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The M3: OKADA CLEARED; MACAU SURPLUS RECORD

THE MACAU METRO MONITOR, SEPTEMBER 11, 2013

 

 

OKADA'S UNIVERSAL SAYS LETTER CLEARS IT OF GRAFT macaubusiness.com

Universal Entertainment received a letter dated August 23rd from the Philippine Economic Zone Authority clearing it of wrongdoing in obtaining land for its Manila casino-resort.

 

GOVT BUDGET SURPLUS PROJECTED TO BREAK RECORD macaubusiness.com

Macau's government budget surplus is on track to exceed 2012's MOP72.8BN by month end. At the end of August, the cumultive surplus stood at MOP68BN, over 30% higher than the YTD surplus from a year ago. 

 

 

 


September 11, 2013

September 11, 2013 - dtr

 

BULLISH TRENDS

September 11, 2013 - 10yr

September 11, 2013 - spx

September 11, 2013 - nik

September 11, 2013 - dax

September 11, 2013 - dxy

September 11, 2013 - euro

September 11, 2013 - oil

September 11, 2013 - natgas

 

BEARISH TRENDS

September 11, 2013 - VIX

September 11, 2013 - yen
September 11, 2013 - gold

September 11, 2013 - copper


Deafening Drops

This note was originally published at 8am on August 28, 2013 for Hedgeye subscribers.

“The noise can be deafening.”

-George Gilder

 

When he wrote that in Knowledge and Power, Gilder was referring to government interference (in markets). He also went on to make the critical, but often overlooked, behavioral link between simple market signals (like interest rates) and central planning noise.

 

“Interest rates are critical for information-theory economic analysis because they are an index of real economic conditions. If the government manipulates them, they will issue false signals, breeding confusion that undermines entrepreneurial activity.” (pg 24)

 

That pretty much sums up what I think all of us are struggling with today. Inclusive of yesterday’s drop in interest rates (oil ripping new highs is an economic headwind), the bond market is becoming as good a leading indicator of the slope of US economic growth’s TREND as anything I can back-test.  At the same time, we have to deal with the deafening impact of central planning commentary.

 

Back to the Global Macro Grind

 

Yesterday’s 1-day drop in the US stock market was deafening too. It came on a legitimate Information Surprise (Oil ripping on Syria) and the rotation you’d expect to see when expectations for growth fall (bond yields and US growth stocks have a positive correlation).

 

How did that deafening drop (there was no volume) fair within the context of the Top 3 biggest 1-day drops since April?

  1. June 20th, 2013 = SP500 -2.5%
  2. April 15th,2013 = SP500 -2.3%
  3. August 28th,2013 = SP500 -1.6%

#EOW (end of world) type stuff, I know.

 

In both of the prior 1-day freak-outs (which were bigger in terms of both magnitude and volume), fear spiked (front-month VIX) to higher levels than what you saw yesterday too. In other words:

  1. US stocks keep making higher intermediate-term TREND lows
  2. US Equity Volatility keeps making lower intermediate-term TREND highs

That’s why we do the multi-duration risk management thing. How else are you going to contextualize the immediate-term TRADE noise of Mr. Market if you don’t have anything to signal the intermediate-term TREND?

 

Since we are raging bears on Emerging Market Equities (EEM), this morning’s discussion is more focused on how to interpret US market noise (US markets include big stuff like the currency and bond market). Here are the other two Big Macro Signals I care about most:

  1. US Dollar Index grinded out another higher-low (versus the recent FEB and JUN lows) and held long-term TAIL support
  2. US 10yr Treasury Yield (2.73% this morning) held both TRADE (2.69%) and TREND (2.44%) levels of support = higher-lows

And yes, the TREND is your less noisy friend, until he/she isn’t – I get that. I also get that Oil prices steadily rising from here could cut US consumption growth in half, sequentially. So there’s a lot to think about (including whether this will be the YTD high in oil altogether).

 

But while I think, I have to try hard to take the emotion out of the decisions I make on what to do next. That’s why my immediate-term TRADE signals determine my short-term risk management decisions. I’ve tried the feel thing – and it ends up not feeling good.

 

When running money in a bull market like this for US growth stocks, not selling the lows is one of the most important decisions you can make. What if you read Zero Hedge, capitulated to your emotional state, and sold the April 15th and/or June 20th lows?

  1. By April 18th (3days later), the SP500 locked in another higher-YTD-low of 1541
  2. By June 24th (3days later), the SP500 locked in another higher-YTD-low of 1573

Can you wait 3 more days to see if this noise settles? Or are we all high-frequency blog freaks now? By August 2nd 2013 (when the SP500 hit its all-time closing high of 1709) you’d have been up +11% and/or +8.6% in SPY, respectively. Just saying.

 

Maybe the world is going to end this time. I started making that call around this time in 2007 (and it almost did end). But this is not 2007, and not one of the people and/or risk management processes that called it last time is making that call this time either.

