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Distant Peoples

“the unnatural task of holding in submission distant peoples...”

-Edward Gibbon


Edward Gibbon was an 18th century British historian who became famous for his 6 volume work, The History of the Decline and Fall of the Roman Empire (published between 1). Contextualizing Roman history is critical in order to attempt to scrutinize the rise and fall of any post 18th century economic empires (Britain, USA, or Japan). Governments plundering their people doesn’t end well.


Alongside Clausewitz (Prussian military theorist), Gibbon was also a favorite of America’s 1st grand strategist in the US State Department, George F. Kennan, whose biography I am waist deep in right now (it starts off slow, but the meat and potatoes of this book start in the post WWII period; I’m studying it now so that I can contextualize Russian policy – a country ETF (RSX) that we re-shorted yesterday).


The reason why I’m highlighting Gibbon’s quote this morning is that it’s FOMC d-day. Via debauching the world’s reserve currency, Ben Bernanke’s Fed has held distant peoples (including those in the US who don’t live in D.C.) in an unnatural submission to a Policy To Inflate food and energy prices. End it man – let #StrongDollar manifest. The People need a consumption #TaxCut.


Back to the Global Macro Grind


For those who were paid to see no inflation at the all-time highs in Oil (2008), Gold (2011), and/or Food Prices (2012), all I can say is shame on you. The People know the truth. And now they are ready to receive the communion of #CommodityDeflation.


I never grew up thinking about which “class” I was in. Class warfare is stated plainly in the opening sentence to Marx’s Communist Manifesto. I’m more of a freedom and meritocracy type of a guy myself. The last word of the last sentence of Darwin’s On The Origin of Species is “evolved.” People who think they can centrally plan other people into submission should evolve too.


To be clear, these are two different ideologies that you see in both political and economic thought. One camp thinks the market and economic system is one that can be “smoothed” and controlled with certainty (policy action). The other believes the global economic system is open, interconnected, and non-linear. You know which camp I’m in.


If you study the last 42 years and back out the Bernanke years (Down Dollar, Up Commodity Inflation to all-time highs), most US market historians understand the power of a #StrongDollar (“tighter” money than you have today, combined with fiscal conservatism). Unless left wing Marxists are levered up on their credit cards at home, I think even they get the #StrongDollar thing too.


So when will Bernanke acknowledge economic gravity and get out of our way?


US economic growth has accelerated from +0.38% in Q4 of 2012 to +2.5% in Q1 of 2013. The US Dollar strengthened the entire way through this #GrowthAccelerating period as #CommodityDeflation took hold.


Look at both the US Consumption side of the US economy (very strong in Q113) and the consumption sectors of the US stock market (here are the inflations and deflations for 2013 YTD):

  1. US Healthcare Stocks (XLV) = +18.68% YTD
  2. US Consumer Staples Stocks (XLP) = +17.31% YTD
  3. US Consumer Discretionary Stocks = +15.12% YTD 


  1. CRB Commodities Index (19 commodities) = -2.3% YTD
  2. Brent Crude Oil = -5.9% YTD
  3. Cattle = -6.7% YTD
  4. Corn = -7.6% YTD
  5. Wheat = -7.9% YTD
  6. Coffee = -9.7% YTD
  7. Sugar -10.8% YTD
  8. Gold = -12.1% YTD
  9. Copper = -13.2% YTD
  10. Silver = -20% YTD

Do you hear me now, Ben? Do more of this. Do more of nothing.


On a 3 month duration, the US stock market gets this inasmuch as it did in 1983-89 and 1993-99 (#StrongDollar periods). Our intermediate-term TREND correlation between the USD and US Stocks (SPY) = +0.72. USD vs Commodities (CRB Index) on a 3 month duration is -0.71. It’ll keep working, unless Bernanke says he’ll devalue the Dollar again. Distant Peoples, Unite!


