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MACAU: THE RISE OF VIP HOLD

This note was originally published April 09, 2013 at 13:37 in Gaming

  • We’ve documented mass hold climbing higher over the years.  VIP hold has also been trending higher lately above the theoretical win rate of 2.85% and closer to 2.96%.
  • March junket hold on a trailing twelve-month basis (TTM) was 3.21%, about 20bps higher than the TTM hold in January 2010.  If we take into account direct play, adjusted VIP hold on a TTM was 3.00% in March, compared with a 2.80% adjusted VIP hold TTM in January 2010.
  • While mass volumes have been resilient so far in the face of higher hold, it remains to be seen how the high hold will affect VIP volume growth.  The good news is that comps are relatively easy for the back half of the year.

 

MACAU: THE RISE OF VIP HOLD - ttt

 

If you'll recall, Hold (or Hold Percentage) is the measure of the amount of money a casino table game keeps from the total amount of money that is dropped into the table game's cash box.


Morning Reads From Our Sector Heads

Keith McCullough (CEO):

 

Singapore Downtown Mansion on Sale at Record $242 Million (via Bloomberg)

 

Swan Backs Japan-to-U.S. Stimulus as G-20 Meets, Yen Slides (via Bloomberg)

 

Todd Jordan (GLL):

 

U.S. says Okada's Universal is target of criminal bribery probe (via Reuters)

 

Rob Campagnino (Consumer Staples):

 

Herbalife Auditor KPMG Resigns As Partner At Firm Is Fired For Providing Inside Information (via Business Insider)

 

Britain's Asda says finds horse drug in corned beef (via Reuters)

 

Tom Tobin (Healthcare):

 

Observation v. Inpatient? Amid audits, hospitals struggle to decide (via Advisory.com)

 

Hospitals: The cost of admission (via 60 Minutes)

 

Jay Van Sciver (Industrials):

 

MSC Industrial Direct Co., Inc. Reports Results For Its Fiscal 2013 Second Quarter (via MSC Direct)

 

Josh Steiner (Financials):

 

JPM on whale of a roll (via NY Post)

 

Scant Relief On Foreclosure Payments (via WSJ)

 

Kevin Kaiser (Energy):

 

Exxon Mobil Is Found Neligent in New Hampshire MTBE Use (via Bloomberg)

 

Brian McGough (Retail):

 

Rising Costs, Riots Squeeze Bangladesh (via WWD)





Waiting To Buy

Client Talking Points

Red Light, Green Market

Using the VIX as a way to gauge the market works well...if you understand how to utilize it correctly. Right now, we're waiting for two things to happen before we start going into the market on volatility signals:

 

1) We need the S&P 500 to be oversold

 

2) We need the VIX to be overbought

 

Both of these things need to occur on an immediate-term TRADE basis. When these signals hit, we'll be comfortable buying the SPX. But until then, we have to wait. If we revisit last Friday you'll find that:

 

1) On Friday morning, the SP500 was immediate-term TRADE oversold at 1540


2) On Friday morning, the VIX was immediate-term TRADE overbought at 15.23

 

You can't just go around randomly jumping in and out of the market without a process; you might as well hit the craps table if that's what you want to do. 

The Effects of Japan

The Bank of Japan's stimulus announcement from last week has done all sorts of crazy things to the global markets. We suppose that people get riled up over news of a $1.4 trillion stimulus that's unprecedented. Despite the Japanese government saying (and to paraphrase Kyle Bass from his interview on Bloomberg yesterday) "We've got your back!", investors ran away from JGBs. Meanwhile, the Nikkei 225 looked like it spent too much time at the gym and has tacked on a +7.1% gain over the last five trading days. As for the US, we rallied and then went back to business as usual: trying to reach new highs in the S&P 500

Asset Allocation

CASH 26% US EQUITIES 26%
INTL EQUITIES 22% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 26%

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

"It is possible to trade this rally w/o that hate/love thing. Just mind noise. Also very nearly possible to trade it w/o CNBC." -@Daytrend

QUOTE OF THE DAY

"All movements go too far." -Bertrand Russell

STAT OF THE DAY

China posts surprising trade deficit of $880 million for March as imports surge by +14.1% year-over-year.


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.

I'm Thinking

This note was originally published at 8am on March 27, 2013 for Hedgeye subscribers.

“I’m thinking, Mom, I’m thinking.”

-Bill Gates

 

That’s how Joey Reiman starts Chapter 2 of Thinking For A Living – “The Golden Age of Ideas and Nine Thinkers Who Figured Out How To Make It Work For Them.” It’s a quick read and I’m enjoying it. Studying success inspires me more than Cyprus does.

