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THE M3: SANDS OCCUPANCY; GOLDEN WEEK VISITATION

THE MACAU METRO MONITOR, OCTOBER 9, 2013

 

 

RECORD HOTEL OCCUPANCY, CASINO VISITS AT SANDS Macau Business

Sands China Ltd properties recorded 1.5 million visitors in the first week of October, up 23% YoY.  Sands China executive vice-president of operations Gunther Hatt says the company’s properties were “near full capacity” for the week and its 9,000 hotel rooms were fully occupied from last Wednesday to Friday.

 

GOLDEN WEEK ARRIVALS WERE UP BY 6.2% THIS YEAR Macau Business
Golden Week tourist arrivals were up by 6.2% YoY.  From October 1 to Monday, 901,176 tourist arrivals were recorded by the police.  The Macau Government Tourist Office says mainland arrivals grew by 12.1% to more than 722,000 people during the week.

 



October 9, 2013

October 9, 2013 - dtr2

 

BULLISH TRENDS

October 9, 2013 - 10yr

October 9, 2013 - dax

October 9, 2013 - nik

October 9, 2013 - VIX

October 9, 2013 - euro

October 9, 2013 - oil

October 9, 2013 - natgas

 

BEARISH TRENDS

October 9, 2013 - spxA

October 9, 2013 - dxy

October 9, 2013 - gold

October 9, 2013 - copper

 


Mind Your Business

This note was originally published at 8am on September 25, 2013 for Hedgeye subscribers.

“Money, not morality, is the principle of commercial nations.”

-Thomas Jefferson

 

That’s the opening quote to chapter 7, “The Birth of The Dollar”, in Jack Weatherford’s economic history classic The History of Money. We study history so that we can attempt to contextualize the madness of the moment in which we are living. Watching Bernanke debauch the value of the American People’s money is obviously immoral – but who cares?

 

Morals? This isn’t about morals. This is about getting paid. And for political types, since the speech circuit pay-wheels have already been greased for life, you only get paid by politicians if you can spin. Storytelling that this recent 4-day drop in the US stock market is “all about Congress” is paramount to the unaccountable @FederalReserve’s fiction.

 

That’s the short-run. In the long run, most politically conflicted narratives are dead. We’re a long way removed from 1787 (1st issuance of coins in the United States) when “copper coins bore the motto “Mind Your Business” (Weatherford, pg 119).” But my business  of protecting against the loss of your capital to poorly timed policy decisions remains.

 

Back to the Global Macro Grind

 

My business adheres to a rule that Warren Buffett used to uphold as “Rule #1” of investing (before he went all chuckles @CNBC and pro government socialization of his P&L’s risk on us): “Don’t lose money.”

 

In order for we commoners who don’t get insider and government “preferred” investment terms to execute on this rule, we need to let Mr. Market tell us what to do next.

 

As of this morning, the most obvious of the new obvious in our Correlation Risk model is the US Dollar moving to an immediate-term correlation versus bond yields of almost 1.0 (US Dollar Index 3-week correlation to US 10yr Treasury Yield = +0.98).

 

What does that mean?

  1. Bernanke’s causal impact on the value of American Purchasing Power (US Dollar) is massive
  2. There’s an explicit link between US currency and bond yields in the face of policy information surprise
  3. When moving in tandem, US Dollars and Bond Yields are coincident (leading) US growth indicators

I realize that this isn’t the framework you are going to read from Morgan Stanley this morning. And that’s precisely why our contrarian bull case on US Growth was right this year. Consensus economists and market strategists don’t use our framework.

 

To review our (and world history’s) account of mapping economic gravity:

  1. When a country’s currency is rising alongside its country’s interest rates = #GrowthAccelerating signal
  2. When a country’s currency is falling alongside its country’s interest rates = #GrowthSlowing signal

To be clear, a signal can whip around and change direction more often than you can remain solvent trying to trade every move. But the intermediate-term TREND signals don’t lie nearly as often as the Fed’s forecasts do.

 

This is why we overlay our A) fundamental research with B) a quantitative risk management signal that is multi-duration and multi-factor. Since I never know what Mr. Market is going to start signaling as risk, I just need to wait and watch for trending signals.

 

Now some might say that doesn’t make sense because the trends can change. But that is precisely the power of the process. As policies, prices, correlations, etc. change - we do. The alternative strategy is dogmatic naval gazing about what “should” happen.

 

In summary, what’s “new” in our model as of the last week?

  1. US DOLLAR: our intermediate-term TREND line of $81.35 broke on Bernanke’s decision to break it
  2. US 10YR TREASURY YIELD: our immediate-term TRADE line of 2.79% broke; and TREND support of 2.55% is under attack

Since the #1 Style Factor leading market performance in 2013 YTD = LONG GROWTH, this very immediate-term information surprise to the market on both the US Dollar and Bond Yields matters, big time. Why? Because, unlike the Fed’s marked-to-model dogma of 0% interest rates on the short end of the curve, US growth expectations are marked-to-market.

 

One other way to consider Mr. Market’s current #GrowthSlowing message within this Down Dollar, Rates Down move was in yesterday’s US stock market sub-sector divergences. The Financials (XLF) led losers on the day (-0.6%). The why on that isn’t that complicated to follow – as long-term rates fall, the leading indicator for the Financials (Yield Spread) compresses.

 

Since Larry Summers was eliminated as a prospective Fed head (his policy would have been more hawkish = #StrongDollar, #RatesRising), the Yield Spread (10yr minus 2yr yield) has compressed by -8.5% to +229 basis points wide. That’s not a point of difference between Bernanke and my definition of morality; that’s just going to eat into the principle of profits.

