Popping Bubbles

“It’s imperative that the Fed begins to taper.”

-Larry Fink


Not to be confused with what the CEO of Blackrock (and PIMCO) and anyone who was running levered long Bernanke’s Bond Bubble  was saying from June to August (when they weren’t positioned for bonds getting smoked), this is new.


We should have been tapering now for a few months so, on the margin this is progress, I guess. Don’t forget that guys like Fink and Bill Gross get paid to “advise” our un-elected Fed Chairman on timing. There’s no conflict of interest there vs The Rest of Us, of course.


Fink went on to say in Chicago yesterday that “we’ve see real bubble-like markets again. We’ve had a huge increase in the equity market. We’ve seen corporate-debt spreads narrow dramatically.” Ya think? Bubbles, bubbles, and more bubbles. Now our central planning overlords are going to time both how we inflate and pop them. #cool


Back to the Global Macro Grind


I’ll be seeing some of our top clients in NYC today, and it’s always interesting to see the whites of people’s eyes on USA central-market-planning days. When Bernanke shocked anyone who wasn’t on the inside of it all that he wasn’t going to taper on September 18th, I was seeing clients in Chicago. The look on people’s faces as they checked their iPhones and crackberries was flabbergasting.


I highly doubt Bernanke is going to signal a taper today. But I highly doubted he was going to cancel his entire “communication process” and not taper last time! So what do I know. I’m just a man in a room trying to let Mr. Market tell me who has inside information.


What I do know, and to a degree this is Fink’s blazingly obvious point, is that into both month-end (and Mutual Fund year-end) tomorrow we have a US stock market that is bubbling up to all-time highs.


Check this puppy out:

  1. Yield Chasing is Back! Slow-growth Consumer Staples stocks (XLP) = +7.9% for the month!
  2. SP500 at an all-time high (on no volume) = +5.4% for the month and +24.4% for the YTD
  3. Russell2000 at an all-time high = +32.0% YTD!

Now if you’ve been A) bullish on US stocks and B) bearish on Gold, Commodities, and Bonds for most of 2013 like we have, you’re pseudo cool with all of this. Commodities (CRB Index, 19 Commodities) are actually -5.1% YTD, so being completely out of some big asset classes has been as important as being long US growth when it was actually accelerating.


Now, not ironically, US #GrowthSlowing is what’s starting to marinate, sequentially (month-over-month) in SEP-OCT:

  1. US Pending Home Sales (SEP) reported earlier this week slowed -5.6%
  2. US Retail Sales #GrowthSlowing was reported yesterday at -0.1% vs +0.3% in AUG
  3. US Consumer Confidence for OCT dropped -11% month-over-month to 71.2 from 80.2 SEP

Isn’t this whole Bernanke Down Dollar, Rate Repression thing awesome?


To review our playbook, when they are happening at the same time:

  1. Down Dollar, Down Rates = #GrowthSlowing signal
  2. #StrongDollar, #RatesRising = #GrowthAccelerating signal

In other words, Fink finally has his policy lobby to Bernanke right. There is no US Growth Policy other than letting economic gravity occur. The only hope for 3-4% US growth (and a 4% 10yr Yield, $65 Oil, etc.) is via a consistent #StrongDollar Tapering Policy.


#StrongCurrency is cool guys. India is doing it. The British are doing it. So now all we need are all of our wonderfully and politically connected men and women of the United States of Centrally Planned America to do it.


Fink just did it. My boys tell me that back in the day he was a big Jimmy Carter Democrat. Today, he’s plugged into Obama’s ear too. So he can do this! Warren, you can do it too. Yes You Can!


