Chart & Bullets:  While MGM has successfully set the Street’s focus on Q1 RevPAR, our favorite metric is taking a turn for the worse.


  • We liked MGM for most of this year – one of the reasons was the upturn in Strip slot volume
  • The MGM story has centered around RevPAR gains, particularly in Q1 2014 as a few big conventions cycle through.  However, we still view slot volume as the most important metric and volume is likely moving lower through the end of the year.
  • The Q1 focus sets up the MGM story for disappointment as investors lose sight of the slot (and earnings?) issue going forward. 



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




  • $300MM Entertainment Destination to open in May 2014




  • We still believe that we are going to be able to not only meet the goal of $40 million in synergies, but we believe that, from what we've had exposure to up to this point, we're going to be able to exceed that.
  • There is a large portion of that that is entirely driven by combination of public company costs, i.e., one board, one set of financials, as well as integrating the teams in effectively, mostly down in Las Vegas. We have done an enormous amount of work on this, and while there is some effect on the margin by virtue of Lumiere, the reality is that the scale of the company and our ability to realize savings through better procurements, a better marketing program that will look to do best practices, really remains largely unchanged.


  • In terms of guest behavior, in the second quarter, we saw trips decline at a greater rate than spend per trip. Meaning that people came less often, but their spend per trip was pretty much in line with historical levels.
    • Midwest it is a little bit more pronounced than down South, but nonetheless it's softness that we're seeing pretty much across the portfolio.
    • The impact has been more pronounced at the lower tiers


  • We continue to see strong guest acquisition and growing loyalty among our guests. Repeat visitation is very strong, with over 55% of our guests returning for multiple trips. The hotel continues to be a good story, with occupancy now in the mid-90s consistently. And our regional high end business continues to grow every month, although at a lower pace than we had originally anticipated.


  • The second phase of the renovation will begin this fall after the busy summer season.


  • The impact of Horseshoe Cincinnati has been less than anticipated so far.


  • Finally, in New Orleans, we continue to see an improvement in the operating performance of this property


  • The facility is well underway and we're excited about bringing the property into our portfolio in the second quarter of 2014.


  • We've been running right around $5 million or so, call it mid-$5 millions on the current set of portfolio, and that's the set we have that clearly we're working through that as it relates to the combined company.
  • So while I don't expect if we were to, without the acquisition, that that number will change in any material way in that $5 million to $5.5 million per quarter, certainly we'll recalibrate that and give you some parameters once we complete the acquisition.


TODAY’S S&P 500 SET-UP – November 5, 2013

As we look at today's setup for the S&P 500, the range is 29 points or 1.30% downside to 1745 and 0.34% upside to 1774.      










THE HEDGEYE DAILY OUTLOOK - 10                                                                                                                                                                  



  • YIELD CURVE: 2.30 from 2.31
  • VIX closed at 12.93 1 day percent change of -2.64%

MACRO DATA POINTS (Bloomberg Estimates):

  • 7:45am: ICSC/Goldman weekly sales
  • 8:30am: ECB’s Draghi speaks in Frankfurt
  • 8:55am: Redbook/Johnson weekly sales
  • 10am: ISM Non-Manuf. Composite, Oct., est. 54 (prior 54.4)
  • 10am: IBD/TIPP Eco. Optimism, Nov., est. 42 (prior 38.4)
  • 11am: Fed to buy $1.25b-$1.75b in 2036-2043 sector
  • 11:30am: U.S. to sell $45b 4W bills
  • 1:15pm: Fed’s Lacker speaks on labor market in N.C.
  • 5pm: Fed’s Williams speaks with reporters in San Francisco


    • Election Day; Voters choose governors in N.J. and Va., and mayors in N.Y., Boston, Detroit, Miami, Seattle, other cities
    • Elections pose first test for parties since govt shutdown
    • Colorado to vote on 25% tax on marijuana sales
    • Washington could be first state to require labels on GMOs
    • Senate in session, House not in session
    • Senate votes to end debate, advance GLBT workers’ bill
    • Congress debating measures to address patent trolls
    • Senate Banking Cmte hears from community, mortgage bankers on housing finance, 10am
    • CMS Administrator Marilyn Tavenner testifies on health exchanges at Senate Health Cmte hearing, 10am
    • Senate Commerce, Science and Transportation Cmte panel holds hearing on aviation manufacturing, 2:30pm
    • Senate Environment Cmte hears from EPA, Southwestern Energy lawyer, policy grouns on emissions of methane in oil, gas drilling, 2:30pm
    • CFTC meets on rules to limit speculation in commodity derivatives; measures would replace rules enacted in 2011 that were struck down by federal judge last yr, 9:30am


