darling said the economy will shrink 3.5% this year, far from the 1.25% contraction he forecasted in November of last year. While the downward revision did not come as a surprise to us, the announcement helps to confirm our negative bias towards the UK's leadership and its ability to right the economy.  The UK's statistic office, HM Treasury, which collects a selection of forecasters, helps to confirm Darling's number, albeit their average GDP came in at -3.7% for this year. According to the same estimates, the UK won't see positive growth until 2010, yet at a modest rate of +0.3%.  


As a measure of inflation, CPI rose 2.9% Y/Y from 3.2% in February Y/Y, confirming its downward momentum on a month-over-month basis. It's likely we can expect CPI to fall below the Bank of England's 2% target in Q2. While deflation is being felt throughout the EU, we believe that the UK's rate of decline will outpace its European peers.  Deflationary pressure tends to reverberate throughout an economy, including depressing earnings growth, consumption, home prices, and investments, while pushing up unemployment, savings rates, and bond yields to name a few.


One positive data point worth mentioning is housing. According to Hometrack national average prices, (see chart below) UK housing prices are improving. The rate of change on a year-over-year basis is declining and month-over-month there was a clear upturn in October of last year.  Despite the positive rate of change, we're of the firm opinion that the uptick in prices will take a considerable duration to hit Main Street, yet on the margin the data is positive.


While the question isn't if the UK will recover, but when and at what rate... until we see a more positive trajectory in that recovery, we'll continue to hold our bearish view.   


Matthew Hedrick


Ugly Macro Factors Converge on the UK - ukhousing

Weekly Sports Apparel Numbers Lookinig Good

Is anyone watching these SportscanINFO sports apparel numbers? Argue with the validity of the sample all you want (as I often do) -- but if it is a weak sample it is at least a consistently weak sample. The rising trajectory over the past 4-5 weeks does not want to stop.


Weekly Sports Apparel Numbers Lookinig Good - Industry Total Chart

Weekly Sports Apparel Numbers Lookinig Good - All Channels   chg

MCD – Something New to consider

McDonald’s is a very healthy company, with slowing trends and margin pressure around the world.  In summary, this was not a great quarter from MCD.  The company reported 1Q09 EPS operating EPS of $0.83 vs. $0.82 and the earnings benefited from a lower tax rate of 28.6% for 1Q09 as compared with 30.6% for 1Q08.


The march comps were basically in line with consensus estimates, but mark a significant slowdown from last year.  Globally, McDonald’s reported 4.1% same-store sales with the United States up 5.6%; Europe up 2.9% and APMEA up 5.4%.  The calendar shift/trading day adjustment varied by regions, ranging from -1.0% to -1.8% in March 2009. In March, Europe’s comps were negatively impacted by approximately 2% due to the change in timing of Easter-related school and business holidays from March 2008 to April 2009. On a consolidated basis, traffic increased 1.0% in 1Q09 vs. 3.2% for 2008 and was negatively impacted by 1% due to the leap year.    


Most notable and relevant to what we may hear from YUM is MCD’s commentary on China.  Due to employment issues in Southern China, McDonald’s reduced unit openings for the year from 175 to 150. 


McDonald’s also noted that same-store sales in China were negative for 1Q09 and got worse as the quarter ended.  Importantly, McDonald’s cut prices by 30% during the quarter to help mitigate the decline in traffic trends.  Needless to say this is very painful to McDonald’s margins during the quarter.


McDonald’s management team noted that the decline in menu prices in China was due to signs that Chinese consumers were trading down from Western QSR down to Chinese QSR.  According to MCD, Meal prices for Chinese QSRs are close to 30-40% below what a traditional western QSR meal prices are.  Western style QSR has more to compete against that Chinese QSR, but food at home too.  Western QSR is a luxury for most Chinese consumers.  With higher unemployment and slower income growth, the typical consumer is going to look for cheaper alternatives.    


The most recently available CPI data for urban areas showing an average food cost decline of nearly 22% since last April.  So McDonald’s 30% menu price cut, is only keeping pace with alternative distribution channels. 


A key question now is; does a 30% price cut represent a sufficient inducement to consumers alarmed by economic contraction and job losses to spend money on pricey fast food at the same pace they did during better times?


 MCD – Something New to consider - china food


None of these data points are positive for YUM.  Importantly, YUM success is very closely aligned to how its China business performs.   Looking to when YUM reports 1Q09, I expect YUM to face similar challenges as YOY commodity pressures will be more severe in 1Q09 (vs. 4Q08) and the company is lapping 12% same-store sales growth and 33% operating profit growth.



Currently, YUM is trading at 8.3x NTM EV/EBITDA and the stock is up 6% in the past week and 18% over the past month.  Why?

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