If the US doesn’t do this, Europe will be the better place to allocate your capital in 2014. If the USA’s said free-market leadership signs off on Burning The Buck and Japanese Rate Repression, the Euro, Pound, and Swiss Franc are going up. If that continues to happen, you’ll basically have the exact same call we made on US growth almost a year ago occur in Europe:

  1. #StrongEuro, #StrongPound, etc. = deflates European inflation
  2. Inflation slowing = real/inflation-adjusted economic growth stabilizing, then accelerating

At the beginning of Q413 we called this Top Global Macro Theme #EuroBulls. And with Spanish consumer prices (CPI) dropping to NEGATIVE year-over-year in the most recent month (-0.1% y/y OCT vs +0.9% in SEP), we’ll reiterate that call again this morning.


As for the popping of the bubbles, to paraphrase my pal Hemingway, at first it happens slowly (#GrowthSlowing), then like in November of 2007, it happens all at once. After locking in its YTD low on September 2nd (when we were long growth), our Bull/Bear Sentiment Spread just ripped to a fresh YTD high this morning – that’s a +60% move to the bullish side in 2 months. #bubbly


Our immediate-term Risk Ranges are now:


UST 10yr Yield 2.40-2.60%



Spain’s IBEX 9588-10,097

Euro 1.36-1.39

Pound 1.60-1.62


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Popping Bubbles - Chart of the Day


Popping Bubbles - Virtual Portfolio

October 30, 2013

October 30, 2013 - table



October 30, 2013 - Slide2

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October 30, 2013 - Slide5

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October 30, 2013 - Slide7

October 30, 2013 - Slide8

October 30, 2013 - Slide9

October 30, 2013 - oil

October 30, 2013 - natgas



TODAY’S S&P 500 SET-UP – October 30, 2013

As we look at today's setup for the S&P 500, the range is 22 points or 1.13% downside to 1752 and 0.12% upside to 1774.                                              










THE HEDGEYE DAILY OUTLOOK - 10                                                                                                                                                                  



  • YIELD CURVE: 2.18 from 2.19
  • VIX closed at 13.41 1 day percent change of 0.75%

MACRO DATA POINTS (Bloomberg Estimates):

  • 7am: MBA Mortgage Applications, Oct. 25 (prior -0.6%)
  • 8:15am: ADP Employment Change, Oct., est 150k (prior 166k)
  • 8:30am: Consumer Price Index, Sept., est. 0.2% (prior 0.1%)
  • 10:30am: DOE Energy Inventories
  • 2pm: FOMC Rate Decision, est. 0%-0.25% (prior 0%-0.25%)


    • 9am: HHS Sec. Sebelius to testify before House Energy and Commerce Cmte on problems with rollout
    • 9:30am: House Transportation Cmte hearing on FAA’s aircraft certification process
    • 10am: House, Senate negotiators meet on FY 2014 budget resolution; have until Dec. 13 to deliver recommendations to Congress
    • 10am: FDIC to consider plan to implement liquidity risk standards for certain FDIC supervised firms
    • 10am: Senate Banking panel hearing on JOBS Act
    • 3:55pm: President Obama speaks on health care in Boston


  • Boeing said to near order haul of up to $87b for 777X
  • CFTC to adopt client-funds rule after MF Global, Peregrine
  • Obama presses lawmakers to confirm Mel Watt for FHFA
  • JPMorgan said to meet U.S. resistance on mortgage accord terms
  • AMR’s CEO sees way to settle federal suit on US Airways Merger
  • U.S. Steel to close some North American Capacity amid review
  • Defaults seen below crisis levels in next cycle, Moody’s says
  • Brixmor raises $825m in first REIT IPO by Blackstone
  • RBS said to review currency-trading practises
  • Barclays quarterly profit meets ests. as FICC revenue falls
  • Twitter adds photos and video previews to user feeds: NYT
  • LinkedIn 4Q rev., adj. Ebitda views miss ests.
  • Batista’s OGX said to plan bankruptcy protection filing today