  • Morgan Stanley says AIG may sue over mortgage-linked trades
  • Investment bank’s 2013 litigation accrual climbs to $549m
  • Vornado loses $256m on 3-year J.C. Penney investment
  • Boeing in union talks to build 777X in state of Washington
  • Co. aware of Air India 787 windshield crack during landing
  • Google lobbying expenditures top $18m amid spying debate
  • Co. starting video service for providers of paid lessons
  • Pandora says it’s weathering Apple’s iTunes Radio challenge
  • Venture capital funding for medical devices down 40%: WSJ
  • GM Oct. sales up 12% on Buick-Wuling deliveries
  • U.S. DoE may rule on Freeport, Cameron LNG in 1-2 months


    • Affiliated Managers Group (AMG) 7:55am, $2.15
    • AOL (AOL) 7am, $0.51
    • Arcos Dorados Holdings (ARCO) 8am, $0.11
    • Ares Capital (ARCC) 8am, $0.39
    • Ashland (ASH) 6am, $1.50
    • Becton Dickinson (BDX) 6am, $1.46
    • Charter Communications (CHTR) 8am, $0.03
    • Cognizant Technology Solutions (CTSH) 6am, $1.10
    • Cole Real Estate Investment (COLE) 8:34am, $0.22
    • CVS Caremark (CVS) 7am, $1.02 - Preview
    • Delphi Automotive (DLPH) 7am, $0.95
    • Denbury Resources (DNR) 7:30am, $0.43
    • DirecTV (DTV) 7am, $1.01 - Preview
    • Dominion Resources (D) 7:30am, $0.90
    • Emerson Electric (EMR) 6:25am, $1.11
    • Energizer Holdings (ENR) 7:30am, $1.32
    • FirstEnergy (FE) 8:25am, $0.92
    • Fossil Group (FOSL) 6:55am, $1.36 - Preview
    • HCA Holdings (HCA) 8:17am, $0.79
    • Health Care REIT (HCN) 7:30am, $0.96
    • Hecla Mining (HL) 8am, ($0.01)
    • Henry Schein (HSIC) 6:51am, $1.21
    • Host Hotels & Resorts (HST) 6am, $0.27 - Preview
    • IntercontinentalExchange (ICE) 7:30am, $1.83
    • International Flavors & Fragrances (IFF) 7am, $1.18
    • Isis Pharmaceuticals (ISIS) 8:30am, ($0.27)
    • Lexington Realty Trust (LXP) 7:30am, $0.26
    • Liberty Interactive (LINTA) 7:30am, $0.19
    • Louisiana-Pacific (LPX) 8am, $0.12
    • Medical Properties Trust (MPW) 8:30am, $0.25
    • Melco Crown Entertainment (MPEL) Bef-mkt, $0.31
    • Michael Kors Holdings (KORS) 7am, $0.68 - Preview
    • Mosaic (MOS) 7am, $0.56 - Preview
    • Och-Ziff Capital Management (OZM) 7:30am, $0.20
    • Orbitz Worldwide (OWW) 8:01am, $0.13
    • Quicksilver (KWK) 7:30am, ($0.05)
    • Regeneron Pharmaceuticals (REGN) 6:30am, $1.90 - Preview
    • Rowan Cos (RDC) 8am, $0.40
    • RR Donnelley & Sons (RRD) 6:30am, $0.35
    • Sempra Energy (SRE) 9am, $1.23
    • T-Mobile US (TMUS) 6am, $0.04
    • TransCanada (TRP CN) 8:30am, $0.59 - Preview
    • Westjet Airlines (WJA CN) 6:30am, $0.48
    • Zoetis (ZTS) 7am, $0.34


