The Macau Metro Monitor, May 22, 2013




Galaxy's CFO Robert Drake said that he expects 2013 casino revenue for the city to increase by “mid-teens,” while VIP revenue will expand by “high single digit."  He added that the company is considering a “golf course” or “some other non-gaming amenity” if it is successful in acquiring a piece of land on Hengqin Island and the development of facilities complementary to what it has across the water at Galaxy Macau on Cotai.



Sarkis Izmirlian, CEO of resort company Baha Mar Ltd., said he selected Global Gaming Asset Management, LLC—led by former longtime LVS president William Weidner—to manage the gambling operations of his project, partly because he believes the team understands China better than anyone else.  The Baha Mar resort, currently the largest tourism development in the West, is being built by China State Construction Engineering Corp. and primarily financed by the Export-Import Bank of China. The selection of Mr. Weidner's team further solidified China's role in the project.


The beachfront Baha Mar project in Nassau will have a 100,000-square-foot casino with more than 150 gambling tables and 1,500 slot machines as well as luxury hotels, dining and shopping, a golf course and a convention center.  It is set to open in December 2014.


Once the resort opens, Izmirlian said he expects it will account for 10% to 15% of the Bahamian economy. While the Bahamas has historically relied on the U.S. for 90% of its business, Izmirlian said he hopes Baha Mar can help to broaden its appeal, including to Chinese visitors.


Weidner, whose company is also managing the casino operations of Philippine ports magnate Enrique Razon Jr.'s recently opened Solaire Resort & Casino in Manila, said he plans to engage junket operators to bring Chinese customers to Baha Mar.  He said he also plans to reach out to high-rollers directly.  However, the current absence of direct flights between China and the Bahamas could complicate the process.




Your Opinion

“Look, I want to hear your opinion.”

-George F. Kennan


One of the hardest things to do in this profession is to check your position at the door and listen to the other side of the trade. Some opinions matter; some don’t. The market’s opinion always matters – so don’t just hear Mr. Market; listen to him very closely.


Our all-star energy analyst, Kevin Kaiser, and I had the opportunity to debate one of our best short ideas with the top holder of the stock yesterday. This wasn’t this 70 year old hedge fund manager’s first rodeo. Herniated disc in his back and all, he took the meeting with us during the market open. He had plenty of other things going on, but he really listened to our opinion. #Respect


At one point in the meeting, the debate between Kaiser and the analyst in the room got so intense that the PM decided to call the CEO of the company in question. He got the exec on the phone within a minute, told him what the bear case was (right in front of us), and asked for his opinion. Watching him listen to the CEO’s answers made me smile. Questioning and listening like that is not easy.


Back to the Global Macro Grind


This game isn’t easy. Laden with our individual confirmation biases, we are all hostage to being human while we play it. There is a real-time score on every decision we make. Our opinion is marked to market every day. If you don’t love that; you don’t love the game.


I’m not always sure if I am getting dumber or smarter each day. From a Global Macro Strategy perspective, that’s why I find it useful to study history – and not just market history – but the history of decision making. What was the process? Were they making decisions within an open network of information? What dogmas, agendas, and conflicts of interests impacted those decisions?


I just finished reading George F. Kennan’s brick of a biography. It’s thick because the man lived 101 years and kept strategizing until the very end. He never retired because he never stopped questioning, listening, and thinking. He was one of the most introspective and self-effacing strategists I have ever studied. If you had a seat at the table in a meeting with him, your opinion mattered.


“The thing you were planning for took place the day before yesterday, and everyone who wants you to know why in the hell you didn’t foresee it a long time ago.”George F. Kennan (pg 277)


Which brings me to today…


Mr. Macro Market’s opinion (#StrongDollar, Down Gold, Up Stocks) into Ben Bernanke’s testimony to Congress today is now old news. Why in the hell didn’t people foresee that there would ultimately be an end to these ridiculous expectations of endless QEs?


Why isn’t my opinion on expecting no more incremental easing equally ridiculous?


This is what makes a market. This is also why I spend so much time on both the road (seeing clients) and on Twitter (reviewing credible criticism of my positions). It’s not personal. Everyone’s goal in this game is to be right for the right reasons.


