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Core metrics were solid in May driving 6% YoY GGR growth.  Volatile Baccarat the laggard.



On the surface, May GGR growth of “only” 6% looks disappointing since we were expecting mid-teens growth off of low hold last year.  However, the core metric of slot volume was actually strong.  Baccarat drop actually declined 13% and hold was a little lower than normal which drove the negative variance from our estimate.  We would focus on the strength of slot volume which suggests an increasingly healthier Las Vegas Strip.




Baccarat drop and revenue are notoriously volatile.  Following February and March YoY growth of 100% and 39%, respectively, Baccarat drop fell 17% and 11%, respectively in April and May.  History suggests June and/or July should show marked improvement.  Typically, negative Baccarat months are followed by strong months due to “whale play” timing.  The following chart displays the YoY volatility in monthly volume but also shows that the annual volume is fairly consistent and generally up.




Morning Reads on Our Radar Screen

Takeaway: A quick look at some stories on Hedgeye's radar screen.

Keith McCullough – CEO

Bernanke Supports Continuing Stimulus Amid Debate Over QE (via Bloomberg)

Dollar slips as markets reassess Fed plans to scale back QE (via Reuters)


Morning Reads on Our Radar Screen - bbo9


Tom Tobin – Healthcare

Why The White House Is Panicking About ObamaCare (via Forbes)


Matt Hedrick – Macro

Germans Hail Snowden as NSA Evokes Stasi Seizing Lives of Others (via Bloomberg)


Howard Penney – Restaurants

Restaurant sales stall in June (via Restaurant News)


Jonathan Casteleyn – Financials

Bernanke Supports Continuing Stimulus Amid Debate Over QE (JC note: When the lender of last resort continues to be the lender of first resort unintended consequences happen … via Bloomberg)


Brian McGough – Retail

L Brands Reports Flat June Comps (LTD) (via Dividend.com)

Dial-in: Stratfor's Top Three Geo-Political Tail Risks Featuring George Friedman

Dial-in: Stratfor's Top Three Geo-Political Tail Risks Featuring George Friedman - friedman.dialin


We will be hosting an expert call featuring George Friedman, renowned author, Founder and Chairman of global intelligence company, Stratfor Enterprises. The call titled "Stratfor's Top Three Geo-Political Tail Risks" will be held today, July 11th at 11:00am EDT.




A global geopolitical overview of what IS important.




  • Toll Free Number:
  • Direct Dial Number:
  • Conference Code: 134473#
  • There are no slides associated with this call



Europe, China and the U.S. are the 3 pillars of the international system that Stratfor considers important right now and for the foreseeable future.


On the call Friedman will discuss the historical shift that is taking place, current events and the potential for long term impact.




George Friedman founded Stratfor in 1996 and now guides Stratfor's strategic vision and oversees the development and training of the company's intelligence unit.


Friedman has authored several books, including The Next 100 Years, The Next Decade, America's Secret War, The Intelligence Edge, The Coming War With Japan and The Future of War.


He received his Bachelor's degree from the City College of the City University of New York and holds a Ph.D. in Government from Cornell University.



  • Global Geopolitics
  • Intelligence Gathering and Analysis
  • International Affairs
  • Geopolitical Forecasting
  • Modern and Historical Warfare
  • U.S. Foreign Policy

For Stratfor's latest strategic piece CLICK HERE. For more information about Stratfor and their global strategic analysis offerings CLICK HERE.



Contact if you have any further questions. 

Casual Dining Double Dip

Knapp Track and Black Box Intelligence


Yesterday, Knapp and Black Box both reported disappointing sales trends for June after posting three straight months of positive sales.


Knapp reported that June 2013 same-restaurant sales declined 2%, while comparable traffic trends declined 3.1%.  April and May same-restaurant sales trends both showed a 0.5% increase.  Overall for the second quarter, same-restaurant sales and traffic were down 0.3% and 1.5%, respectively.


Black Box reported slightly better June numbers than Knapp.  June 2013 same-restaurant sales came in flat, while comparable traffic trends declined 2.5%.  April and May same-restaurant sales increased 0.4% and 0.8%, respectively.  The cumulative second quarter results showed a 0.4% increase in same-restaurant sales and a 2.0% decrease in traffic.


Despite the discrepancies in the numbers, both measures of sales trends suggest that this summer will present a challenging top line environment for the casual dining industry.  With the Bloomberg U.S. Full Service Restaurant Index up 37% YTD and valuations at cyclical highs, we see little room for upside in the group from current levels.