    • Agrium (AGU CN) 5:30pm, $0.57 - Preview
    • Amdocs (DOX) 4:01pm, $0.64
    • American Capital (ACAS) 4:01pm, $0.21
    • Axiall (AXLL) 5pm, $0.96
    • BioMed Realty Trust (BMR) Aft-mkt, $0.34
    • Canadian Apartment Properties REIT (CAR-U CN) 5:15pm, $0.43
    • CBL & Associates Properties (CBL) 4pm, $0.54
    • CH Robinson Worldwide (CHRW) 4:15pm, $0.73
    • International (CTRP) 5pm, $0.41
    • DaVita HealthCare Partners (DVA) 4:03pm, $0.96
    • Energy Transfer Equity (ETE) 5:05pm, $0.64
    • Energy Transfer Partners (ETP) 5:09pm, $0.61 - Preview
    • Franco-Nevada (FNV CN) 5:24pm, $0.20
    • Frontier Communications (FTR) 4:01pm, $0.06
    • Gulfport Energy (GPOR) 4:05pm, $0.13
    • Iamgold (IMG CN) 5:05pm, $0.06
    • Jazz Pharmaceuticals (JAZZ) 4:05pm, $1.68
    • Liberty Global (LBTYA) 5:19pm, $0.41
    • Live Nation Entertainment (LYV) 4:04pm, $0.35
    • MercadoLibre (MELI) 4pm, $0.72
    • Myriad Genetics (MYGN) 4:05pm, $0.46
    • ONEOK (OKE) 4:05pm, $0.30
    • ONEOK Partners (OKS) 4:05pm, $0.65
    • OpenTable (OPEN) 4:30pm, $0.42
    • QEP Midstream, Partners (QEPM,) 4:05pm, $0.24
    • QEP Resources (QEP) 4:05pm, $0.39
    • Regency Energy Partners (RGP) 5pm, $0.09
    • SandRidge Energy (SD) 4:05pm, $0.02
    • Seattle Genetics (SGEN) 4:05pm, ($0.22)
    • Sunoco Logistics Partners (SXL) 4:02pm, $0.83
    • Tesla Motors (TSLA) 4:03pm, $0.10 - Preview
    • Twenty-First Century Fox (FOXA) 4:04pm, $0.35
    • Two Harbors Investment (TWO) 4:05pm, $0.24
    • ValueClick (VCLK) 4:04pm, $0.39
    • Verisk Analytics (VRSK) 4:10pm, $0.60
    • Vivus (VVUS) 4:05pm, ($0.38)
    • Zillow (Z) 4:02pm, ($0.08)


  • China May Phase Out Sugar Stockpiling Regime, NDRC Director Says
  • Cotton Slumping as Glut Expands Record China Hoard: Commodities
  • Coffee Falls to Five-Year Low on Growing Supplies; Cocoa Climbs
  • Corn Trades Near Three-Year Low as U.S. May Raise Crop Forecast
  • Copper Gains as Strengthening Auto Sales Indicate Steady Demand
  • WTI Crude Futures Near Four-Month Low on U.S. Oil Supply Outlook
  • Gold Trades Near Two-Week Low on Stronger Dollar, Slowing Demand
  • Iron Exports to China Reach Record From Australia’s Port Hedland
  • China, U.S. Steel-Price Spread Signals Decline: Chart of the Day
  • Panama Canal’s LNG Surprise to Redefine Trade in Fuel: Freight
  • Commodities Position Limits Weighed Anew With Revised CFTC Plan
  • Libya Hariga Port Likely to Load Oil Exports Next Week
  • Nickel LME Stocks 164% Higher Ytd on Record Oversupply: BI Chart
  • Starbucks Raises U.K. Latte Coffee Prices First Time in 3 Years


























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 80.47%
  • SHORT SIGNALS 78.71%

Look Forward

This note was originally published at 8am on October 22, 2013 for Hedgeye subscribers.

“Look forward all the time.”

-T.E. Lawrence


That’s what T.E. Lawrence, aka Lawrence of Arabia, wrote home to his Mom at Christmas time in 1915. He’d just lost two of his British born brothers to WWI within the span of 5 months. He was only 27 years old.


On the road, on your own, no one teaches you to look forward in life. You have to learn that lesson yourself. Been there, done that. I left home when I was 16 years old. And for me at least, looking forward has always been born out of adversity, failure, and loss. That’s my only way out.


