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MACAU: AUGUST DETAIL LOOKS EVEN BETTER

Mass up huge, low hold on VIP

 

 

Here are some observations for August.  We will follow up with a more detailed analysis.

 

 

MARKET

  • GGR increased 18% YoY
  • Market hold (including direct play) was actually a little low:  2.89% vs trailing 24-mth avg of 2.98%
  • August GGR growth hold-adjusted in both periods:  +23.1%
  • Mass revenue grew a whopping 44%, the highest rate since January 2012
  • Lower hold drove VIP revenue growth of only 8% but junket volume increased 16% 

LVS

  • VIP hold was in-line with last year and near normal
  • GGR and Mass YoY growth of 41% and 72%, respectively, led the market
  • VIP and slot revenue growth also led the market
  • Market share of 22.3% almost met July’s big jump to 22.5% - increase from June was all volume driven

WYNN

  • Hold was meaningfully higher than normal but below last August
  • Mass revenue grew only 3% but Junket volume growth was strong at +16%
  • Market share jumped sequentially due to VIP volume and high hold
  • Mass share fell to 6.3%, tying its lowest ever

MPEL

  • MPEL held high on VIP and well above last year's
  • GGR and Mass growth of 30% and 69%, respectively - trailed only LVS in the market
  • VIP revenue growth was also the 2nd highest due to high hold
  • Junket volume only grew 2% and remains a concern for us – Junket share fell nearly to a 6 year low
  • Meanwhile, Mass share hit an all-time high at 14.1%

MGM

  • Hold was normal but well below August 2012's
  • Still, GGR grew 17%, in-line with the market
  • Mass growth trailed the market but Junket volume led the market

GALAXY

  • Held well below last year which caused a drop of 1% in GGR
  • Mass grew exactly in-line with market but VIP revenue fell 13%
  • Junket volume growth of only 11% also trailed the market
  • GGR market share fell to its lowest level in 9 months
  • Mass revenue share also fell below trend

SJM

  • Hold was below normal and last August's
  • Mass revenue growth of 24% was SJM’s highest in a year and a half but still trailed the market
  • GGR market share fell to its 2nd lowest level ever at 23.9%

MACAU:  AUGUST DETAIL LOOKS EVEN BETTER - vipv


Morning Reads on Our Radar Screen

Takeaway: A quick look at some stories on our radar screen.

Keith McCullough – CEO

Dollar hits over one-month highs (via Reuters)

Manufacturing ISM Rises To 55.7, Beats Expectations, Highest Since April 2011 (via Zero Hedge)

Hangar Haggling With Ballmer Girds Twitter’s CFO for IPO (via Bloomberg)

Syria crisis: UN says more than 2m have fled (via BBC)

 

Morning Reads on Our Radar Screen - doll999

 

Daryl Jones – Macro

Nobody Watches Business TV Anymore (via New York)

 

Josh Steiner – Financials

August Home Prices rose +12.3% Y/Y  (via CoreLogic)

Inventory crunch easing up for home buyers (via Sun Sentinel)

 

Jonathan Casteleyn – Financials

PIMCO highlights its stock funds: Expect continued weakness in bonds  (via Twitter)

 

Matt Hedrick – Macro

SNB Franc Shield Reaps Reward of Growth Defying Euro Area (via Bloomberg)

 

Kevin Kaiser – Energy

Decades of Ruptures From Defect Show Perils of Old Pipe (via Bloomberg)

Brent Crude Climbs On Missile Test Report (via WSJ)

 

Howard Penney – Restaurants

Starbucks Pastor-to-Be Shows Shift in U.S. Part-Time Job Market (via BusinessWeek)


Bullish Growth: SP500 Levels, Refreshed

Takeaway: Does US #GrowthAccelerating data support a stock market holding its TREND line? Today, the market’s answer to that is yes.

POSITION: 12 LONGS, 5 SHORTS @Hedgeye

 

I finally caught a post-summer beach wave to the upside here – and for the right reasons; summer is over, and US growth expectations continue to make a comeback.

 

Post the best NSA rolling Jobless Claims print we have seen all year (last Thursday = -10.6% y/y), and a solid PMI Friday, we just got a barn burner of a New Orders print out of the ISM (63.2! for AUG). Good looking end to the world there.

 

Additionally, across our core risk management durations here are the lines that matter to me most right now:

 

  1. Immediate-term TRADE resistance = 1661
  2. Intermediate-term TREND support = 1630

 

So, does US #GrowthAccelerating data support a stock market holding its TREND line? Today, the market’s answer to that is yes. And if you look at the growthier components of the stock market (QQQ), the answer is a resounding yes.

 

The new bear case is going to be that they were so wrong on growth’s slope change in 2013 that its really bearish now (from a much higher price).

 

Meanwhile, the real bear case to be made in 2013 was in bonds. #RatesRising for the right reasons.

KM

 

Keith R. McCullough
Chief Executive Officer

 

Bullish Growth: SP500 Levels, Refreshed - SPX


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European Banking Monitor: Calm Seas

Below are key European banking risk monitors, which are included as part of Josh Steiner and the Financial team's "Monday Morning Risk Monitor".  If you'd like to receive the work of the Financials team or request a trial please email .