Our immediate-term Risk Ranges for Gold, Oil, US Dollar, EUR/USD, USD/YEN, UST10yr Yield, VIX, and the SP500 are now $1, $98.07-104.83, $81.58-82.63, $1.29-1.31, 97.11-100.93, 1.66-1.76%, 11.67-14.29, and 1, respectively.


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Distant Peoples - Chart of the Day


Distant Peoples - Virtual Portfolio


TODAY’S S&P 500 SET-UP – May 1, 2013     

As we look at today's setup for the S&P 500, the range is 35 points or 1.41% downside to 1575 and 0.78% upside to 1610.










  • YIELD CURVE: 1.46 from 1.46
  • VIX  closed at 13.52 1 day percent change of -1.39%

MACRO DATA POINTS (Bloomberg Estimates):

  • Treasury Quarterly Refunding Announcement
  • 7am: MBA Mortgage Applications, April 26 (prior 0.2%)
  • 8:15am: ADP Employment Change, April, est. 150k (prior 158k)
  • 8:58am: Markit US PMI Final, April, est. 52.0
  • 10am: Construction Spending M/m, March, est. 0.6% (prior 1.2%)
  • 10am: ISM Manufacturing, April, est. 50.6 (prior 51.3)
  • 10am: ISM Prices Paid, April, est. 52.6 (prior 54.5)
  • 10:30am: DOE Energy Inventories
  • 2pm: FOMC meeting ends today, est. 0.25% (prior 0.25%)
  • 5pm: Total Vehicle Sales, April, est. 15.30m (prior 15.22m)
  • 5pm: Domestic Vehicle Sales, April, est. 12.00m (prior 12.00m)


    • House, Senate not in session
    • Treasury announces quarterly refunding plans for govt operations, may comment on U.S. debt; Obama in Feb. signed legislation suspending $16.4t debt limit through May 18
    • FOMC releases policy statement at close of two-day meeting


  • Fed seen slowing stimulus with QE cut to $50b by yr-end
  • PREVIEW April Auto Sales: SAAR may post 6th month above 15m
  • U.S. manufacturing probably grew at slower pace in April
  • Facebook seen reporting sales jump as mobile-ad options expand
  • T-Mobile USA to debut on NYSE today after MetroPCS combination
  • ING U.S. unit prepares IPO led by “unsung heroes” of AIG bailout
  • SEC weighs cross-border swap rules amid calls to restrict reach
  • BMC Software gets >$6.5b bid from Bain, Golden Gate: Reuters
  • Schwab sues BofA, other banks over alleged Libor manipulation
  • China manufacturing expanded at weaker pace in April
  • Yahoo discussions over Dailymotion stall, French official says
  • DreamWorks posts surprise 1Q profit aided by “The Croods”


