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November 5, 2013

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BULLISH TRENDS

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BEARISH TRENDS

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Information Revolution

“The mechanization of ginning, spinning, and weaving the cotton launched the industrial revolution.”

-Jack Weatherford

 

The cotton gin was 1793. Twitter was 2006. Eli Whitney and Jack Dorsey had more than a few things in common. One was their age (Whitney was a 28 yr old teacher and Dorsey was a 29 yr old web developer/failed shoe salesman). That’s where revolutions come from, baby. As my man Brandon Flowers wrote in “Only The Young” (great tune):

 

“Look back in silence; the cradle of your whole life. There in the distance, losing its greatest prize. Nothing is easy, nothing is sacred. Why? Where did the bough break? It happened before your time. Only the young can break away, break away…“

 

And so it continues to begin – the unearthing of every single Western academic dogma about economics and markets ever spun. The unraveling of a weave of storytellers that only my God can be smiling down upon as stronger currencies lead new peoples to the promise land of purchasing power. Behold, the Information Revolution in financial markets is here!

 

Back to the Global Macro Grind

 

Tomorrow at 11AM EST, Hedgeye veteran blue-liner, Daryl Jones, and Hesham Shaaban will host a Black Book conference call on the Twitter IPO (if you’d like information on how to access the call, ping ). It’s a fascinating story within the history we are building here @Hedgeye. I see it as our Trojan Horse in taking down the #OldWall of aforementioned dogmas.

 

Mr. Market, take down that #OldWall!

 

How is that going to work? Let’s just look at what we did using Twitter yesterday in order to front-run a ridiculous #OldWall financial media meme that the Fed being on taper-hold is a “good” thing for growth:

  1. All research starts with asking the right question – our clients often ask, “Isn’t #RatesRising Bad for Growth?”
  2. So we created a video answering that simple question with a simple answer @HedgeyeTV:  http://www.youtube.com/watch?v=BthNo_F6yvQ
  3. And we went on to answer two more big client questions we have been getting, then tweeted it (and re-tweeted it)

In the stone age of perceived financial market and economic wisdoms, you didn’t have Twitter, Videostreaming, YouTube, etc. So you actually had to take the government’s (and the banks they bail out) word for it on these economic history matters.

 

Ginning, spinning, and weaving, these academic dudes (and dudettes) who have never risk managed markets can get really creative. So was Karl Marx in introducing the adored Obama concept of #ClassWarfare in the first sentence of the Communist Manifesto.

 

And who the heck am I to call these people out? Sometimes I feel like a modern day version of some Iroquois or Creek Indian who is sitting here creating things (like cotton and rubber - you know, the stuff all the white dudes actually started to use). But what do I know?

 

What do you know?

 

The more I read, the less I know. So, admittedly, I do get a little frustrated to see central planning bureaucrats like Jim Bullard @FederalReserve on Big Government Intervention TV spewing economic forecasts that are rarely right, but never in doubt.

 

At one point yesterday @CNBC, Bullard actually said that it’s time Americans see QE (money printing, Dollar Devaluation, and 0% rates of return on your hard earned savings accounts) as a “normal policy position.”

 

Normal?

 

Go back to that Iroquois style @HedgeyeTV video Darius Dale and I did and see the next popular client question: “How Concerned Are You About A Major Dislocation in the Credit Markets?”

 

Bullard, dude, there is nothing normal about credit markets that go no-bid when a bond ticks down half a point. Wake up man. You and your boy Bernanke have a “new normal” alright. It’s called a MBS bond bubble that people can’t get out of!

 

In other counter-Keynesian-consensus-dogma-economic-news this morning:

 

BREAKING: UK Services PMI for OCT hits a 16yr high at 62.5

 

Huh? With austerity and a #StrongerCurrency (we’re long the British Pound) the United Kingdom is seeing #GrowthAccelerating? You bet your Danny Blanchflower (Dartmouth Dogma professor of Currency Devaluation and Big Government Spending) it’s accelerating.

 

This morning, to be sure on my historical account, I went back to the time period I reviewed with my kids this weekend in the movie “Free-Birds” (where turkeys try to turn back the clocks on being slaughtered for Thanksgiving), and the replay still shows that there has never been a country that has devalued its way to long-term economic prosperity. Danny, you can’t turn back the clock. Gobble, gobble.

 

#StrongCurrency = Deflates The Inflation and real (inflation adjusted) consumption #GrowthAccelerating.

 

On the margin, that’s Europe now (not the USA –it was the USA 10 months ago):

  1. Swiss Consumer Prices (CPI) drop to -0.3% y/y in OCT = consumption tax cut for consumers
  2. Eurozone PPI (producer prices) drop -0.9% y/y in SEP = cost of goods tax cut for producers (good for margins)

And on what planet are Old World pundits allowed to fear-monger you that Deflating The Inflation is a bad thing? I guess maybe Pluto, Dartmouth (sorry guys, I’m picking on Blanchflower), or one that doesn’t have Twitter. Good luck keeping that one alive. As another revered American revolutionary, Martin Luther King Jr. reminded us, “a lie cannot live” forever.

 

Our immediate-term Risk Ranges are now:

 

SPX 1

DAX 8

Swiss Market Index 8159-8232

USD 80.17-80.98

Euro 1.34-1.36

Pound 1.60-1.62

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Information Revolution - Chart of the Day

 

Information Revolution - Virtual Portfolio


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C&B: STRIP SLOT VOLUME ROLLING OVER

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. 

C&B: STRIP SLOT VOLUME ROLLING OVER - ll


PNK 2Q YOUTUBE

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

 

 

PNK INTRODUCES BELTERRA PARK GAMING & ENTERTAINMENT CENTER Oct 23

  • $300MM Entertainment Destination to open in May 2014

RIVER CITY CASINO UNVEILS 200-ROOM HOTEL; COMPLETES $82MM EXPANSION Sept 16

 

ASCA SYNERGIES

  • 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.

CUSTOMER TRENDS

  • 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

L'AUBERGE BATON ROUGE

  • 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.

L'AUBERGE LAKE CHARLES RENOVATION

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

HORSESHOE CINCINNATI IMPACT

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

BOOMTOWN NEW ORLEANS

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

RIVER DOWNS

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

CORPORATE EXPENSE RUN RATE

  • 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.

THE HEDGEYE DAILY OUTLOOK

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.      

                                                                                                                         

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: 2.30 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

GOVERNMENT:

    • 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

WHAT TO WATCH:

  • 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

AM EARNS:

    • 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

PM EARNS:

    • 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
    • Ctrip.com 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)

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • 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 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

 

 

 

 

 

 

 

 

 

 

 

 

 


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