    • AGL Resources (GAS) 8am, $0.15
    • American Tower (AMT) 7am, $0.91
    • Arrow Electronics (ARW) 8am, $1.20
    • Athabasca Oil (ATH CN) Bef-mkt, C$(0.07) - Preview
    • Automatic Data Processing (ADP) 7:30am, $0.66
    • BorgWarner (BWA) 8am, $1.34
    • Cameco (CCO CN) 8:30am, C$0.18 - Preview
    • Comcast (CMCSA) 7am, $0.61 - Preview
    • Corning (GLW) 7am, $0.32
    • Diebold (DBD) 8am, $0.42
    • Energen (EGN) 6:30am, $0.61
    • Exelon (EXC) 7:30am, $0.67
    • Garmin (GRMN) 7am, $0.59
    • General Motors (GM) 7:30am, $0.94 - Preview
    • Graphic Packaging (GPK) 7:30am, $0.13
    • Hess (HES) 7am, $1.44 - Preview
    • Hyatt Hotels (H) 7:30am, $0.22 - Preview
    • Jones Group (JNY) 7am, $0.42
    • Level 3 Communications (LVLT) 7am, $(0.12)
    • MSC Industrial Direct (MSM) 7:30am, $0.90
    • PG&E (PCG) 8:03am, $0.78
    • Phillips 66 (PSX) 8am, $0.93
    • Praxair (PX) 6:05am, $1.51
    • Public Service Enterprise (PEG) 7:30am, $0.76
    • Sealed Air (SEE) 6am, $0.33
    • Sherritt Intl (S CN) 7:42am, C$0.02 - Preview
    • SodaStream Intl (SODA) 7:30am, $0.84
    • Southern (SO) 7:30am, $1.11
    • Spirit Airlines (SAVE) 6:15am, $0.75
    • Sprint (S) 7am - Preview
    • SPX (SPW) 6:30am, $1.25
    • Taser Intl (TASR) 7:30am, $0.08
    • TE Connectivity (TEL) 6am, $0.90
    • Walter Energy (WLT) 8am, $(1.01) - Preview
    • Wisconsin Energy (WEC) 7am, $0.59


    • Active Network (ACTV) 4:05pm, $(0.01)
    • Allstate (ALL) 4:05pm, $1.44
    • American Capital Mortgage Investment (MTGE) 4:01pm, $0.78
    • Arris (ARRS) 4pm, $0.34
    • Atmel (ATML) 4:05pm, $0.09
    • Avis Budget Group (CAR) 4:15pm, $1.51
    • Axis Capital (AXS) 4:05pm, $1.22
    • Boston Beer (SAM) 4:10pm, $1.82
    • Canadian Oil Sands (COS CN) 5:01pm, C$0.42
    • Capstone Mining (CS CN) Aft-mkt, $0.02
    • Centerra Gold (CG CN) Aft-mkt, $(0.01)
    • Cogeco Cable (CCA CN) Aft-mkt, C$1.03
    • Community Health Systems (CYH) 4:15pm, $0.68
    • Computer Sciences (CSC) 4:15pm, $0.83
    • Cousins Properties (CUZ) 4:01pm, $0.12
    • Crocs (CROX) 4pm, $0.17
    • Duke Realty (DRE) 4:09pm, $0.28
    • Equity Residential (EQR) 4:21pm, $0.73
    • Exelixis (EXEL) 4:17pm, $(0.37)
    • Expedia (EXPE) 4pm, $1.36 - Preview
    • Facebook (FB) 4:05pm, $0.19 - Preview
    • First Quantum Minerals (FM CN) 5pm, $0.21 - Preview
    • FleetCor Technologies (FLT) 4:01pm, $0.98
    • Hanesbrands (HBI) 4:01pm, $1.13
    • InterMune (ITMN) 4pm, $(0.71)
    • International Rectifier (IRF) 4:01pm, $0.14
    • Intersil (ISIL) 4:05pm, $0.17
    • Intrepid Potash (IPI) 4:03pm, $0.07
    • Jarden (JAH) 4:05pm, $1.00
    • JDS Uniphase (JDSU) 4:05pm, $0.12
    • Key Energy Services (KEG) Aft-mkt, $0.01
    • Kraft Foods (KRFT) 4pm, $0.70 - Preview
    • Lincoln National (LNC) 4:10pm, $1.22
    • Lundin Mining (LUN CN) 5pm, $0.07 - Preview
    • Marriott (MAR) 4:30pm, $0.45 - Preview
    • MetLife (MET) 4:05pm, $1.36
    • Microchip Technology (MCHP) 4:15pm, $0.60
    • Murphy Oil (MUR) 4:31pm, $1.47
    • Owens-Illinois (OI) 4:04pm, $0.77
    • PerkinElmer (PKI) 4:01pm, $0.48
    • Questar (STR) 4:10pm, $0.18
    • Rovi (ROVI) 4:05pm, $0.48
    • Ruckus Wireless (RKUS) 4:05pm, $0.04
    • Skyworks Solutions (SWKS) 4:30pm, $0.62
    • Starbucks (SBUX) 4:05pm, $0.60 - Preview
    • SunPower (SPWR) 4:05pm, $0.25
    • Trinity Industries (TRN) 4:01pm, $1.17
    • United Online (UNTD) 4:15pm, $0.09
    • Visa (V) 4:05pm, $1.85
    • Williams (WMB) 4:01pm, $0.14
    • Williams Partners (WPZ) 4:01pm, $0.30
    • XL Group (XL) 4:01pm, $0.54