    • Haemonetics (HAE) 6am, $0.46
    • Iron Mountain (IRM) 6am, $0.27
    • ADT (ADT) 6am, $0.43
    • Humana (HUM) 6am, $1.80
    • Knight Capital Group (KCG) 6am, $0.04
    • Genesee & Wyoming (GWR) 6am, $0.89
    • Coventry Health Care (CVH) 6:30am, $0.81
    • Blackbaud (BLKB) 6:30am, $0.20
    • Progressive Waste Solutions (BIN CN) 6:30am, $0.20
    • Loblaw (L CN) 6:30am, C$0.47
    • SPX (SPW) 6:30am, $0.26
    • CVS Caremark (CVS) 7am, $0.79 - Preview
    • Merck (MRK) 7am, $0.79 - Preview
    • Time Warner (TWX) 7am, $0.74 - Preview
    • Radian (RDN) 7am, $(0.09)
    • Chesapeake Energy (CHK) 7am, $0.25 - Preview
    • WEX (WEX) 7am, $0.96
    • Amtrust Financial (AFSI) 7am, $0.73
    • Jean Coutu Group (PJC/A CN) 7am, C$0.26
    • American Tower (AMT) 7am, $0.82
    • Jones Group (JNY) 7am, $0.15
    • Comcast (CMCSA) 7am, $0.51 - Preview
    • El Paso Electric (EE) 7am, $0.12
    • Viacom (VIAB) 7am, $0.95 - Preview
    • AllianceBernstein (AB) 7:02am, $0.36
    • Avista (AVA) 7:05am, $0.69
    • ViroPharma (VPHM) 7:30am, $0.17
    • Hyatt Hotels (H) 7:30am, $0.08
    • Energizer (ENR) 7:30am, $1.28
    • Hospira (HSP) 7:30am, $0.44 - Preview
    • Sealed Air (SEE) 7:30am, $0.18
    • Exelon (EXC) 7:30am, $0.68
    • Clean Harbors (CLH) 7:30am, $0.33
    • IntercontinentalExchange (ICE) 7:30am, $1.97
    • MSCI (MSCI) 7:30am, $0.54
    • Pinnacle Entertainment (PNK) 8am, $0.19
    • Cott (BCB CN) 8am, $0.09
    • Devon Energy (DVN) 8am, $0.55 - Preview
    • Mastercard (MA) 8am, $6.17
    • Phillips 66 (PSX) 8am, $1.89 - Preview
    • Arrow Electronics (ARW) 8am, $0.88
    • IPG Photonics (IPGP) 8am, $0.70
    • KKR Financial (KFN) 8:20am, $0.35
    • Clorox (CLX) 8:30am, $1.05
    • Rowan (RDC) 8:30am, $0.52
    • PDC Energy (PDCE) 8:30am, $0.16
    • MFA Financial (MFA) 8:30am, $0.21
    • Allergan (AGN) 9am, $0.96
    • Expeditors Intl of Washington (EXPD) 9am, $0.39
    • Enbridge Energy Partners (EEP) Bef-mkt, $0.17
    • Cameco (CCO CN) Bef-mkt, C$0.08
    • Unum Group (UNM) 4pm, $0.78
    • Covance (CVD) 4pm, $0.72
    • MedAssets (MDAS) 4pm, $0.29
    • Walter Energy (WLT) 4pm, $(0.90) - Preview
    • Equity One (EQY) 4pm, $0.29
    • Acadia Healthcare (ACHC) 4pm, $0.20
    • Genpact (G) 4pm, $0.22
    • Caesars Entertainment (CZR) 4pm, $(1.46)
    • Kimco Realty (KIM) 4:01pm, $0.32
    • CBS (CBS) 4:01pm, $0.68 - Preview
    • New Gold (NGD CN) 4:01pm, $0.10
    • Impax Laboratories (IPXL) 4:01pm, $0.20
    • Pioneer Natural Resources (PXD) 4:01pm, $0.97
    • Cornerstone OnDemand (CSOD) 4:01pm, $(0.08)
    • Synchronoss Technologies (SNCR) 4:01pm, $0.28
    • DexCom (DXCM) 4:01pm, $(0.17)
    • Las Vegas Sands (LVS) 4:01pm, $0.67 - Preview
    • Healthcare Realty Trust (HR) 4:02pm, $0.32
    • Shutterfly (SFLY) 4:02pm, $(0.14)