The aforementioned Kennan quotes came out of the US State Department policy planning meetings of 1. At the big turns in US policy history (post WWII in this case), respecting the pattern of decision making is critical.


Is Bernanke at the turn?


If you use the economic data for an opinion, he definitely should be. He’s been effectively easing monetary policy now since the day he took his seat as the head of the Fed in 2006. It’s been a long death march for conservative US Savers that needs to end.


What major macro markets have already front-run him making the turn?

  1. US Dollar Index = Bullish Formation (anything tighter, on the margin, is bullish for a currency that’s been devalued)
  2. Gold = Bearish Formation (up for 12 straight years with the last 6 of them becoming Bernanke’s bff, ending)
  3. US Treasury Yields = Bullish Formation (provided that our long-term TAIL risk line of 1.82% on the 10yr holds)

But will 1.82% on the 10yr hold? Will Bernanke acknowledge economic gravity? I don’t know. But neither my opinion nor yours will matter come 10AM EST. Pencils down – your central planning overlord will issue his un-elected opinion.


I think I know how our CYA State of The Union in this country got to this point. But the more history I read, the less I know about how politically conflicted and compromised it really was all along.


There’s nothing I can do about that history now. Neither can you. The best we can do each and every risk management morning isn’t playing the game we’d all like to play. It’s to play the game that history has put in front of us.


Our immediate-term Risk Ranges for Gold, Oil (Brent), Copper, US Dollar, USD/YEN, UST 10yr Yield, VIX, and the SP500 are now $1, $102.16-105.13, $3.26-3.39, $83.57-84.69, 101.49-104.62, 1.82-2.01%, 12.18-13.79, and 1, respectively.


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Your Opinion - Chart of the Day


Your Opinion - Virtual Portfolio

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This indispensable trading tool is based on a risk management signaling process Hedgeye CEO Keith McCullough developed during his years as a hedge fund manager and continues to refine. Nearly every trading day, you’ll receive Keith’s latest signals - buy, sell, short or cover.

Trade of the Day: LEN

Takeaway: Keith bought back shares of Lennar (LEN) this afternoon on strength in the nation’s housing market.

Keith bought shares in Lennar (LEN) at 12:34pm today at $42.34. Miami-based Lennar is one of the country’s largest new home builders.


Keith writes of his purchase of LEN stock, “(I’m) buying back our long #HousingsHammer position on an immediate-term TRADE oversold signal.”


Keith has already had two winning trades on the long side of LEN since March.


Trade of the Day: LEN - LEN

Consumer Staples: Ho-Hum

Takeaway: We still don't see material upside to 2013 consensus estimates across consumer staples.

Offered with minimal commentary, other than to say that revenues were marginally light of consensus and EPS modestly ahead, on average.  We still don't see material upside to 2013 consensus estimates across consumer staples.


Here's an all-encompassing look at Q1 consumer staples earnings in a single chart.


Consumer Staples: Ho-Hum - campo chart



If You Get the Dollar Right...

Takeaway: It’s critical to pay close attention to what the US dollar is doing. If you get the dollar right, you get a lot of things right.

It’s critical to pay close attention to what the US dollar is doing in the immediate term, as it serves as a good indicator of what lies ahead in the intermediate and longer term.


Get this:

  • On a three week basis, the S&P 500 versus the USD has a remarkable, positive correlation of +0.91. That is just fantastic. (Correlation of course is a statistical measure of how two securities move in relation to each other. Correlation varies from +1 to -1. Values close to +1 indicate a high-degree of positive correlation while values close to -1 indicate a high degree of negative correlation.
  • Meanwhile, the 10-year bond yield positive correlation versus the USD is +0.92 on a 3-week basis. That’s better than fantastic.
  • To top it off, gold has a negative 3-week inverse correlation of -0.87 against the dollar.  

Is that telling you something?


Bottom line: If you get the dollar right, you get a lot of things right. The dollar is getting stronger folks, not weaker. And that’s why we’re not ready to get off the bullish rocking horse.


Check out the chart below. It shows the performance of the USD index which has risen sharply since January. Note the table which shows the key correlations between the dollar and the S&P 500, commodities, 10-year Treasury and gold.


If You Get the Dollar Right... - U.S dollar 052113

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