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End Of The Food Stamp Gravy Train?

The Supplemental Nutrition Assistance Program (SNAP, aka Food Stamps), saw one of the largest month-over-month declines in participation during January. While it may be due to policy changes in North Carolina, in general, it appears that people are beginning to jettison the program from their lives. This comes after the SNAP participation rate hit a 30-year high in late 2012, as people without jobs and those who had given up on looking for a job jumped on the bandwagon.

 

End Of The Food Stamp Gravy Train? - foodstamps1

 

As more people drop out of the labor force in America and latch on to SNAP and Supplemental Security Income (SSI), the American economy will suffer a decrease in tax revenue as well as other additional problems.

 

End Of The Food Stamp Gravy Train? - foodstamps3

 

End Of The Food Stamp Gravy Train? - foodstamps2


MARCH IN MACAU: DETAILED PROPERTY ANALYSIS

As you already know, the market grew 25.4% YoY to a new record GGR of US$3.9 billion or HK$30.4 billion.  Overall, a great month – not quite as good as the headline 25% growth because of high hold.  However, we had heard all along that hold was running high so investors shouldn’t be surprised.

 

Here are our main takeaways:

 

MACAU

  • As we thought, VIP hold definitely played a role in the March strength.  We estimate that including direct play, VIP hold was 3.15% versus a normalized 2.96% and 2.79% in March of 2012.
  • Had VIP hold been normal this March, YoY growth in GGR would’ve been 20%.  With normal VIP hold in both periods, GGR growth was 16%.
  • MGM and MPEL were the only operators to hold low in VIP during the month
  • Mass market growth continued its blistering pace, up 30% YoY, consistent with the last 9 months
  • VIP volume growth grew its fastest in almost a year at 10%, surprising since hold was so high which usually dampens play
  • Overall market VIP hold continues to tick up over time – obviously a positive for concessionaires
  • Slots were disappointing at only 7% growth

LVS

  • Another above trend Mass market share month
  • Overall market share was in-line with recent trend
  • VIP Hold was higher than normal in both March of 2013 and 2012 but even higher in March 2013
  • On a YoY basis, LVS was the top dog with GGR growth of 59%

MPEL

  • MPEL actually held below normal in March 2013 and well below March of 2012
  • Despite the low hold, GGR increased 20% YoY
  • Mass was up a whopping 37%
  • VIP volume grew the most in a year and a half
  • Market share consistent with trend but Mass was above
  • Adjusted EBITDA in Q1 should handily beat estimates

WYNN

  • In terms of luck, Wynn was a clear standout with its highest VIP hold in a year and a half compared to its lowest over the same period
  • Despite a 15% YoY increase in GGR, VIP volume actually declined 22%, the highest one month decline in 4 years
  • Indeed, VIP volume share was its lowest ever
  • Mass was solid, up 20% as Mass share was slightly above recent trend

MGM

  • MGM got clocked on VIP with its lowest hold in over 3 years
  • Yet VIP revenue actually increased 8% on a 37% increase in volume
  • Mass grew a strong 33% YoY and Mass share ticked up considerably
  • Aside from low hold which drove a low market share, this was a strong month for MGM Macau

GALAXY

  • Galaxy held above normal and higher than last year
  • Mass growth was once again strong at 39% but below the trend of recent months
  • Mass share remained consistent with trend

SJM

  • Big jump in market share was solely driven by very high VIP hold
  • Mass market share fell to its lowest level ever at 25%

Expert Call Today: Psychological Drivers of the Global Economy

The Hedgeye Macro Team, led by CEO Keith McCullough and DOR Daryl Jones, will be hosting an expert conference call entitled, "Behavioral Markets: Quantifying the Psychological Drivers of the Global Economy" today, April 8th at 11:00am EDT featuring Dr. Richard Peterson.

 

 

CALL DETAILS 

  • Date: Monday, April 8th at 11:00am EDT
  • Toll Free Number: 
  • Direct Dial Number: 
  • Conference Code: 141433#
  • Materials: CLICK HERE (If you are having trouble downloading the slides please email sales@hedgeye.com)

 

CALL OBJECTIVE

Using quantitative analytics of global information news flow and social media, we identify the sentiments and macro themes that drive asset prices.  We then discuss the implications of today's trends in equities, currencies, and commodities.

 

 

TOPICS WILL INCLUDE 

  • How specific types of information alter the brain's information processing
  • Techniques for quantifying sentiment in information flow
  • How sentiment predictably impacts prices of equities, currencies, and commodities
  • Where instability creates global buying opportunities
  • Currency trust and uncertainty - review AUD, CAD, and JPY
  • Commodities - current and upcoming environment
  • Equities - the relationship between investor anger and future prices

 

ABOUT RICHARD PETERSON, M.D.

From developing quantitative models to imaging the brains of investors, Dr. Peterson has spent his career at the intersection of mind and the markets. Dr. Peterson is Managing Director of the MarketPsych Group of companies comprising MarketPsych Data (financial sentiment data derived from news and social media), MarketPsych (behavioral economics consulting and training), and MarketPsy Capital (quantitative psychology-based asset management).