    • Pharmacyclics (PCYC) 4:02pm, $0.21
    • MetLife (MET) 4:03pm, $1.30
    • CACI International (CACI) 4:05pm, $1.65
    • Allstate (ALL) 4:05pm, $1.30
    • Con-way (CNW) 4:05pm, $0.27
    • Atmel (ATML) 4:05pm, $0.03
    • Hanger (HGR) 4:05pm, $0.26
    • Tetra Tech (TTEK) 4:05pm, $0.40
    • JDS Uniphase (JDSU) 4:05pm, $0.11
    • Mid-America Apartment Communities (MAA) 4:05pm, $1.19
    • Sovran Self Storage (SSS) 4:05pm, $0.83
    • Corporate Executive Board (CEB) 4:05pm, $0.63
    • Endurance Specialty (ENH) 4:05pm, $1.09
    • ExlService (EXLS) 4:05pm, $0.40
    • PHH (PHH) 4:05pm, $0.39
    • Facebook (FB) 4:05pm, $0.13 - Preview
    • Visa (V) 4:05pm, $1.81
    • Yelp (YELP) 4:05pm, $(0.06)
    • Rovi (ROVI) 4:05pm, $0.46
    • Prudential Financial (PRU) 4:07pm, $1.88
    • Lincoln National (LNC) 4:10pm, $1.10
    • Boston Beer (SAM) 4:10pm, $0.62
    • SS&C Technologies (SSNC) 4:10pm, $0.43
    • Western Gas Partners (WES) 4:10pm, $0.38
    • Fidelity National (FNF) 4:15pm, $0.40
    • Northeast Utilities (NU) 4:15pm, $0.66
    • Intrepid Potash (IPI) 4:15pm, $0.19
    • KAR Auction Services (KAR) 4:15pm, $0.32
    • C&J Energy Services (CJES) 4:20pm, $0.57
    • Atwood Oceanics (ATW) 4:30pm, $1.22
    • Essex Property Trust (ESS) 4:30pm, $1.88
    • Concur Technologies (CNQR) 4:30pm, $0.24
    • Charles River Laboratories (CRL) 4:30pm, $0.71
    • Sabra Health Care REIT (SBRA) 4:30pm, $0.48
    • Eagle Rock Energy (EROC) 4:30pm, $0.08
    • CVR Partners (UAN) 4:30pm, $0.47
    • Federal Realty Investment Trust (FRT) 4:30pm, $1.12
    • Tesoro (TSO) 4:31pm, $0.70
    • Avis Budget (CAR) 4:35pm, $0.02
    • RenaissanceRe (RNR) 4:45pm, $3.04
    • BioMed Realty Trust (BMR) 4:45pm, $0.39
    • Marriott International (MAR) 5pm, $0.40
    • WGL Holdings (WGL) 5pm, $1.47
    • Canfor (CFP CN) 5pm, C$0.49
    • TeleTech Holdings (TTEC) 5pm, $0.31
    • Triumph Group (TGI) 5pm, $1.60
    • Orient-Express Hotels (OEH) 5pm, $(0.13)
    • Hornbeck Offshore Services (HOS) 5pm, $0.30
    • Constellation Software (CSU CN) 5pm, $1.74
    • Concho Resources (CXO) 5pm, $0.78
    • Murphy Oil (MUR) 5pm, $0.98
    • Atmos Energy (ATO) 5:01pm, $1.32
    • PolyOne (POL) 5:05pm, $0.26
    • Integrys Energy (TEG) 5:08pm, $1.60
    • Brookdale Senior Living (BKD) 5:12pm, $(0.04)
    • Vectren (VVC) 5:30pm, $0.67
    • MDU Resources (MDU) 5:45pm, $0.23
    • Archer-Daniels-Midland (ADM) Aft-mkt, $0.50
    • Curtiss-Wright (CW) Aft-mkt, $0.41
    • Pengrowth Energy (PGF CN) Aft-mkt, C$0.01
    • Macerich (MAC) Aft-mkt, $0.79
    • Pason Systems (PSI CN) Aft-mkt, C$0.35
    • CVR Refining (CVRR) Aft-mkt, $1.58
    • Western Gas Equity Partners (WGP) Aft-mkt, $0.12
    • HudBay Minerals (HBM CN) Aft-mkt, C$0.02
    • Bell Aliant (BA CN) Aft-mkt, C$0.40
    • Realogy Holdings (RLGY) Aft-mkt, $(0.44)