 

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European Financial CDS - European financial swaps were wider almost across the board last week, though only by a small amount. The average and median widening was 3 and 5 bps, respectively. Tighteners included Sberbank and Greek banks.

 

European Banking Monitor: Calm Seas - zz. banks

 

Sovereign CDS – Italy, Spain and Portugal all widened on the week, by 6, 7 and 41 bps, respectively. Ireland and Japan were also wider by 6 and 2 bps, respectively. The US, Germany and France were all unchanged.

 

European Banking Monitor: Calm Seas - zz. sov1

 

European Banking Monitor: Calm Seas - zz. sov2

 

European Banking Monitor: Calm Seas - zz. sov3

 

Euribor-OIS Spread – The Euribor-OIS spread was unchanged last week at 13 bps. The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. 

 

European Banking Monitor: Calm Seas - zz. euribor

 


TUESDAY MORNING RISK MONITOR: INDIA REMAINS A MESS WHILE THE REST OF THE WORLD REMAINS CALM

Takeaway: Most of last week was uneventful from a risk monitoring standpoint, but India's banking system continues to slide.

Key Takeaways:

 

* Indian Financial CDS - Indian financials continue to deteriorate. Last week, 2 of 3 major Indian banks widened. ICICI was wider by 6 bps, IDB widened by 14 bps and State Bank of India tightened by 3 bps. Both ICICI and IDB are now knocking on the door of 400 bps (395 bps apiece), while State Bank is at 365 bps. This is the one area of geographical meltdown globally from a systemic banking standpoint.

 

 

Financial Risk Monitor Summary

 • Short-term(WoW): Negative / 3 of 13 improved / 5 out of 13 worsened / 5 of 13 unchanged

 • Intermediate-term(WoW): Positive / 5 of 13 improved / 4 out of 13 worsened / 4 of 13 unchanged

 • Long-term(WoW): Negative / 2 of 13 improved / 4 out of 13 worsened / 7 of 13 unchanged

 

TUESDAY MORNING RISK MONITOR: INDIA REMAINS A MESS WHILE THE REST OF THE WORLD REMAINS CALM - 15

 

1. U.S. Financial CDS -  Overall, swaps for US financials were essentially unchanged, tightening by 2 bps on average. Large caps were mixed with C and MS tighter, but JPM wider. Specialty Finance swaps were tighter among both cards and MIs. Insurance swaps were flat to tighter. Overall, swaps tightened for 17 out of 27 domestic financial institutions.

 

Tightened the most WoW: AXP, C, MBI

Widened the most WoW: JPM, GS, PRU

Tightened the most WoW: C, COF, MET

Widened the most MoM: MBI, JPM, TRV

 

TUESDAY MORNING RISK MONITOR: INDIA REMAINS A MESS WHILE THE REST OF THE WORLD REMAINS CALM - 1

 

2. European Financial CDS - European financial swaps were wider almost across the board last week, though only by a small amount. The average and median widening was 3 and 5 bps, respectively. Tighteners included Sberbank and Greek banks.

 

TUESDAY MORNING RISK MONITOR: INDIA REMAINS A MESS WHILE THE REST OF THE WORLD REMAINS CALM - 2

 

3. Asian Financial CDS - Indian financials continue to deteriorate. Last week, 2 of 3 major Indian banks widened. ICICI was wider by 6 bps, IDB widened by 14 bps and State Bank of India tightened by 3 bps. Both ICICI and IDB are now knocking on the door of 400 bps (395 bps apiece), while State Bank is at 365 bps. Chinese and Japanese financials were both nominally tighter.

 

TUESDAY MORNING RISK MONITOR: INDIA REMAINS A MESS WHILE THE REST OF THE WORLD REMAINS CALM - 17

 

4. Sovereign CDS – Italy, Spain and Portugal all widened on the week, by 6, 7 and 41 bps, respectively. Ireland and Japan were also wider by 6 and 2 bps, respectively. The US, Germany and France were all unch'd. 

 

TUESDAY MORNING RISK MONITOR: INDIA REMAINS A MESS WHILE THE REST OF THE WORLD REMAINS CALM - 18

 

TUESDAY MORNING RISK MONITOR: INDIA REMAINS A MESS WHILE THE REST OF THE WORLD REMAINS CALM - 3

 

TUESDAY MORNING RISK MONITOR: INDIA REMAINS A MESS WHILE THE REST OF THE WORLD REMAINS CALM - 4

 

5. High Yield (YTM) Monitor – High Yield rates fell 7.4 bps last week, ending the week at 6.48% versus 6.55% the prior week.

 

TUESDAY MORNING RISK MONITOR: INDIA REMAINS A MESS WHILE THE REST OF THE WORLD REMAINS CALM - 5

 

6. Leveraged Loan Index Monitor – The Leveraged Loan Index rose 2.0 points last week, ending at 1802.

 

TUESDAY MORNING RISK MONITOR: INDIA REMAINS A MESS WHILE THE REST OF THE WORLD REMAINS CALM - 6

 

7. TED Spread Monitor – The TED spread rose 0.3 basis points last week, ending the week at 23.7 bps this week versus last week’s print of 23.41 bps.