  • WTI Crude Declines for a Second Day as U.S. Inventories Grow
  • Billionaire Bets on Rare Earths After Uralkali Exit: Commodities
  • Copper Reaches One-Week High as Stockpiles Continue to Shrink
  • Cotton Has Longest Slump Since May as Harvests Add to Supplies
  • Soybeans Advance for Second Day on Export Demand, Palm’s Rally
  • Gold Swings Below Five-Week High in London Before Fed Meeting
  • Potash Producer ICL Weighing on Benchmark Index: Israel Markets
  • Indian Wheat Exports Seen at Record on Government Price Cut
  • MORE: Chalco Sees China Aluminum Output Reaching Record 24M Tons
  • EDF Nuclear-Deal Support Will Spur Power Projects: U.K. Credit
  • Silver Coin Premiums Fall as Comex Inventories Climb: BI Chart
  • Crop Insurance Hazards Revealed in Lost Pheasants in Grasslands
  • CFTC to Adopt Client-Funds Rule After MF Global, Peregrine Cases
  • Indonesia Seen Avoiding Total Ban on Mineral Ore Exports in 2014


























The Hedgeye Macro Team














Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.46%
  • SHORT SIGNALS 78.35%


In preparation for BYI's F3Q 2013 earnings release tomorrow, we’ve put together the recent pertinent forward looking company commentary.




  • FY 2014 guidance of $3.70 to $4.05 per fully diluted share.  Due to normal seasonal trends and the timing of new openings, we expect our diluted EPS from the first half of FY 2014 to contribute about 46% of the earnings. Within that first half, we expect the second quarter to be stronger than the first quarter. In proportional terms, that would be very much along the lines of the fiscal year 2013 results. 


  • While in this fiscal year the WAP growth will continue.. to grow, we have a good pipeline coming, not at the pace that you are used to the last couple of years. The pace is going to slow down a bit in terms of pace of growth, and the rate at which the WAP titles are coming out are going to start increasing over the next three quarters or four quarters, and then the pace will pick up again.
  • Our R&D resources allocation to the WAP and the gaming operations portion of the business is increasing. So in terms of release of WAP titles, you will see that is ticking up over the next few quarters.


  • In terms of being a good content provider, we've already launched our games in about 12 portals to 15 portals in Europe, in all the regulated legal wagering sites and that is going well. We are just about to launch our version two there. We've learnt a lot from our first round experience there, and we created a version two of our content server and that is going to be launched this month and we expect further improvement there.


  • I think over the next couple of years, probably more like the latter half of FY 2015 and FY 2016... the Asia expansion will have a very positive effect on how Bally continues to grow. The SHFL acquisition is really going to help us a lot because it really showed us of our strength in the Australia/Asia part of the world where SHFL does extremely well with their game sales, with their electronic gaming machines. They do extraordinarily well there. And also, of course, the table strength that we will now have.


