An accounting change – but only for this period – obscures a significant miss at the property level

  • PNK missed our adjusted EBITDA estimate of $111 million by $5 million and the Street by $8 million.  On an adjusted EPS basis, the miss looks even worse $0.11 vs the Street at $0.32. 
  • As we suspected, PNK is adopting ASCA’s method of accounting for corporate expense which essentially boosts property level margins while elevating corporate expense.  This is part of the reason ASCA’s property level margins looked so strong on a relative basis.  To our knowledge, PNK is now the only operator to account for corporate expense in this manner.
  • The benefits of the accounting change are clear:  analysts place a higher multiple on property level EBITDA than they do on corporate expense.  Unfortunately, PNK did not adjust the prior year’s corporate in the same manner so margins look better on a YoY basis than they otherwise would.
  • With the acquisition of ASCA, the quarter was already messy but the accounting change further muddies the water.  Our takeaway is that Q3 was indeed a miss and forward estimates need to come down.



CALL TODAY: Can Twitter Fix Its Business and Live Up To Expectations?

CALL TODAY: Can Twitter Fix Its Business and Live Up To Expectations? - TwitterDialin 11.06.13


"Expectations are the root of all heartache."  -Shakespeare



  • Toll Free Number: 
  • Direct Dial Number: 
  • Conference Code: 629758#
  • Materials: CLICK HERE (slides will download prior to the start of the call)


Please join Hedgeye's resident social media experts, Director of Research Daryl Jones and Hesham Shaaban, for an in-depth overview and discussion of Twitter ahead of its initial public offering. The key question we will be looking to answer is whether Twitter management can fix its business model in order to achieve its longer-term growth potential.


The call titled "Can Twitter Fix Its Business and Live Up To Expectations?" will be held today, November 6th at 11:00am EST and will include a detailed 50-page presentation. As an independent research firm, with no investment banking and no trading of our own, Hedgeye is able to bring you our unconflicted, objective analysis of Twitter's forthcoming IPO.



  • A brief overview of Twitter's history and a detailed review of its business model
  • Analysis of the company's stated growth objectives vs. the key challenges/opportunities facing Twitter management
  • Detailed comparison of user  growth and revenue metrics versus Facebook
  • An overview of our recommendations for monetizing the business model
  • Analysis of its longer term growth potential and discussion on valuation


Contact  for more details.


Winners & Losers

Client Talking Points


The British Pound is up another +0.4% versus the US Dollar this morning after another solid accelerating in UK Services PMI to 52.9. 10-year Gilt Yields are up 10 basis points in two days. And they should be. Reality check: Bank of England Governor Mark Carney is not Mervyn King. And Carney is not going to be like Janet Yellen either. #StrongPound.


We bought both the Eurostoxx50 (FEZ) and Swiss stocks (EWL) on yesterday’s European stock market correction. Almost half of my long positions in #RealTimeAlerts are #EuroBull related at this point. #StrongerCurrencies and still long Germany via EWG


Yields shocked some to the upside yesterday as Bernanke/Yellen superimpose a) rising volatility and b) less liquidity in parts of the bond market via policy confusion. Either they whispered to Goldman Sachs' Jan Hatzius that they’re going to move the goal posts on the unemployment rate again or they did not. Which is it? Either way, this is a circus on tapering expectations.

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

In line with our #EuroBulls Q4 theme, we’re long the German DAX via the etf EWG. With European fundamentals showing improvement off low levels, we expect outperformance from Germany, and in turn for the region’s largest economy to pull the rest of the region higher. ECB policy remains highly accommodative and prepared to aid any of its sovereign members to preserve the Union. Inflation remains moderate and fundamentals are positive: confidence readings and PMIs are up since June, with factory orders trending higher and retail sales inflecting to push the trade balance higher. Finally, the unemployment rate has held steady at the low level of 6.9%, all of which signals to us that Germany’s economic climate is ramping up.


WWW is one of the best managed and most consistent companies in retail. We’re rarely fans of acquisitions, but the recent addition of Sperry, Saucony, Keds and Stride Rite (known as PLG) gives WWW a multi-year platform from which to grow. We think that the prevailing bearish view is very backward looking and leaves out a big piece of the WWW story, which is that integration of these brands into the WWW portfolio will allow the former PLG group to achieve what it could not under its former owner (most notably – international growth, and leverage a more diverse selling infrastructure in the US). Furthermore it will grow without needing to add the capital we’d otherwise expect as a stand-alone company – especially given WWW’s consolidation from four divisions into three -- which improves asset turns and financial returns.


Financials sector senior analyst Jonathan Casteleyn continues to carry T. Rowe Price as his highest-conviction long call, based on the long-range reallocation out of bonds with investors continuing to move into stocks.  T Rowe is one of the fastest growing equity asset managers and has consistently had the best performing stock funds over the past ten years.