Context at life’s crossroads is critical. Lawrence needed to become the change he wanted to see in his world. “In the 11 months since he had arrived in Cairo, he had largely been confined to a suite of offices in the Savoy Hotel, a world away from the Western Front…(Lawrence in Arabia, pg  149). Few in Middle Eastern history decided to look forward like he did in 1916. That’s why he’s remembered.


Back to the Global Macro Grind


When you don’t believe in the central-planning command of an economy, it’s really hard to look forward. In fact, I’ve had to fight off my personal confirmation bias that Bernanke is going to wreck whatever is left of our said “free-market” for the better part of a year now – not buying Gold or Bonds on any of these “pullbacks” has been a personal victory. I was tempted.


That’s why I’m using the T.E. Lawrence analogy. He didn’t believe in “mother” (British Military Command) any more than I believe in the US Federal Reserve. I certainly don’t think I’m going to save the world taking on these received wisdoms, but I don’t think my son or daughter will read about me standing down to un-elected and unaccountable tyranny either.


Scott Anderson starts off Chapter 7 of Lawrence in Arabia with a now infamous British Military quote from the Director of Military Intelligence in 1916:


“It seems to me that we are rather in the position of the hunters who divided up the skin of the bear before they had killed it. I personally cannot foresee the situation in which we may find ourselves at the end of the war, and I therefore think that any discussion at the present time of how we are going to cut up the Turkish Empire is chiefly of academic interest.”

-General George McDonough


In other words, the tyranny of government is in the certainty it assigns to the outcomes of its policies. Allowing government to A) trash your savings accounts and B) burn your currency pays the wealthy and punishes the poor.


Ben Bernanke has no business promising the “folks” in America’s heartland that 0% rates of return on their hard earned savings accounts will result in economic prosperity. He should be held in contempt for fear-mongering Americans out of tapering too.


So what will today’s employment report bring?


With Bernanke bought and paid for by the bond bull lobby, does it matter? I have no idea what this guy is going to unilaterally decided in spite of the data. That’s because he’s politicized; not data dependent.


With that accepted, all I can do today is look forward. I can only react to Mr. Market’s read-through on what today’s employment data means. In order to do that, I’ll be focused mostly on the following 3 things:

  1. US DOLLAR – will it hold its long-term TAIL line of $79.21 support on the US Dollar Index (DXY)
  2. US BONDS – will the 10yr US Treasury Yield’s intermediate-term TREND line of 2.57% hold?
  3. GOLD/OIL – will the Bernanke Burning Buck trades of the century continue to come unglued?

Other than in Bernanke’s ideological world, the first 2 things are trivial pro-growth signals. As economic growth stabilizes then accelerates (provided that an un-elected central planner doesn’t try to arrest them) the currency and sovereign yields of a country rise. When gravity isn’t banned, this is called an economic cycle.


The 3rd thing is less obvious. That’s because a lot of people in high places get paid by Gold and Oil inflation via a US Policy to Devalue its currency. So how are those Bernanke Gold and Oil bubbles doing this morning?

  1. GOLD – down again to $1312 and still crashing for both the YTD and from the all-time USD low (-22% and -30%, respectively)
  2. OIL – after snapping our long-term TAIL risk line of $101.37 this past wk, WTIC is still crashing (-30% since 2008)

I know, I know. Bernanke said his whispering to #OldWall in the summer of 2008 that he was going to “cut to zero” had nothing to do with that all-time high in oil that’s priced in the Dollars.


I know, I know. After multiple whisperings of multiple QEs in 2011 where the US Dollar was pulverized to an all-time low, Gold hitting it’s all time high must have been pure irony.


Then came the all-time high in food prices (2012), and the rest is history. According to Bernanke self-serving fictional account, there was “no inflation” at the all-time high in global inflation (in Dollars) in 2011-2012, so now we’ll have Dollar based deflation in commodities and debt, and he’ll have nailed it, right?


Not so fast. Even though deflation in commodity prices pays the consumer via a real-inflation-adjusted tax cut at the grocery store and at the pump. And even though #RatesRising gives frugal bastards like me who have a starved savings account some risk-free fixed income too – Bernanke says no.


No, no, no “folks” – not now. But Ben, if you won’t taper and give us our currency back now, will you ever? Or, from here, is this no longer within your control? Interestingly, but maybe not surprisingly, Mr. Market is already tapering that answer for the perma bulls in Gold, Oil, and Bonds in real-time. Markets look forward; central planners don’t.