  • We have sold 1,943 units into Illinois through the end of FY 2013. We expect this momentum to carry into fiscal 2014 and beyond....We expect to exceed, by a good margin, the 4,000 total units we originally expected to place in this market.
  • We've gone in and we're about a 30-ish percent shift-share in that market. The Illinois Gaming Board continues to approve, I think they approved 250 locations roughly this week. So it's just an ongoing market for us, it's an exciting market. From a overall market, you'll probably see at the end of this over 15,000 machines in that market. And I think we'll continue to play at least the 30% share in that market.


  • It hadn't changed that dramatically from a promotional standpoint. Again, tough to talk about what the competitors are doing product-wise. We have some suspicions. From a pricing and product standpoint, I don't see much change. The benefit about innovating and having unique products like the Wave, like the Curve. We were first with a V32-type product is the ability to put a little bit of a premium on that product.


  • As you see all the regional markets year-over-year down somewhat some bigger than others, I would say our overall performance doesn't mirror that, it's down. But not at the same trajectory that you see some of the regionals down.
  • New York is a market where year-over-year-over-year, we've just had some great results there.


  • As expected, our ASP continued to be impacted by shipments of 200 lower ASP Canadian VLT and 713 lower ASP Illinois VGT units in the quarter. After factoring out these lower ASP units, our domestic ASP was flat versus last quarter. We continue to remain very disciplined with our pricing strategies.
  • (2014) Overall, I'd say net-net you might be up a touch.


  • The margin on Gaming Operations was 69%, within our expected range of 68% to 73%.


  • We continue to expect our Systems margin going forward to approximate an annual range of 70% to 75%.


  • we expect the program to be completed by the end of the first quarter of fiscal 2014. In April, we delivered $150 million in cash and received 2.4 million shares of our common stock. Upon completion of the program, we will likely not collect significantly more shares than the 2.4 million already received, given the recent increase in the volume weighted average share price of our common stock.


  • We feel like customers are purchasing in the marketplace. We may lose maybe a couple percentage of our ship share from time-to-time just because we're a little bit more disciplined in pricing. So we remain optimistic about the replacement cycle, but again, in terms of earnings for us, it's a small piece of our gross profit.


  • We continue to believe we're going to generate at least $30 million in synergy.


  • Looking forward into FY 2014, I think one of the challenges for our international – the game performance is going well, we've launched a lot of different products, but Argentina is a market that, depending upon our ability to get goods into the country, that is one of the drivers in an international quarter being 1,200 units or an international quarter being 950 or 1,000 units.
  • And in terms of FY 2013 we finished, Todd, at about 3,500 units internationally. We expect that number to pick up reasonably significantly in FY 2014.


  • Software and services has been kind of a mid-30s% in terms of percentage. Whereas this quarter, it was nearing 40%. I I'd guesstimate that that comes back down to the mid-30s%.


  • All-in-all, I would expect for R&D to remain at that 11% to 12% of revenue range.


  • Looking into FY 2014, from a margin standpoint, one thing that we've done an okay job at in the last 12 months and 24 months is conversion kit sales. I say, okay, because I think as you sell units and increase your footprint, that increases your ability to ultimately sell more conversion kits into the market, which come at a higher margin.
  • Our hope would be when I look into 2014, maybe we grow the margin fractionally. But again, a lot of the supply chain, for the most part, we've gotten through. From here it's going to require a little bit of change in mix, with our ability to sell conversion kits and go from there.


  • The new Michael Jackson game, that is too early to tell now. We are just launching it. The reaction when we have shown it in various shows has been very positive from customers. A number of customers are eagerly waiting for it. And once we place it this quarter, in the coming months, in our next call we'll be able to give you more color on it.


Takeaway: With today’s rate hike, India continues down the path towards much-needed monetary and fiscal policy reform. That’s a good thing.



