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Trouble In Taiwan

Taiwan's Taiex Index fell another -2.4% last night post-opening after a holiday on April 4 and April 5 as fears intensified over the Chinese bird flu epidemic. The decline was the biggest drop in 10 months in the market and comes on the heels of Chinese officials stating that they can contain the new strain of avian flu. The World Health Organization is paying close attention to the situation and has said there had now been 21 human cases of the H7N9 flu with six deaths associated with the epidemic. 


Trouble In Taiwan - TAIWAN1

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


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:



  • 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


  • 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 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


  • 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 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 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


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

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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.




  • 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)



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.




  • 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



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.


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


Top Long Ideas

Company Ticker Sector Duration

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.


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 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


"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


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


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

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