 

Thinking for yourself isn’t easy. Maybe that’s why I find being on the road therapeutic. Since I’m not the brightest bulb on the tree to begin with, I’ll take every competitive advantage I can get. One of the big ones is having broad diversity in our client base.  Thinking for a living about markets wouldn’t be complete without feedback loops. Thoughtful clients provide those. So does Twitter.

 

I was in Philadelphia for the day yesterday and had a dinner in Delaware last night. I’ll be in Baltimore today. Every client has a different style. They have different questions too. Selfishly, sometimes the best answer I can give in a meeting is ‘I don’t know.’ It means I haven’t thought about that enough; it means I need to be more thoughtful; and it means there is work to be done.

 

Back to the Global Macro Grind

 

Got US #GrowthStabilizing and #HousingsHammer in the bag as your Big Macro Theme thoughts for Q113?

  1. US Durable Goods ramped +5.7% in February to a new intermediate-term TREND cycle high
  2. Case-Shiller’s US Home Price Index ramped to a new high of +8.1% vs 6.9% last month
  3. In response, the SP500 closed at its 2013 high of 1563 yesterday, two points off its all-time high

What about the Italian Election? What about Cyprus? What about the coffee you spilled on your white shirt?

 

There’s always something to be worried about in this good life. When it comes to your performance, the question is are you worried about the things that actually matter? And, if you are, have you expressed those concerns correctly in terms of your portfolio’s positioning? If you are bearish on Spain and Italy, why sell US Equities? Why don’t you just sell Spain or Italy?

 

To be sure, at the end of the world all of this will come home to roost. And the timing on that is something I think about a lot. It’s called mortality. But, in between now and then, I still need to grind through our interconnected Global Macro Risk Management Signals and see what we might want to be thinking about this morning:

 

USA

  1. US Dollar: up for the 7th week in the last 8, #StrongDollar continues to be a pro-growth signal (for the USA) in our model
  2. US Stocks (SP500): making higher-lows and higher-highs, they remain in a Bullish Formation with a risk range of 1554-1568
  3. US Equity Volatility (VIX): making lower-highs and lower-lows, fear remains in a Bearish Formation (risk range 10.82-14.42)

ASIA

  1. Chinese Stocks (Shanghai Comp): bullish TREND support of 2206 holds as economic data sets up to accelerate in March
  2. South Korean Stocks (KOSPI): trading back above its TRADE and TREND (1975) lines of support this morning
  3. Broad Based Rally: overnight, Philippines +2.7%, Indonesia +1.8%, Thailand +1.4%

EUROPE

  1. The Euro (vs USD): continues to break-down (lower-highs and lower-lows) with a bearish risk range now of $1.27-1.29
  2. German Stocks (DAX): testing immediate-term TRADE support of 7861 this morning; bullish TREND remains intact
  3. Spanish and Italians Stocks: both the IBEX (Spain) and MIB Index (Italy) are bearish on our TRADE and TREND durations

BREAKING NEWS: Italy is not the Philippines. Seriously.

 

Who cares about 92 million people and a stock market that’s up +15% YTD (Philippines) when we can freak ourselves out about 1 million people in Cyprus whose stock market is down 98% since 2007?

 

Who cares about the Philippines getting its sovereign debt upgraded to investment-grade for the first time ever (Fitch this morning – ever is a long time), when we can still try to sell crisis coverage advertising when Italy’s debt gets downgraded?

 

I am obviously not thinking about the #EOW (end of the world) thesis correctly. But neither are the Asian and US equity market bears. Henry Ford said, “thinking is the hardest work there is, which is probably why so few engage in it.” Indeed.

 

Our immediate-term Risk Ranges for Gold, Oil (Brent), US Dollar, USD/YEN, UST 10yr Yield, VIX, Russell2000, and the SP500 are now $1586-1605, $106.74-110.29, $82.65-83.38, 94.02-96.71, 1.88-1.96%, 10.82-14.42, 941-955, and 1554-1568, respectively.

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

I'm Thinking - Chart of the Day

 

I'm Thinking - Virtual Portfolio



Stuff Changes

“We are made of the same stuff of which events are made.”

-Ralph Waldo Emerson

 

That’s the opening volley from astrophysicist Eric Chaisson in one of my favorite risk management books, Cosmic Evolution. What’s up with that? What’s up with a chaos theorist prefacing his ideas with the penmanship of a mid-19th century American essayist? It’s all about the storytelling folks. As Taleb recently wrote in Antifragile, “evolution does not depend on narratives, humans do.”