 

In the educational field Dr. Peterson developed popular financial personality tests, published widely in academic journals and textbooks, and is an associate editor of the Journal of Behavioral Finance. His book, "Inside the Investor's Brain" (Wiley, 2007) was called "outstanding" and "a seminal text" on investment psychology by Barrons. That and his second book "MarketPsych" (Wiley, 2010) (with Frank Murtha, PhD) were both named top financial books of the year by Kiplinger's.

 

Dr. Peterson received cum laude Electrical Engineering (B.S.), Arts (B.A.), and Doctor of Medicine degrees (M.D.) from the University of Texas. He performed postdoctoral neuroeconomics research at Stanford University and is Board-certified in Psychiatry. He lives in the New York City area with his family.

 


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Morning Reads From Our Sector Heads

Keith McCullough (CEO):

 

Subbarao Sees 1991 Crisis Rerun Unlikely in Trade Deficit (via Bloomberg)

 

Soros Sees China Shadow-Banking Risk Matching Subprime (via Bloomberg)

 

Todd Jordan (GLL):

 

The Rising Middle Class Fuels Hotel Boom in China (via CNBC)

 

Josh Steiner (Financials):

 

Whitney writes a counterpunch (via NY Post)

 

JPMorgan Works to Avert Split of Chief and Chairman Roles (via NYT Dealbook)

 

Jay Van Sciver (Industrials):

 

Smog dents Beijing's expat appeal (via Financial Times)

 

Rob Campagnino (Consumer Staples):

 

Anheuser-Busch InBev close to agreement with U.S. over Modelo deal (via Syracuse.com)

 

Kevin Kaiser (Energy):

 

G.E. to Buy Lufkin Industries for $3.3 Billion (via NYT Dealbook)

 


Growth Risk

Client Talking Points

Bad Data

Last week, we saw a slew of bad data hit the tape. Everything from the ADP employment report to initial jobless claims came in under expectations and really stunk. The market seems to want to keep the hope alive and has yet to perform a major correction of any sort. That being said, if we continue to get bad spurts of economic data week-after-week, the end result will not be pretty. 

The Korea Situation

All eyes are on North Korea right now and whether their war games are in fact just that: games and nothing more. Kim Jong Un and Co. sure do love the sabre rattling but we believe it's nothing more than that. North Korea is desperate to win back international aid and this is their way of asking for it back. Suffice to say, if any military action is taken by either side, we'll have to reassess the situation at hand.

Asset Allocation

CASH 18% US EQUITIES 30%
INTL EQUITIES 25% COMMODITIES 0%
FIXED INCOME 3% INTL CURRENCIES 24%

Top Long Ideas

Company Ticker Sector Duration
DRI

Darden stands to be a beneficiary from a housing recovery and an improved employment picture, which boosts casual dining trends. The company's net income declined on its recent earnings report but beat the Street's expectations.

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

"3-day 5.6% decline in JPY i largest since October 2008..Only 4 other periods since 1971 where JPY declined more than 5% in 3-day period" -@BergenCapital

QUOTE OF THE DAY

"Because things are the way they are, things will not stay the way they are." -Bertolt Brecht

STAT OF THE DAY

Shares of LUFK surge 37% after GE announces acquisition deal.


MONDAY MORNING RISK MONITOR: FALLING RISK SIGNALS GO FOR NOW

Takeaway: After elevated volatility in the weeks since Cyprus, last week saw a degree of normalcy return to the sector.

Key Takeaways:

 

Overall, risk remains in check in spite of Europe's deposit scare. We remain vigilant based primarily on where we are in the calendar, but as yet the key metrics we watch are not showing signs of degradation. For now, we're sticking with our bullish bias on the Financials sector.

 

XLF Macro Quantitative Setup – In the short-term, our Macro team’s quantitative setup in the XLF shows better upside than downside with +1.7% upside to TRADE resistance and -0.6% downside to TRADE support.

 

* Markit MCDX Index Monitor – Last week the 16-V1 series saw spreads tighten 4.6 bps, ending the week at 79.5 bps versus 84.13 bps the prior week. In spite of Stockton, CA, systemic risk perception around the muni market's default risk continues to drop.

 

* ECB Liquidity Recourse to the Deposit Facility – In spite of Cyprus, the ECB's overnight deposits have remained stable in the past month, and declined by 9.5bn Euros last week.  

 

Euribor-OIS Spread – The Euribor-OIS spread was unchanged week-over-week at 13 bps.

 

* European Financial CDS - Most European banks were tighter last week with an average tightening of 10 bps anda median tightening of 5 bps. This was the first week of improved performance since the Cyprus news broke.

