According to Health Bureau director Lei Chin Ion, the 16 gaming establishments that failed a second round of tests of the air quality in their smoking area must reduce their smoking areas by 10%.  Lei said they must improve the air quality throughout their premises.  He said the smoking areas might be reduced by January.  Most of the casinos that failed the tests are run under SJM.

Failing casinos: Golden Dragon, StarWorld, Jimei, Emperor Palace, Lan Kwai Fong, Club VIP Legend, Kam Pek, Diamond, Grandview

Failing slot-machine parlours: Mocha Hotel Royal, Mocha Hotel Taipa Square, Mocha Marina Plaza, Mocha Golden Dragon, Mocha Hotel Sintra, Mocha Lan Kwai Fong and Mocha Hotel Taipa Square



Lim Tze Chean, a RWS senior executive has been fined S$100,000 for breaching the Casino Control Act on three counts.  Chean admitted to one count of providing misleading information to regulators and two counts of destroying the company's log entries.  At the time of the offences, Lim was a vice-president of VIP services at the gaming services department of RWS.  He is currently director of the projects department at RWS.

Between May and July 2011, Lim gave misleading information to the authorities during investigations.  He also destroyed log entries that showed RWS had issued complimentary Universal Studios Singapore tickets to patrons who renewed their annual levies.  Lim is one of three individuals charged in September last year for doing so.



Japan's biggest property developer Mitsui Fudosan Co has joined forces with media firm Fuji Media Holdings and builder Kajima Corp to develop a proposed casino and resort complex in Tokyo.  


The three firms want to build a complex in Odaiba, near Tokyo Bay, that would include a hotel, conference center and a casino.  That plan hinges on the passage of the law and Tokyo being chosen to host a casino. Japan's biggest city is seen as a prime location for an integrated resort, but it is likely to face competition from more than a dozen other locations across the country.  


Mitsui Fudosan, Fuji Media and Kajima all declined to give further details on the project beyond saying that they had submitted a proposal to the government to develop a casino resort as part of a special economic zone.  A group of more than 100 lawmakers, many from the LDP, will meet on Tuesday to finalize plans for an initial bill which they plan to submit during the current parliament session that ends next month.

November 8, 2013

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Sick and Tired

“I’m getting sick and tired of doing anything half-way.”

-Knute Rockne


Forget about these unaccountable bureaucrats that bombard your #OldMedia channels every day and take some real advice from one of America’s real legends. Got growth and progress? Rockne gave American football the forward pass. God bless his soul.


I’m not sure what I am going to write about this morning. So I guess I’ll just keep writing and see what happens. As you know, I’m sick and tired of these half-baked econ PhDs trying to centrally plan our lives.


The ECB cutting rates and devaluing The People’s currency as European growth is accelerating (not a typo) took my level of disgust up another notch yesterday. I didn’t think that was possible. I guess I thought wrong.


Back to the Global Macro Grind


Like the Fed, the European central planners thought that cutting rates was going to “stimulate growth”, or something like that. Meanwhile, the market’s reaction to yesterday’s European rate cut “news” was global #GrowthSlowing.




Yes. Much like the “growth” style factor being for sale in US Equities ever since the Fed’s unaccountable decision not to taper (Financials down, Staples/Telcos straight up), that’s precisely how Mr. Market voted, worldwide, after the ECB rate cut:

  1. US Growth Stocks got killed yesterday (Nasdaq -1.9%); Russell2000 now -3.7% from its YTD high
  2. European Growth Stocks stopped going up (yes, we sold everything on the ECB “news”)
  3. Asian Stocks continued lower overnight – China and Japan down another -1.1% and -1.0%, respectively

Actually, since the Fed’s slow-growth-no-taper decision and ECB rate cut, from their recent highs:

  1. China’s Shanghai Composite Index is -6.7%
  2. Japan’s Nikkei is -4.7%
  3. US Growth Stocks like Facebook (FB) and Tesla (TSLA) are -12% and -27%, respectively

But don’t tell any of these academic wonks of the Keynesian empire that. They fundamentally believe that Deflating The Inflation (from the world record inflation they perpetuated via currency devaluation in 2011-2012) is now the world’s greatest threat.


