HOUSING: Strong Mortgage Volume

For the first half of 2013, expectations for mortgage volumes were on the low end of the spectrum. Today's Mortgage Bankers Association (MBA) numbers downplay the underlying strength of the housing market. Although total mortgage volume for the first quarter of 2013 dropped 6% quarter-over-quarter, it remains up 6.8% on a year-over-year basis. The same goes for purchase and refinancing volumes, which are up 14.4% and 8% year-over-year, respectively.



HOUSING: Strong Mortgage Volume - HOUSING6



Despite a slight increase in rates (up 0.1%) for Federal Housing Authority loans on April 1st, overall demand remains strong. Housing data continues to show improvement and low mortgage rates should help motivate buyers from both an affordability and action standpoint. 


HOUSING: Strong Mortgage Volume - HOUSING1


HOUSING: Strong Mortgage Volume - HOUSING2


HOUSING: Strong Mortgage Volume - HOUSING3


HOUSING: Strong Mortgage Volume - HOUSING4


HOUSING: Strong Mortgage Volume - HOUSING5


Brian McGough On JCP


Hedgeye Retail Sector Head Brian McGough appeared on CNBC yesterday to discuss the ousting of embattled JCPenney (JCP) CEO Ron Johnson. McGough was one of the first people on Wall Street to note that the timing of the firing was a bad choice for JCPenney as it had yet to fully execute on Johnson’s plan of “stores within a store.” The company is also low on capital and the decision to bring former CEO Mike Ullman back into the mix was confusing at best noted McGough. You can watch Brian’s full appearance on CNBC in the clip posted above. Fast forward to the first minute of the video for his take on JCP.


McGough was also quoted extensively throughout various news outlets yesterday; we’ve rounded up the various stories for you to check out:


J.C. Penney board comes under fire for CEO switch (via Reuters) 


Wall Street hits record high (via TVNZ)


JCPenney Board Of Directors Gets Call To Resign After CEO Ouster (via HuffPo)


J.C. Penney ousts CEO, Mike Ullman returns (via The Star Online)


Did J.C. Penney Pick The Exact Wrong Time To Fire Ron Johnson? (via Forbes)


Big News: J.C. Penney Company, Inc, Alcoa Inc. (via Valued Business News)


Penney same-store sales down 10% in 1Q, Dow Jones reports (via Chicago-Tribune)


J.C. Penney ousts CEO Ron Johnson (via MarketWatch)












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.




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.

Early Look

daily macro intelligence

Relied upon by big institutional and individual investors across the world, this granular morning newsletter distills the latest and most vital market developments and insures that you are always in the know.

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


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


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


"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


"All movements go too far." -Bertrand Russell


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

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:



  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)


  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%


  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,



Keith R. McCullough
Chief Executive Officer


I'm Thinking - Chart of the Day


I'm Thinking - Virtual Portfolio

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