 

Financial Risk Monitor Summary

 • Short-term(WoW): Positive / 4 of 12 improved / 2 out of 12 worsened / 7 of 12 unchanged

 • Intermediate-term(WoW): Negative / 1 of 12 improved / 7 out of 12 worsened / 5 of 12 unchanged

 • Long-term(WoW): Positive / 7 of 12 improved / 2 out of 12 worsened / 4 of 12 unchanged

 

MONDAY MORNING RISK MONITOR: FALLING RISK SIGNALS GO FOR NOW - 15

 

1. U.S. Financial CDS -  Citi and Morgan showed the worst performance week-over-week, rising by 7 and 5 bps, respectively. On a month-over-month basis, however, Morgan is tied with BofA for worst at +20 bps apiece. Overall, swaps widened for 19 out of 27 domestic financial institutions.

Tightened the most WoW: AXP, GNW, XL

Widened the most WoW: MMC, AGO, C

Tightened the most WoW: XL, ALL, GNW

Widened the most MoM: MTG, JPM, BAC

 

MONDAY MORNING RISK MONITOR: FALLING RISK SIGNALS GO FOR NOW - 1

 

2. European Financial CDS - Most European banks were tighter last week with an average tightening of 10 bps anda median tightening of 5 bps. This was the first week of improved performance since the Cyprus news broke.

 

MONDAY MORNING RISK MONITOR: FALLING RISK SIGNALS GO FOR NOW - 2 best

 

3. Asian Financial CDS - While Japanese bank stocks have soared on the back of QE-Quadrill-Yen, default risk measures have ticked up modestly for most Japanese banks.

 

MONDAY MORNING RISK MONITOR: FALLING RISK SIGNALS GO FOR NOW - 17

 

4. Sovereign CDS – Sovereign swaps were tighter across the planet last week, except for Japan where they were flat. The biggest improvements were in Italy and Spain, where swaps dropped 19 bps apiece.

 

MONDAY MORNING RISK MONITOR: FALLING RISK SIGNALS GO FOR NOW - 18

 

MONDAY MORNING RISK MONITOR: FALLING RISK SIGNALS GO FOR NOW - 3

 

MONDAY MORNING RISK MONITOR: FALLING RISK SIGNALS GO FOR NOW - 4

 

5. High Yield (YTM) Monitor – High Yield rates fell 3.0 bps last week, ending the week at 5.78% versus 5.81% the prior week.

 

MONDAY MORNING RISK MONITOR: FALLING RISK SIGNALS GO FOR NOW - 5

 

6. Leveraged Loan Index Monitor – The Leveraged Loan Index rose 1.3 points last week, ending at 1788.1.

 

MONDAY MORNING RISK MONITOR: FALLING RISK SIGNALS GO FOR NOW - 6

 

7. TED Spread Monitor – The TED spread rose 0.8 basis points last week, ending the week at 21.64 bps this week versus last week’s print of 20.86 bps.

 

MONDAY MORNING RISK MONITOR: FALLING RISK SIGNALS GO FOR NOW - 7

 

8. Journal of Commerce Commodity Price Index – The JOC index fell -1.6 points, ending the week at 8.25 versus 9.9 the prior week.

 

MONDAY MORNING RISK MONITOR: FALLING RISK SIGNALS GO FOR NOW - 8

 

9. Euribor-OIS Spread – 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. The Euribor-OIS spread was unchanged week-over-week at 13 bps.

 

MONDAY MORNING RISK MONITOR: FALLING RISK SIGNALS GO FOR NOW - 9

 

10. ECB Liquidity Recourse to the Deposit Facility – In spite of Cyprus, the ECB's overnight deposits have remained stable, and declined by 9.5bn Euros last week. 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: FALLING RISK SIGNALS GO FOR NOW - 10

 

11. Markit MCDX Index Monitor – Last week the 16-V1 series saw spreads tighten 4.6 bps, ending the week at 79.5 bps versus 84.13 bps the prior week. In spite of Stockton, CA, systemic risk perception around the muni market's default risk continues to drop. 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. 

 

MONDAY MORNING RISK MONITOR: FALLING RISK SIGNALS GO FOR NOW - 11

 

12. Chinese Steel – Steel prices in China fell 0.7% last week, or 25 yuan/ton, to 3,630 yuan/ton. Taking a step back, Chinese steel prices have been declining since mid-February of this year. We use Chinese steel rebar prices to gauge Chinese construction activity, and, by extension, the health of the Chinese economy.

 

MONDAY MORNING RISK MONITOR: FALLING RISK SIGNALS GO FOR NOW - 12

 

13. 2-10 Spread – Last week the 2-10 spread tightened to 162 bps, -4 bps tighter than a week ago. We track the 2-10 spread as an indicator of bank margin pressure.

 

MONDAY MORNING RISK MONITOR: FALLING RISK SIGNALS GO FOR NOW - 13

 

14. XLF Macro Quantitative Setup – Our Macro team’s quantitative setup in the XLF shows 1.7% upside to TRADE resistance and 0.6% downside to TRADE support.

 

MONDAY MORNING RISK MONITOR: FALLING RISK SIGNALS GO FOR NOW - 14

 

Joshua Steiner, CFA

 


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