 

TUESDAY MORNING RISK MONITOR: INDIA REMAINS A MESS WHILE THE REST OF THE WORLD REMAINS CALM - 7

 

8. CRB Commodity Price Index – The CRB index rose 1.0%, ending the week at 291 versus 288 the prior week. As compared with the prior month, commodity prices have increased 2.1% We generally regard changes in commodity prices on the margin as having meaningful consumption implications.

 

TUESDAY MORNING RISK MONITOR: INDIA REMAINS A MESS WHILE THE REST OF THE WORLD REMAINS CALM - 8

 

9. Euribor-OIS Spread – The Euribor-OIS spread was unchanged last week at 13 bps. The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. 

 

TUESDAY MORNING RISK MONITOR: INDIA REMAINS A MESS WHILE THE REST OF THE WORLD REMAINS CALM - 9

 

10. Chinese Interbank Rate (Shifon Index) –  The Shifon Index fell 31 basis points last week, ending the week at 2.96% versus last week’s print of 3.27%. The Shifon Index measures banks’ overnight lending rates to one another, a gauge of systemic stress in the Chinese banking system.

 

TUESDAY MORNING RISK MONITOR: INDIA REMAINS A MESS WHILE THE REST OF THE WORLD REMAINS CALM - 10

 

11. Markit MCDX Index Monitor – Last week spreads widened 10 bps, ending the week at 106 bps versus 96 bps the prior week. The Markit MCDX is a measure of municipal credit default swaps. We believe this index is a useful indicator of pressure in state and local governments. Markit publishes index values daily on six 5-year tenor baskets including 50 reference entities each. Each basket includes a diversified pool of revenue and GO bonds from a broad array of states. We track the 16-V1.

 

TUESDAY MORNING RISK MONITOR: INDIA REMAINS A MESS WHILE THE REST OF THE WORLD REMAINS CALM - 11

 

12. Chinese Steel – Steel prices in China fell 0.3% last week, or 12 yuan/ton, to 3598 yuan/ton. We use Chinese steel rebar prices to gauge Chinese construction activity, and, by extension, the health of the Chinese economy.

 

TUESDAY MORNING RISK MONITOR: INDIA REMAINS A MESS WHILE THE REST OF THE WORLD REMAINS CALM - 12

 

13. 2-10 Spread – Last week the 2-10 spread tightened to 238 bps, -5 bps tighter than a week ago. We track the 2-10 spread as an indicator of bank margin pressure.

 

TUESDAY MORNING RISK MONITOR: INDIA REMAINS A MESS WHILE THE REST OF THE WORLD REMAINS CALM - 13

 

14. XLF Macro Quantitative Setup – Our Macro team’s quantitative setup in the XLF shows 1.5% upside to TRADE resistance of $19.74 and 1.0% downside to TREND support of $19.24.

 

TUESDAY MORNING RISK MONITOR: INDIA REMAINS A MESS WHILE THE REST OF THE WORLD REMAINS CALM - 14

 

Joshua Steiner, CFA

 

Jonathan Casteleyn, CFA, CMT

 


September Morn...

Client Talking Points

JAPAN

After a big move on bullish European economic data yesterday, a +3% move higher got the party started early in Japanese Equities as the Yen (versus the US Dollar) remains below 96.89 TREND resistance. The Nikkei is up almost 36% year-to-date. Ka-boom! But holding Hedgeye's TREND support of 13,362 is the more important risk management point. We like Japan. The rest of Asia? Not so much.

UK

Paul Krugman? He can stop writing about austerity crushing the UK economy now. The UK economic data sees #GrowthAccelerating yet again in August (so did the USA’s PMI print of 53 on Friday, don’t forget). Witness the blockbuster Construction PMI print of 59.1 this morning (versus 57 in July). Both the FTSE and Pound are bullish TREND in our Hedgeye model.

UST 10YR

Got #RatesRising? In case you missed it, the 10-year US Treasury yield corrected a whopping 4 basis points last week. Well, it bounced again this morning and is making yet another higher-low here trading back to 2.83%. There is no resistance up to 2.93%. Our Hedgeye immediate-term risk range is 2.71-2.93%. We are still bearish on bonds. And yes, we are still bullish on US growth stocks. The yield spread has widened back to +242 basis points. The Financials (XLF)? They like that.

Asset Allocation

CASH 26% US EQUITIES 27%
INTL EQUITIES 23% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 24%

Top Long Ideas

Company Ticker Sector Duration
WWW

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.

MPEL

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.

HCA

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

TWEET OF THE DAY

Yield Spread backs up to +242bps wide (10s minus 2s); should be bullish for $BAC today @KeithMcCullough

QUOTE OF THE DAY

"No matter what business you're in, you can't run in place or someone will pass you by. It doesn't matter how many games you've won." - Jim Valvano

STAT OF THE DAY

#RatesRising? The average rate for high-yield and investment-grade U.S. corporate debt surged almost a full percentage point from May to June. Even with the jump to 4.3%, rates are below the average of 6.9% in the decade before the start of the bull market.(Bloomberg)


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