  • Gold ETP Holdings Cap Record Drop Wiping $17.9 Billion in Assets
  • China Affair With Cheap Diamonds Heats Mass Market: Commodities
  • U.S. Mint Sales of Gold Coins Advance to Highest in Three Years
  • Brent Crude Declines a Second Day as Global Supplies Increase
  • Copper Slides on Weaker-Than-Estimated Chinese Manufacturing
  • Gold Falls as Investors Weigh Fed Meeting With ETP Holdings Drop
  • Wheat Slides as World Supply Rebound Makes Up for Kansas Losses
  • Sugar Swings in New York on Delivery Speculation; Cocoa Stable
  • Cash for Doomed Crops Means U.S. Farmers Avoid Disaster Costs
  • Biofuel Pioneer Forsakes Renewables to Make Gas-Fed Fuel: Energy
  • Biggest Brazil Smelter Says Copper Demand Is Exceeding Capacity
  • WTI Set to Tumble If It Fails to Breach $100: Technical Analysis
  • Cocoa Deliveries From Brazil’s Bahia Little Changed: Hartmann
  • Cheapest Europe Naphtha Seen Losing Asian Luster: Energy Markets























The Hedgeye Macro Team












Today we bought Lennar (LEN) at $40.59 a share at 1:55 PM EDT in our Real-Time Alerts. We sold the LEN long higher last week and now I'm getting an immediate-term TRADE oversold signal. We remain bullish on #HousingsHammer (and love the 18% short interest in this stock). 



SPB - A Miss, But Some Good with Not So Good

SPB reported Q2 EPS of $0.44, $0.08 below consensus.  The stock is not well-followed or particularly well-modeled, but the results are still likely below expectations.  More important than the EPS result, in our view, was that the company maintained its FCF guidance (the basis of the story is in an accelerating free cash flow profile) and continues to believe that it can delever its balance sheet by over $200 million in 2H.  With leverage to one of our key macro themes (housing) in the form of its newly acquired hardware and home improvement business and guidance of approximately $4.50 per share in FCF in ’13, SPB is an interesting story in a sector without a lot of interesting stories.

If this name were to be weak tomorrow (below $55), we would be buyers.  The name isn’t for everyone, admittedly – it trades by appointment and long/short investors would likely get frustrated having to hedge it out.  However, in terms of potential upside, we think it is definitely worth doing more work on the name.

What we liked:

  • Remains on pace for $240 million of FCF in ‘13
  • Still on track to delever balance sheet by $200 million in 2H
  • Good quarter in Global Pet Supplies - +3.3% constant currency growth
  • Newly acquired Hardware and Home Improvement business was +10.6% year over year top line

What we didn’t like:

  • Going through the press release and updating the model – tighten it up, people
  • EPS missed consensus, but that is not the meat of the story
  • Sales in just about every segment were down (but for the pro forma results in Home and Hardware and Global Pet Supplies) with total firm constant currency organic revenue declining 1.5%
  • Global Batteries declined 1.8% and the commentary indicated that the company gained share in North America – with consensus modeling just a 1% top line decline in ENR you can probably rest a touch easier tonight before tomorrow’s EPS result
  • Home and Garden declined 7.0%, confirming what we suspect (and is likely widely known) will be a weak quarter at SMG.  At $42, we suspect lighter results were largely priced in at SMG, at $45, we are a little less sure.  Also, SPB management specifically pointed out that the company does not participate in the fertilizer, seed or mulch big business – may have been to clarify, or may have been a sign those categories were weaker overall.

Bottom line, keep this one on your radar screens and be a buyer on material weakness.


Call with questions,




Robert  Campagnino

Managing Director





Matt Hedrick

Senior Analyst

Stock Report: Wolverine World Wide (WWW)

Stock Report: Wolverine World Wide (WWW)  - he sr www boxes


WWW is one of the best managed and most consistent companies in retail. We’re rarely fans of acquisitions, but the recent addition of Sperry, Saucony, Keds and Stride Rite (known as PLG) gives WWW a multi-year platform from which to grow.


We think that the preailing bearish view is very backward looking and leaves out a big piece of the WWW story, which is that integration of these brands into the WWW portfolio will allow the former PLG group to achieve what it could not under its former owner (most notably – international growth, and leverage a more diverse selling infrastructure in the US). Furthermore it will grow without needing to add the capital we’d otherwise expect as a stand-alone company – especially given WWW’s consolidation from four divisions into three -- which improves asset turns and financial returns.