Three for the Road


There's an #OldWall backslapping network out there that gets paid ad dollars to bs you, then there's us @KeithMcCullough


”A successful man is one who can lay a firm foundation with the bricks others have thrown at him.” -David Brinkley


$1.35 Billion: Found! A stash of 1,500 artworks that may be worth 1 billion euros if confirmed to be by artists such as Pablo Picasso, Max Beckmann and Marc Chagall. The works originally may have been seized by the Nazis from German museums and private collectors. They were found amid piles of garbage and outdated food packets, according to a report in Focus magazine.

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November 6, 2013

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The Fed's English

“Why do we have noses that run and feet that smell?”



The Fed’s English can be confusing too. As you can see in our Chart of The Day, that’s what’s been driving unprecedented volatility in the US bond market this year. Confusion about @FederalReserve policy is starting to breed contempt.


But oh no, no, no – silly Mucker must have this all wrong. The Fed has a “study” that proves pretty much anything they want to prove. The latest data-mining propaganda coming out of the head of the anti-dog-eat-dog-Fed-Monetary-Affairs-Division, William English, insinuates that it’s time for Bernanke and Yellen to move the goal posts again on the unemployment target. #Wonderful


Huh? This is what Bush/Obama empowered - an un-elected and un-checked central planning agency that is trying to prove out their academic dogma versus well established forces (like gravity). The Fed can pretty much keep making up the rules as they go here until the entire Bond Bubble blows up. Isn’t that awesome? History will write plenty of English “papers” on this!


Back to the Global Macro Grind


Since the Fed was wrong on its US growth forecast again (this time they and #OldWall were too low at the beginning of 2013, and the bond market started front-running them as tapering expectations perpetuated the 2-stroke engine of #StrongDollar + #RatesRising), and the unemployment rate is getting too close to their policy change target of 6.5%, they need to change the target.




Or is it? I’ll be doing another full day of institutional client meetings in NYC today and I’ll tell you that (especially for clients who aren’t in the business of being levered-long bonds that they can’t get out of) this expectations game isn’t cool.



  1. 1.       Dollar Down + Rates Down = US Growth Expectations Down (see US economic history for details)
  2. For the last month, you’ve seen every growth “Style Factor” start to underperform slow-growth yield chasing
  3. If we’re going back to slow-growth yield chasing (long Gold, Consumer Staples, and Bonds) that’s a big shift

The Fed won’t have a “study” on this because that would prove that incrementally dovish policy does 2 things:

  1. Devalues America’s Currency (which they are supposed to be protecting)
  2. Represses rates and growth expectations (as Dollar Debauchery perpetuates inflation, not real-growth)

All the while, the same western academic dogma that we imported from Europe remains in parts of Europe. This morning’s central planning bureau headline out of Italy’s Finance Minister is begging Mario Draghi to cut rates and devalue the Euro!


To review, from December 2012 to August 2013, a #StrongCurrency policy (tapering):

  1. Crushed inflation expectations
  2. Ramped real (inflation adjusted) growth expectations

But these damn bureaucrats see that very Deflating of The Inflation (from the world’s all-time high inflation readings of Gold and Food prices in 2011-2012) as a threat to their failed policies!


Moving along, I bought more exposure to our #EuroBull Macro Theme yesterday via:

  1. Eurostoxx50 Index (FEZ) which tested and held my immediate-term TRADE line of support
  2. Swiss stocks (EWL) which were holding support and have bounced a full +1% this morning

Why buy US Growth anymore if we’re going to let these clowns at the Fed blow up our currency again? This all started with Keynes in Britain, and even the British have given up on the QE thing (thank God) at this point. Carney (the Canadian who doesn’t do crack cocaine) replacing Mervyn King at the Bank of England is like replacing Bernanke with me (or something like that).


#StrongPound in the United Kingdom continues to perpetuate rising UK growth expectations. When growth expectations rise, government bond yields rise (bonds go down). The 10yr UK Gilt Bond Yield is +10 basis points in the last 2-days as the UK printed the best Services PMI reading in 16 years (UK industrial production growth just accelerated to +2.2% y/y as well).


The final point to be made this morning is that after perpetuating Gold, Bond, and Utility Bubbles with his 0%-interest-rates-forever thing (formally known in a Hedgeye “paper” as Yield Chasing), Bernanke is probably going to get tagged with creating another US stock market bubble too. Today’s II Bull/Bear Sentiment Spread just clocked a fresh YTD high at +3960bps wide to the bull side.


I am still recommending prayer for those at the Fed who still don’t yet know about the “paper” on the definition of insanity. The summary of the paper is in plain English too – doing the same thing over and over again, and expecting different results.


Our immediate-term Risk Ranges are now:


UST 10yr Yield 2.55-2.69%



Swiss Market 8113-8299

Pound 1.60-1.62

Gold 1


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


The Fed's English - Chart of the Day


The Fed's English - Virtual Portfolio

Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.