 

Maybe everyone who didn’t call the 2007 topping process is going to nail it this time. But maybe not. All I can tell you is that the noise of #PTCs (professional top callers) since April of 2013 has been deafening.

 

Our immediate-term Risk Ranges are now as follows:

 

UST 10yr Yield 2.70-2.93%

SPX 1621-1666

EEM (Emerging Markets) 36.91-38.49

VIX 15.05-18.98
USD 80.91-81.73

Brent 110.69-115.98

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Deafening Drops - CHART

Deafening Drops - vp


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VIDEO: Hedgeye's Best Ideas: Kinder Morgan

 

Hedgeye Risk Management Senior Energy Analyst Kevin Kaiser speaks with Hedgeye Managing Director Todd Jordan about his concerns regarding energy behemoth Kinder Morgan.


Kaiser illuminates some of the key points from his rigorous, in-depth research on North America's largest oil and gas pipeline and processing company which he says is "misunderstood and mispriced."


THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – September 11, 2013


As we look at today's setup for the S&P 500, the range is 32 points or 1.37% downside to 1661 and 0.54% upside to 1693.      

                                                                                                                         

SECTOR PERFORMANCE


THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

EQUITY SENTIMENT:


THE HEDGEYE DAILY OUTLOOK - 10A


CREDIT/ECONOMIC MARKET LOOK:

  • YIELD CURVE: 2.48 from 2.49
  • VIX  closed at 14.53 1 day percent change of -7.04%

MACRO DATA POINTS (Bloomberg Estimates):

  • 7am: MBA Mortgage Applications, Sept. 6 (prior 1.3%)
  • 10am: Wholesale Inventories M/m, July, est. 0.3% (pr -0.2%)
  • 10am: Wholesale Sales M/m, July, est. 0.5% (prior 0.4%)
  • 10:30am: DoE Inventories
  • 11am: Fed to purchase $1.25b-$1.75b in 2036-2043 sector
  • 1pm: U.S. to sell $21b 10Y notes in re-opening

GOVERNMENT:

    • De Blasio gets most votes in New York Democratic mayoral primary
    • House, Senate in session
    • House Transportation and Infrastructure Cmte to unveil Water Resources Reform and Development Act of 2013, 2pm
    • House Oversight panel meets to review TARP inspector general’s report on Treasury role in Delphi pension bailout, 1:30pm
    • House Financial Svcs panel holds hearing on the Fed at 100 years, 2pm

WHAT TO WATCH:

  • Obama pursues Russian proposal on Syria chemical weapons
  • IBM to sell customer-service business to Synnex for $505m
  • Apple iPhone 5C seen as expensive: analysts
  • Vodafone $10.2b Kabel Deutschland deal under threat
  • Disney delays fifth “Pirates of the Caribbean” film
  • Canada, Ontario sell $1.1b in GM shares
  • Verizon said to plan record bond sale of up to $49b
  • China’s richest man hunts hotel mgmt cos. in U.S.
  • KKR said to weigh teaming with Japan INCJ for Panasonic unit
  • U.K. unemployment unexpectedly falls to 7.7%

EARNINGS:

    • Dollarama (DOL CN) 7:30am, C$0.78
    • Evertz Technologies (ET CN) 4pm, C$0.14
    • Men’s Wearhouse (MW) 5:30pm, $1.14
    • Vera Bradley (VRA) 4:03pm, $0.32

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • Ruthenium Slides to Eight-Year Low as Hard-Disk Demand Declines
  • Tin Shortage Worsens as Indonesia Rules Curb Supply: Commodities
  • Copper Climbs as Banks Project Stronger Chinese Economic Growth
  • Brent Crude Rises From Two-Week Low as Syria Strike Risk Remains
  • Gold Swings Near Three-Week Low as Obama Seeks Syria Delay
  • Soybeans Gain Before USDA Report Set to Signal Lower U.S. Output
  • Cocoa Rises to 1-Year High in New York on Shortage; Coffee Gains
  • Aluminum Buyers in Japan Said to Win Fee Cut From Suppliers
  • Sugar Harvest in India Seen Beating Estimate to Worsen Glut
  • Hurricane Humberto Is First of Season; Storm Gabrielle Weakens
  • Goldman Expects Decline in Commodities Index in 12 Months on Oil
  • Power Prices to Hold Near 8-Year Low on Weather: Energy Markets
  • China Scrap Copper Imports Surge as Smelters Struggle: BI Chart
  • Gold Decline Seen by Goldman as Fed’s Tapering to Spur Selling

THE HEDGEYE DAILY OUTLOOK - 5

 

CURRENCIES

 

THE HEDGEYE DAILY OUTLOOK - 6

 

GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 3

 

THE HEDGEYE DAILY OUTLOOK - 4

 

EUROPEAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - 7

 

ASIAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - 8

 

MIDDLE EAST

 

THE HEDGEYE DAILY OUTLOOK - 9

 

 

The Hedgeye Macro Team

 

 

 

 

 

 

 

 

 

 

 

 


End of Their World

This note was originally published September 10, 2013 at 07:58 in Early Look

Greater than the tread of mighty armies is an idea whose time has come."