The stock is hardly washed out – we get that. But the reality is that this for a high quality globally diversified portfolio that has consistent 20-30% EPS growth and improving returns we don’t think that arguing a high teens multiple is a stretch. 18x our 2014 estimate of $3.55 gets us to a $64 stock, or 36% above current levels. Take that out to 2015 and 2016 and we’re looking at $75 and $95, respectively. When we juxtapose that alongside 15x what we think is a worst case $2.50 in EPS power, we’re looking 3 to 1 upside/downside over the course of a 12-18 months.



INTERMEDIATE TERM (the next 3 months or more)

There is currently a bifurcation between the Legacy business and the new PLG brands. Due to heavy exposure to a) Europe, which is in a perennial recession, b) the US industrial economy with its CAT, Harley and HyTest brands, and c) the cold-weather outdoor boot business through its Merrell brand – which has been shellacked two years in a row due to unfavorable weather – the Legacy brands are under pressure. But accretion in the PLG brands is well ahead of plan. The company is playing down the combination synergies – and in fact is dodging the topic at all costs. Our sense is that it wants 2013 to be the year of ‘accretion’ while ’14 and ’15 will be the year of synergies.


LONG-TERM (the next 3 years or less)

PLG was only 5% outside of the US under its former owner, but WWW’s legacy business was 40% outside of the US due to its strong International distribution network of 10,000+ points of distribution in over 200 countries.  As WWW layers these new brands over its infrastructure, we think it can drive double-digit growth in this billion dollar business while lowering unit costs. That gets us to 7-8% consolidated top line growth, 15-2-% EBIT growth, and 20%+ EPS growth.  Add on accelerated cash flow generation and subsequent debt paydown, and we think that this story has legs.  



Stock Report: Wolverine World Wide (WWW)  - he sr www chart



In preparation for MAR's 1Q 2013 earnings release tomorrow, we’ve put together the recent pertinent forward looking company commentary.




  • "New York's always been a dynamic market, continues to be. A lot of supply is coming on, mostly limited service-type branded supply, but that supply is getting absorbed. Probably has the effect of holding down rate a little bit, but clearly occupancy is being absorbed and those hotels are filling up. Right now, there's not much full-service construction anywhere in the nation, except for New York, and that's because developers can get their returns in New York, and that's why it's getting done there. So I think New York will be a great market. The other thing you have is Sandy, you still have some occupancy in there from Sandy that caused some compression in the city and pushed some stuff out."
  • "As of year-end, our Group pace was running about 6%, probably a little more rate than occupancy in that. We feel like we've got about 65%, 70% of our Group on the books for 2013 right now, which is where you want to be. That leaves about 30% to be booked in the year for the year. As you look at that in the year, for the year bookings with occupancy near peak levels, you'll get more pricing in there."
    • "You're seeing the window lengthen a little bit. It's not lengthening a lot, but it's lengthening a little bit which means those groups are saying, I need to book it now for the – or I'm not going to get those dates I want out there because the occupancy has strengthened, so we're feeling good about Group."
  • "At year-end, we were about 85% done... with the corporate, special corporate negotiations. We came in probably just north of 5%. We were hoping to be maybe a point or two higher, but you'd had the whole fiscal cliff thing at the year-end kind of inhibited that a little bit. But we feel good about where we came out, north of 5% is a pretty good rate increase. But the good news was as we talk to our major customers, they indicate they're going to be travelling more in 2013, than 2012. That their budgets for travel were up and that's a good sign. Like you said, it's about 11% to 15% depending on the brand of our total transient mix or total mix and it's good to see that there's going to be a little more volume."
  • [EDITION in London, Miami, and New York] "We'll invest probably in those three properties you mentioned about $900 million in total. About $250 million of that will be in 2013. They're in various stages of completion. London will be finished and opened probably by June of this year. Miami, which is on South Beach, probably first quarter of 2014. And then the Clock Tower in New York City will be probably early 2015, give you kind of timing.  We'll recycle those hotels, sell those hotels shortly after they open, anywhere from six months, three to six months maybe after that, and recycle that capital."
  • "We're a BBB company, investment grade. That gets us into the commercial paper market. That's where we want to be. So we try to stay at a 3 to 3.25 adjusted debt-to-adjusted EBITDA. So as EBITDA grows, that creates debt capacity for that."
  • "What you'll see as we have those growth in rooms outside the U.S. in Asia-Pacific, Middle East, you're going to see an acceleration of incentive fees for those hotels."
  • [Incentive fee] "We're projecting by 2014, we'll be back at that $370 million level. But it'll be more international, less domestic."