In our view, stocks most vulnerable to this type of environment are the marginal regional concepts that are trying to compete with the national chains.  Although our favorite short in the casual dining space is RRGB, we believe that very few stocks will be spared in the midst of a casual dining correction.




Other Casual Dining Names


CAKE – Remains on the Hedgeye Best Ideas list as we feel the business model is one of the best in the casual dining industry.  We don’t believe that DRI’s aggressive push toward discounting will impact CAKE nearly as much as more direct competitors in the space.


EAT – Has been a Hedgeye LONG tail call for three years.  Unfortunately, the Chili’s chain is in the direct line of fire for the DRI discounting initiatives.  We do not believe that EAT management will succumb to the temptation to increase discounting, but rather will continue to focus on what has been driving the business forward for the past few years. 


DRI – The spread between the Knapp and Black Box data suggests that DRI had a very bad June.  However, we cannot confirm that to be the case.  We are buyers of DRI on dips below $50.  Ultimately, we believe that DRI is in need of a major restructuring. 


BLMN – From a valuation perspective BLMN is the best short in the group - but valuation is not a catalyst.  In response to DRI, BLMN has stepped up its discounting, which will likely hurt the margin recovery story.  BLMN’s top line has been more resilient than others in the group which is a net positive.  While we view BLMN as a likely short, it is more due to a group call rather than any specific issue we have with the business model.


TXRH, BWLD, RT and BJRI – All of these names are on our list of potential shorts at these levels.



Casual Dining Double Dip - Black Box SSS



Casual Dining Double Dip - Black Box Traffic




Howard Penney

Managing Director


[PODCAST] Keith's AM Call: Bernanke

Hedgeye Risk Management CEO Keith McCullough takes his gloves off on the Central Planners at the Bernanke Fed. Keith's economic strategy this morning? Prayer.



Client Talking Points


Dollar Down is Ben Bernanke’s go-to move. Oil, Gold and Silver (virtually everything that’s regressive and unproductive to real consumption growth basically) is ripping. We definitely didn’t get the super-secret memo coming on that. This changes our US #GrowthAccelerating call to potentially SLOWING sequentially in Q3, and in a hurry. It's sad.


What’s more dangerous for rising oil prices? A Syrian overlord or a Monetary overlord like Bernanke? Someone evidently knew he was going to trump the Fed Minutes (half the Fed actually disagrees with him now) with his comments. Oil was front-running that, big time. Now Brent is above our long-term TAIL risk ling of $108.11/barrel. That's just great (if you’re long #GrowthSlowing this morning, that is).


The "Long Treasuries" lobby is large and Ben Bernanke buckled to it. The 10-year (2.58% last) sees the immediate-term risk range open wide to 2.41-2.77% now. Make no mistake, this central planning “communication tooling” vs economic gravity is only going to drive FICC (Fixed Income Currency Commodity) volatility higher, not lower. Atta boy Ben.

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

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 prevailing 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.


Gaming, Leisure & Lodging sector head Todd Jordan says Melco International Entertainment stands to benefit from a major new European casino rollout.  An MPEL controlling entity, Melco International Development, is eyeing participation in a US$1 billion gaming project in Barcelona.  The new project, to be called “BCN World,” will start with a single resort with 1,100 hotel beds, a casino, and a theater.  Longer term, the objective is for BCN World to have six resorts.  The first property is scheduled to open for business in 2016. 


Health Care sector head Tom Tobin has identified a number of tailwinds in the near and longer term that act as tailwinds to the hospital industry, and HCA in particular. This includes: Utilization, Maternity Trends as well as Pent-Up Demand and Acuity. The demographic shift towards more health care – driven by a gradually improving economy, improving employment trends, and accelerating new household formation and births – is a meaningful Macro factor and likely to lead to improving revenue and volume trends moving forward.  Near-term market mayhem should not hamper this  trend, even if it means slightly higher borrowing costs for hospitals down the road. 

Three for the Road


Top 3 Bloomberg headlines this morn are all about the almighty central planner in Chief; just as Jefferson designed it



"It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."
- Henry Ford


Global equities have lost about $3 trillion in value and 10-year Treasury yields have surged more than 50 basis points since May 22, when Bernanke indicated the central bank may reduce its bond-buying program as economic risks subside. (Bloomberg)

Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.