 

Our immediate-term Risk Ranges are now as follows (we have 12 Global Macro ranges in our Daily Trading Range product too):

 

UST 10yr Yield 2.61-2.79%

SPX 1683-1704

Nikkei 14523-14844

VIX 12.95-14.98

USD 80.24-81.34

Gold 1291-1331

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Mind Your Business - Chart of the Day

 

Mind Your Business - Virtual Portfolio


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THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – October 9, 2013


As we look at today's setup for the S&P 500, the range is 12 points or 0.27% downside to 1651 and 0.46% upside to 1663.                                  

                                                                                             

SECTOR PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

EQUITY SENTIMENT:

 

THE HEDGEYE DAILY OUTLOOK - 10

 

CREDIT/ECONOMIC MARKET LOOK:

  • YIELD CURVE: 2.25 from 2.25
  • VIX  closed at 20.34 1 day percent change of 4.79%

MACRO DATA POINTS (Bloomberg Estimates):

  • 7am: MBA Mortgage Applications, Oct. 4 (prior -0.4%)
  • 10am: Fed’s Evans speaks on monetary policy in Washington
  • 10:30am: DOE Energy Inventories
  • 12pm: Fed’s Lockhart appears with Felipe Bulnes, Chilean ambassador to U.S., at World Affairs Council of Atlanta
  • 1pm: U.S. to sell $21b 10Y notes in reopening
  • 2pm: Fed releases minutes from Sept. 17-18 FOMC Meeting
  • 6pm: ECB’s Draghi speaks in Cambridge, Mass.

GOVERNMENT:

    • 8:30am: IMF Dir. of Monetary and Capital Markets Jose Vinals holds briefing on Global Financial Stability Report
    • 9am: World Bank President Jim Yong Kim gives press conference
    • 9:30am: House Oversight and Government Reform Committee holds hearing on IRS’s role in implementing Obamacare
    • 10am: Senate Banking, Housing and Urban Affairs Committee holds hearing on housing finance reform
    • 10:30am: Veterans Affairs Sec. Eric Shinseki testifies on effect of govt shutdown on VA benefits, services to veterans at House Veterans’ Affairs Cmte hearing
    • Noon: Financial Accounting Standards Board and International Accounting Standards Board hold public roundtable meeting on revised exposure drafts on leases
    • 1pm: House Small Business Committee holds hearing on effects of Obamacare on definitions of full-time employee with regard to small businesses

WHAT TO WATCH:

  • Yellen to be named by Obama as 1st female Fed chairman
  • Obama seeks post-debt deal talks as senate republicans seem open
  • Newcrest to replace CEO, chairman after asset writedown
  • Wal-Mart to buy Bharti’s stake in India retail venture
  • Jos. A. Bank offers to buy Men’s Wearhouse for $2.3b
  • SAC’s Cohen is said to face $1.8b cost to settle fraud charges
  • AT&T said to be close to wireless tower sale to Crown Castle
  • RBS said to hand over FX trader’s messages to U.K. regulator
  • Apple seeks China Mobile 3G, 4G knowledge in Beijing engineer ad
  • Apple said to debut new IPads at Oct. 22 event
  • J.P. Morgan said planning to cull business clients: WSJ
  • South Korea suspends some U.S. beef imports on additive: WSJ
  • Carlyle joins bid for Li Ka-Shing’s Parknshop chain: WSJ

EARNINGS:

    • Family Dollar Stores (FDO) 7am, $0.84 - Preview
    • Fastenal (FAST) 6:50am, $0.41 - Preview
    • Helen of Troy (HELE) 4:01pm, $0.72
    • Jean Coutu Group (PJC/A CN) 7am, C$0.25
    • RPM International (RPM) 7am, $0.71

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • Tin Smelters in Indonesia Furlough Staff as Rule Curbs Trade
  • Codelco Spends to Back View Copper Set for Rebound: Commodities
  • Commodity Prices Wrong as Often as 27% of the Time for Traders
  • Copper Falls for Third Day Amid Deadlock Over U.S. Debt Ceiling
  • Soybeans Fall for Second Day as Weather Aids Harvest in U.S.
  • Gold Drops in London Trading as Investors Assess Stimulus, Debt
  • Robusta Coffee Falls Before Record Vietnamese Crop; Cocoa Rises
  • WTI Crude Oil Fluctuates as U.S. Debt Limit Impasse Continues
  • Alcoa Earnings Top Estimates After Gains at Aerospace Segment
  • Rebar Closes Near 3-Month Low as IMF Cuts China Growth Outlook
  • Metal Prices Unresponsive to Economic Surprise Index Surge
  • Captain Phillips’s Ship Helmed by Tom Hanks at Risk in Shutdown
  • Shale Drillers Offered Water Cheaper Than U.K. Residents: Energy
  • Gold Imports by India Slump as Curbs Reduce Demand for Jewelry

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

 

 

 

 

 

 

 

 

 

 

 

 


WWW: McGough Reiterates High Conviction Buy

Takeaway: Hedgeye Retail Sector Head Brian McGough reiterates his high conviction thesis on WWW.

We wanted to make sure you saw the following brief HedgeyeTV video Retail Sector Head Brian McGough recorded today discussing Wolverine World Wide (WWW).

 

In case you missed it, WWW’s exceptionally strong earnings report this morning didn’t surprise McGough. As an “Investing Ideas” subscriber, you know that he has been one of the lone Wall Street bulls on the company.


Here's a link to the video.


You can also click here to read McGough’s full research report on WWW released in April detailing his bullish take on the company. 



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