 

While finding the deep simplicity of the Global Macro point that matters can often feel like finding Waldo himself, Chaisson channeling Emerson is consistent with our discipline of Embracing Uncertainty. Emerson was labeled as a “transcendalist” – he preached individualism and self reliance; he did not support dogmatic and/or traditional organizations.

 

We’re human, so we want things about markets to make simple sense within our organizational boxes. But markets change, fast and slow. Sometimes they make sense. Sometimes they don’t.  In the heat of a thermodynamic moment, does every phase change make sense to everyone? Does that change care if you understand it? Of course not. Best we can do is try to keep up.

 

Back to the Global Macro Grind

 

Keeping up with the US stock market hasn’t been easy for the #PTCs (professional top callers). Every time the SP500 sells off to a higher-low (1540 on Friday), they claim victory. Every time we rally off those higher-lows to higher all-time highs, I hear crickets.

 

Crickets? What are crickets? Do you hear them on the floor of the NYSE? Crickets – you can hear the hum when something was supposed to happen, and didn’t. #crickets

 

While I am not entirely sure what kind of a risk management process top-calling is, it fits within the confirmation biases of consensus. My tally is up to 28 high profile PMs, strategists, pundits, etc. who are currently still trying to call the top in US stocks. Maybe this time is different – maybe they’ll all nail it, at the same time. Maybe not.

 

Quantifying sentiment in markets is probably the hardest thing to do – I’ve tested and trialed almost every voodoo signal I have been issued on this front, and I am left with very few that I’d actually act on. Let’s consider those few:

 

1.   Sentiment Spread – the II Bullish/Bearish survey data doesn’t tell me much on most metrics other than its historical spread (ie Bulls minus Bears). This morning, that spread is +2990 basis points wide. Over a decade of my tabulating/monitoring this spread, a relatively safe sell zone is +3 basis points wide. A relatively safe buy zone is basis points wide.

 

2.   Exhaustion (VIX vs SPX) – while plenty will quibble with this for theoretical reasons (“front month doesn’t reflect sentiment” … “term structure matters more”, etc. etc.), for me it’s just a signal that I’ve built for myself that works most of the time. The problem with it is that it’s not signaling all of the time. So I have to wait on it.

 

If you’ve studied thermodynamics, you’ll agree that waiting for a certain amount of entropy matters before you register a certain amount of consequential change (energy). That’s one way to conceptualize my VIX/SPX signal. What I am waiting on is:

 

A)     SPX immediate-term TRADE oversold

B)      VIX immediate-term TRADE overbought

 

Sounds simple, because it is – after you’ve incorporated multiple-factors across multiple-durations in order to contextualize that immediate-term moment. In other words, it’s a lot easier to roll with the conclusion after the process signals it.

 

I’m not submitting that I haven’t been run over by my signals once in a while. Nor am I suggesting that either the Sentiment Spread or the VIX/SPX signal are stand alone silver bullet signals. They are just two of the many tells I use instead of gnomes.

 

Just to roll through putting the aforementioned into action:

  1. On Friday morning, the SP500 was immediate-term TRADE oversold at 1540
  2. On Friday morning, the VIX was immediate-term TRADE overbought at 15.23

So, our #RealTimeAlerts (immediate-term signaling product) acted, aggressively on that, covering shorts and buying stocks (including the SPY itself). This is not about taking victory laps – this is about being accountable to what I do and why. I feel like putting my process out there like this makes it better. Sharp clients question it; so do my analysts internally. In the end, for me at least, that’s a win.

 

The other side of the buy/cover signal is to have the discipline to sell/short on the bounce. We’ve seen that for a few days since the Friday lows, and now, as the SP500 makes another all-time high, we’ll get another SPX overbought/VIX oversold signal too.

 

Will that happen at VIX 12.21 and SPX 1576? I don’t know. And that’s the point. Embracing Uncertainty in a non-linear and dynamic ecosystem like this is what I do. Stuff Changes. So I need to change alongside it.

 

Our immediate-term Risk Ranges for Gold, Oil (Brent), Copper, US Dollar, USD/YEN, UST 10yr Yield, VIX, and the SP500 are now $1, $103.86-107.78, $3.29-3.47, $82.23-83.34, 96.12-100.05, 1.71-1.82%, 12.21-14.51, and 1, respectively.

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Stuff Changes - Chart of the Day

 

Stuff Changes - Virtual Portfolio


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