Our immediate-term Risk Ranges (all 12 are in our Daily Trading Range product) are now as follows:


UST 10yr Yield 2.57-2.69%

SPX 1712-1764

USD 79.49-80.23

Yen 96.83-99.03

WTIC Oil 98.12-101.37

Gold 1291-1331


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Look Forward - Chart of the Day


Look Forward - Virtual Portfolio

EVEP: Stepping to the Side, Removing "Best Idea" Short

We are removing Short EV Energy Partners (EVEP) from our Best Ideas list.  We added the “position” on 4/26/2013 at $47.00/unit:  4/26/13: Short EVEP: New “Best Idea”


Moving On......With the market now less positive on EVEP’s Utica acreage and the recent $200MM equity raise, our thesis is largely played out.  EVEP will release 3Q13 results on 11/8, and we don’t have high conviction on the quarter one way or the other, so we prefer to step aside here.  In our view, EVEP still has typical MLP issues (especially typical among the upstream MLPs) including understated maintenance CapEx, overstated DCF, high leverage, and over-valuation.  But at this point, we prefer short exposure to upstream MLPs LINE / LNCO, BBEP, and VNR.


Kevin Kaiser

Managing Director


RL: ST and LT Calls Are Very Different

Takeaway: We think expectations are low for 2Q14, and think that EPS growth will accelerate by 30%+ over six months. But we’re concerned longer-term.

CONCLUSION: We have a bifurcated view on RL right now. We like it from both a TRADE and TREND perspective, as expectations are too low headed into Wednesday's print, as RL guided to a msd decline in EPS, but in reality they’re going to post EPS growth of at least 1,000bps higher. Furthermore, the company will begin to show a meaningful acceleration in EPS growth over the next two quarters (near 30%) that should put it in the top decile of earnings growers in retail.


But from a TAIL vantage point, we're far less constructive. As much as we like how the company is executing on its long-term initiatives (international expansion,, and real estate), we're concerned about the recent changes in the C-suite. In the end, our degree of confidence in how the company will be executing three-years out is partially diminished.



So why are we concerned about management? Roger Farah shifting 50% of his time away from the company simply does not sit well with us.  The fact is that Roger has been incredibly effective over the past decade. Ralph might be the CEO, but Roger has basically executed on everything that is outside of the creative side of the organization. Yes, it's a positive that the company still has him given that it was a risk that he'd leave entirely. But we just don't buy the concept of a part-time COO. The way we see it, you're ether in or you're out. It's like being half pregnant.


On the flip side, the promotion of Chris Peterson is a big positive. He's one of the top 5 retail CFOs we've met -- which says a lot. At P&G he was heavily responsible for parts of the organization outside that of a traditional CFO (and his division of P&G was 5x the size of RL).


Similarly, Jackie Nemerov, who was also promoted and reports directly to Ralph Lauren, is far more capable than many on Wall Street likely give her credit for. There's no one at the company (perhaps with the exception of Ralph himself) who has earned more respect and loyalty by her direct and indirect reports. In the end, as incredibly effective as Roger has been over the years, the reality is that some of that was likely Nemerov adding to the size of his halo.


Lastly, we need to consider Ralph Lauren himself. He's one of the more successful CEOs in retail, and has created one of the best brands in apparel. But we can't ignore the fact that he just turned 74. There's not a whole lot of CEO's in the S&P that are over 70. In fact, there are only 14 CEOs in America who are older than 74. Not that there is a set formula for when a person needs to stop working, but it’s worth noting that the average retirement age for CEOs is between 60-65.


We're not questioning Mr. Lauren's competence. How could we? But he's such a powerful force inside the company, and the likelihood of him being the boss in another five years -- at least in his current capacity -- is not too great. We don't have a problem with this at all. But where we're more concerned is that we're not sure the Board has any clear succession plans for Mr. Lauren. That's probably because the Chairman of the Board is also the CEO -- and he has no plans to go anywhere anytime soon.


In the end, there are two things that are certain; 1) The company is executing and has increasing momentum in its business, but 2) The company is undergoing the most significant period of transition in the executive offices that RL has seen since before 2000. 





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