-Victor Hugo

 

I’ve spent many early mornings this year attempting to objectively contemplate the end of the world. Despite the Nasdaq (+23% YTD) closing at a fresh YTD high yesterday, on every downtick in US growth stocks everyone and their brother has been worried about it – and there have been big fear-based advertising businesses built on it. How some people get paid is serious stuff.

 

Our Big Macro Idea in 2013 (that the world wouldn’t end) has drawn the ire of everyone, from the old-boy financial media network, to the newbie ad-platform from parts unknown (Zero Hedge). Many of you have seen the comments they chose to flog in public – in Twitter, on TV, in the press.  Only a very few of us have seen the ugliness of some of the emails some of these characters have sent me.  Least said, soonest mended (word to the wise…)

 

We will continue to power forward with an idea whose time has come – a transparent, accountable, and trustworthy independent research platform that has zero conflicts of interest. We have no banking, trading, or advertising revenues to pander to. We aren’t banned from the securities industry either, like some of our snottier critics. We’re right where we want to be - standing in the arena of meritocratic debate.

 

Back to the Global Macro Grind

 

Today is what we call an Event Day @Hedgeye, because we are hosting one of our Best Idea Conference Calls on what we believe is a significantly overvalued company called Kinder Morgan. For those of you who follow either our written research from Energy sector all-star Kevin Kaiser or my #RealTimeAlerts, you’ll know we’ve been bearish in both print and #timestamped KMP short sales since the beginning of August.

 

For the end of the world community that somehow hasn’t called the short side of things that actually go down in 2013 (like Gold, Bonds, or Linn Energy – another short idea from Kaiser), this whole event day thing drives them right squirrel. How dare a “young” and up and coming research and risk management firm interrupt their navel gazing?

 

Admittedly, I’ve only been making short calls for about 15 years, so I may not know as much as the clients who pay for our work. Every morning of my market life, I wake up assuming that I need to learn something. It’s not my job to assume we’re going to be right – it’s to try to prove myself wrong.

 

The #OldWall and its media outlets have a different model – they know everything about everything, 5 miles wide and an inch deep:

 

From our Wall St 2.0 friends at Seeking Alpha > Kinder Morgan Energy Partners (KMP): "There is an outfit that is trying to get this thing down. They are calling it a house of cards. Richard Kinder (the CEO), come on this show. I know they are going to (do) a massive hit job on you. If you want to be able to tell your story, Mad Money welcomes you. This is a stock I like." –Jim Cramer

 

Mr. Cramer got nowhere with his Sound and Fury in our last public debate – which descended into members of the Old-Boy network trying to suggest we were committing a securities violation with our research call on Linn Energy (LINN).  One has to admire the conviction the man brings to the table today, on what looks like a replay of the same tape. Occasionally wrong, never in doubt.

 

Whether you’re a media talking head trying to drive advertising revenues, an Old Wall firm that’s banking one of Kinder’s deals, or just a portfolio manger flat out chasing dividend yield because you have to – it’s all cool with us. So is doing our own work on an idea whose time has come.

 

For those of you who think it’s a big positive that Rich Kinder “bought stock” in KMI here are a few research nuggets to consider as you contextualize that headline:

  1. Kinder bought 500,000 shares = $18M worth of stock = increasing his stake by 0.2%
  2. Kinder holds 241,000,000 shares of KMI = $8.8B (yes, that’s a B, as in $8.8 billion worth)
  3. Kinder receives more than $400M (per year) in dividend and distribution payments from his KMI holdings

In other words, Kinder has more than a few billion reasons to defend both his stock’s crazy valuation and how he gets paid. The old-boy network of Old Wall Street and the media brotherhood are going to help him do that.

 

After Bear Stearns crashing … and all that we have gone through in the last 5 years as a profession, is this the best the said savants of the closed-network that was Wall St 1.0 can do?

 

Or, after missing epic declines in both Gold and Bonds (and after trying to freak people out at yet another higher-low for the US stock market at the August lows), is this just the end of their world as they knew it?

 

We don’t purport to know everything. But we do our own work and we’re looking forward to objective analysis that attempts to refute our well researched opinion. Dial into our call on Kinder Morgan at 11AM (ping sales@Hedgeye.com for access) and, instead of calling just calling us “young” (Daryl Jones and Todd Jordan are getting old!), please tell us what you think.

 

Our immediate-term Global Macro Risk Ranges are now:

 

UST 10yr Yield 2.84-3.02%

SPX 1658-1678

VIX 14.73-17.41

USD 81.22-82.68

Brent 111.91-115.19

Gold 1361-1398

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

End of Their World - Chart of the Day

 

End of Their World - Virtual Portfolio


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