  • A continued pursuit of demonstrably tighter monetary policy in India would be positive for the country’s structural GIP outlook in three ways:
    1. Inflation decelerating to levels consistent with its regional/global peers (benchmark WPI has averaged +7.6% since the Congress Party took the helm in mid-2009 vs. a GDP-weighted average of +5.1% YoY for “BRIC” economies since then);
    2. Fiscal policy stability amid lower inflation (i.e. the #1 political issue in India) and a reduction in the fiscal deficit/GDP ratio (5.8% in 2Q13) via lower subsidy expenditures (13.7% of total expenditures); and
    3. Lower domestic demand and higher real interest rates contributing to an improved domestic savings/investment ratio would tighten up the bloated current account deficit (the latest current account deficit/GDP ratio came in at 5.3% for 2Q13).
  • Additionally, India is also developing some noteworthy tailwinds with respect to its intermediate-to-long-term fiscal policy outlook that are likely to make the country’s equity and debt capital markets look increasingly attractive on the long side at the current juncture (CLICK HERE for more details).


In conjunction with its newfound hawkish bias, the RBI hiked its benchmark policy rates today by +25bps, taking the repo rate and reverse repo rate up to 7.75% and 6.75%, respectively. The bank, led by its new governor Raghuram Rajan, also lowered its marginal standing facility rate -25bps to 8.75% (a continued unwind of former governor Subbarao’s INR crisis measures) and held its cash reserve ratio flat at 4%.




Today’s hike was predicted by 32 of 42 analysts surveyed by Bloomberg, a marked shift from Rajan’s first hike roughly 1M ago when we were the only firm on the Street calling for this demonstrable shift to tighter monetary policy in India. Indeed, the Indian rupee has appreciated +2.2% vs. the USD since we began to call for the currency to strengthen amid this drive to combat inflation back on SEP 20. That is the largest gain across the 21 currency markets we actively cover across Asia and Latin America over that time frame.




At the time, we thought investors would penalize India’s equity and debt capital markets for what appeared to be the start of a prolonged series of rate hikes, but with the SENSEX Index up +3.3%, 10Y INR Yields flat and 2Y INR Yields down -44bps since then, it appears investors feel very comfortable looking through this obvious near-term headwind to economic growth with an eye towards an improving structural outlook – a scenario we discussed then, but ultimately failed to sign off on at the time.








Going back to the aforementioned rate hike, accompanying commentary from the Dr. Rajan-led RBI board was undeniably hawkish:


  • “We can’t live with close to double-digit CPI for an extended period of time.”
  • “It is important to break the spiral of rising price pressures in order to curb the erosion of financial saving and strengthen the foundations of growth.”
  • “Wholesale-price inflation is expected to remain higher than current levels through most of the remaining part of the year, with consumer inflation probably remaining around or above 9 percent.”


Indeed, a continued pursuit of demonstrably tighter monetary policy in India would be positive for the country’s structural GIP outlook in three ways:


  1. Inflation decelerating to levels consistent with its regional/global peers (CPI has averaged +9.9% YoY since over the past 3Y vs. a GDP-weighted average of +5.3% YoY for “BRIC” economies over that same duration);
  2. Fiscal policy stability amid lower inflation (i.e. the #1 political issue in India) and a reduction in the fiscal deficit/GDP ratio (5.8% in 2Q13) via lower subsidy expenditures (13.7% of total expenditures); and
  3. Lower domestic demand and higher real interest rates contributing to an improved domestic savings/investment ratio would tighten up the bloated current account deficit (the latest current account deficit/GDP ratio came in at 5.3% for 2Q13).


It’s worth noting that the +90bps premium to the benchmark repo rate is a signal that participants in India’s on-shore swaps market are pricing in the equivalent of 3-4 more +25bps rate hikes over the NTM.