  • "What we've seen over the last couple of years is the government has been much more cautious about travel spending. They've been much more cautious about food and beverage spending when they do hold meetings. In fact, a number of our hotels, we'll talk about how government groups over the last year or 18 months won't order lunch for their attendees at a government meeting."
  • "In Asia, GDP growth has moderated a bit, but continues to chug along at better than 5%. With the leadership transition complete, we think China travel should regain its footing later in the year.  In Asia, we expect first quarter REVPAR to increase at a mid single-digit rate, strengthening a few points as the year progresses."
  • "We expect Thailand and Indonesia to remain strong throughout the year."
  • "In the Caribbean and Latin America region, we expect first quarter REVPAR will increase at a mid single-digit rate, improving to a mid-to-high single-digit rate for the full year. Here, we're more bullish than in October. While economic growth has slowed a bit in Brazil, we've seen lodging demand strengthen in Mexico and the Caribbean. We are pursuing hotel development opportunities in Brazil, Mexico, Colombia, Peru and Chile."
  • "In Europe, we expect some modest improvement in GDP in 2013, but given the tough comparison to the Olympics and other events, we are still expecting flattish REVPAR growth for the quarter and the full-year, similar to our outlook in October."
  • "In the Middle East and Africa, we are modeling a mid single-digit increase in REVPAR, consistent with our October outlook, with double-digit REVPAR growth in the first quarter. In 2012, we signed 11 new projects in the region, Africa's extraordinary wealth of natural resources drives economic growth and we expect to open our first three Marriott Hotels in Sub-Saharan Africa no later than 2014. The Middle East and Africa region represent 3% of our fee revenue."
  • In the Middle East and Africa, we are modeling a mid single-digit increase in REVPAR, consistent with our October outlook, with double-digit REVPAR growth in the first quarter. In 2012, we signed 11 new projects in the region, Africa's extraordinary wealth of natural resources drives economic growth and we expect to open our first three Marriott Hotels in Sub-Saharan Africa no later than 2014. The Middle East and Africa region represent 3% of our fee revenue."
  • "Worldwide for 2013, we expect to open 30,000 rooms to 35,000 rooms. Most of these rooms are already under construction or under renovation; nearly half of our anticipated 2013 openings will be in the U.S., including conversions to our Autograph brand and newly-built limited service hotels."
  • "Incentive fee growth will be likely constrained by more modest REVPAR growth in Europe and Asia than we've seen in recent years."
  • [2013 Group pace]  "Well, there's a little bit of difference quarter-to-quarter, to be sure, and some of that is driven by seasonality. I think the back half is probably a bit stronger than the front half."
  • [2013] "We would expect to return anywhere from $800 million to $1 billion share repurchase and dividends to shareholders."
  • [Cash level] "I guess, we usually try to stay around the $100 million, and as long as we have access to commercial paper markets, which are robust and our credit rating we do, we kind of finance the business with the commercial paper markets. And that's backed with a $1.75 billion revolver."
  • "F&B is growing notwithstanding and should continue to grow in 2013."
  • "We have seen on a limited service side financing getting a little better, but it's still under terms that are requiring the developer to guarantee the debt, provide credit enhancements. And the leverage isn't what it was way back when, so to speak. But that money is becoming available, especially from regional and local banks as the CMBS market has strengthened providing capacity for those. As to the full-service hotels, especially whether a suburban or even urban full-service hotels, we haven't seen new construction type financing. Now financing is starting to show up for asset sales, but not for new construction."


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