Indeed, this is the three-pronged “turnaround story” we think investors have begun to speculate on recently and, with Global Macro entropy at levels not seen since early 2Q, we continue to think it pays to play the long and short side of EM assets on idiosyncratic country fundamentals in the absence of a clear, co-directional trend in the USD and US interest rates.


On that front, India is also developing some noteworthy tailwinds with respect to its intermediate-to-long-term fiscal policy outlook that are likely to make the country’s equity and debt capital markets look increasingly attractive on the long side at the current juncture (CLICK HERE for more details).


Of course, a confirmed quantitative breakdown in the DXY through its long-term TAIL line of support in conjunction with a breakdown in the UST 10Y Yield through its intermediate-term TREND line of support would make us broadly bullish on emerging market assets, amongst other asset classes (CLICK HERE for more details).






Our central planning overlords at the Fed convene today and tomorrow to determine which asset classes we are allowed to speculate in; we await their commands with baited breath. If the most recent fundamental and quantitative signals (CLICK HERE for more details) are correct, investors will continue getting paid to speculate in emerging market assets with respect to the intermediate-term TREND. In the context of India’s real GDP growth basing here in the fourth quarter, that bodes well for INR denominated assets.




Lastly, the SENSEX Index is within a half-a-percent from its all-time high; we would interpret a close above that price as a quantitative signal that India’s well-documented policy blunders (email us for “the list”) are likely/finally in the rear-view mirror. That would be HUGE for helping India finally tap into its vast growth potential. It’s worth noting that real GDP growth has decelerated to a decade-low of +5% in the most recent fiscal year and even further to +4.4% YoY in 2Q13 (-1.1x standard deviations below the trailing 3Y mean); additionally, today the RBI reduced its FY14 GDP forecast to +5%, which is -50bps below the previous estimate of +5.5%.




Please feel free to ping us with any follow-up questions.


Darius Dale

Associate: Macro Team


In an effort to evaluate performance and as a follow up to our YouTube, we compare how the quarter measured up to previous management commentary and guidance





SLIGHTLY WORSE - 2014 guidance (net yields: 4ish and EPS: $2.20ish) missed Street expectations slightly but EPS was in line with us.  Weak Caribbean commentary was offset by positive signs from Europe.   





  • WORSE:  mgmt lowered 1Q 2014 bookings expectations primarly due to the heightened compeitive environment in the Caribbean
  • PREVIOUSLY:  We're feeling pretty decent about what's going on for next year, although it's early. We're feeling pretty good about the booking patterns for 2014. First quarter, we're feeling very good about both on the load and the price.


  • WORSE:  Mgmt refused to say promotional environment in the Caribbean has abated in the last month or so.
  • PREVIOUSLY:  I would say that we've had some promotional activities going on following that. And when I look at it right now, I would say that things in the last few weeks seem to have been a little bit better. And I think some of the noise as well is – some of the players may be doing a little bit more from a promotional standpoint to fill up their ships.  Having said that, what I'm seeing now is that will play out over the remainder of this year.


  • SAME:  Getaway will be introduced in January 2014.  Bookings have been consistent with mgmt expectations.    
  • PREVIOUSLY:  Norwegian Getaway, is getting ready for her debut in Miami early next year.


  • SAME:  3Q onboard revenue grew 1.5%, led by strong performance from the casino segment.  4Q onboard revenue is back to normal.
    • Onboard, we have a great quarter – some of it is Breakaway, some of it is just the continuing efforts we have. I would tell you that the remainder of the year is built into our forecasted guidance and yields...But it is a little lumpy.


  • SAME:  Positive commentary regarding 2014.  Mgmt believes mid-single digit pricing gains is reasonable.
    • We've been able to bottom out in Europe market with yields and we're starting to see the ticket yields improving. But there are a few more Europeans on the ships than what has been the trend.
    • On the margin, we're seeing a bit more of the Americans, but we're also seeing quite a few – and you look at the European economic situation, you're getting a little bit of a later booking from some of these countries. And we're all fighting for the same number of consumers. So in some cases, you're getting people that are spending a little bit less from the European side.

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