No. To be clear, their most recent policy moves are the new threat. Deflating The Inflation is not “DEFLATION!” The 2-stroke engine of 1. #StrongCurrency and 2. #RatesRising stimulates consumption growth via a consumption TAX CUT.


How else do you want to explain the recent Q313 rip in US #GrowthAccelerating from 0.14% in Q412 to +2.84%? Up until Bernanke decided to interrupt the 2-stroke engine (also known as economic gravity) with a no-taper, Down Dollar, Down Rates move, the US economy had its best sequential (3 quarter, 9 month) move in half a decade!


And now guess what the market thinks might happen next?

  1. US Growth’s GDP slope slows from 2.84%!

Do you need another exclamation mark? Are you sick and tired of reading this yet? Or are you Fed Up with waking up in the morning to these politicians trying to fear-monger you about “default risk” and “deflation”?


Now I know what I am writing about.


I’m writing about what real people in the real world are talking about – not this Keynesian/Marxist central-planning-anti-dog-eat-dog-gravity-smoothing crap.


As Ben Stiller recently said, “there’s always an element of fear that you need to work until people get sick and tired of you … or that you finally figure out that you are a fraud after all.”


Are these un-elected people at the Fed and ECB frauds? Or are they just completely bought and paid for by the Bond Bull Lobby and currency debauchery camps?


I don’t know. But I do know that Draghi worked at Goldman. And I also noticed that Goldman just had the worst FICC (Fixed Income, Currency, Commodity) quarter in the Federal League…


Was Goldman’s prop and/or FICC team choking on too much illiquid bond and currency bubble paper that they finally had to start taking some marks?


Why is Goldman’s Hatzius such a raging dove? Why is he trying to scare the hell out of the Fed on #RatesRising when his own desk is saying the opposite? Why is he all of a sudden lobbying for the Fed to change the goal posts on a lower “unemployment” target?


Who can really get out of any of these bubbles (MBS, REITS, etc.) that Bernanke backstopped? How will it end? Or are they trying to convince you, like they did in late 2007, that nothing could possibly go wrong?


I’ll stop writing and end with a message sponsored by both Republicans and Democrats who have empowered the Fed (and encouraged the BOJ and ECB) to devalue your hard earned currency:


“If you’re sick and tired of the politics of cynicism… come and join this campaign.”

-George W. Bush


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


UST 10yr Yield 2.49-2.70%



USD 80.32-81.36

Euro 1.33-1.35

Pound 1.60-1.62


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Sick and Tired - Chart of the Day


Sick and Tired - Virtual Portfolio


TODAY’S S&P 500 SET-UP – November 8, 2013

As we look at today's setup for the S&P 500, the range is 26 points or 0.58% downside to 1737 and 0.91% upside to 1763.                                                          










THE HEDGEYE DAILY OUTLOOK - 10                                                                                                                                                                  



  • YIELD CURVE: 2.32 from 2.32
  • VIX closed at 13.91 1 day percent change of 9.79%

MACRO DATA POINTS (Bloomberg Estimates):

  • 8:30am: Chg in Nonfarm Payrolls, Oct, est. 120k (prior 148k)
  • 8:30am: Personal Income, Sept., est. 0.3% (prior 0.4%)
  • 9:55am: UofMich. Confidence, Nov. prelim., est. 74.2 (pr 73.2)
  • 11am: Fed buys $4.75b-$5.75b in 2018-2019 sector
  • 12pm: Fed’s Lockhart speaks in Oxford, Miss.
  • 1pm: Baker Hughes rig count
  • 3:30pm: Fed’s Bernanke speaks at IMF in Washington
  • 6pm: Fed’s Williams speaks in Los Angeles



    • 1:10pm: President Obama speaks on economy, exports New Orleans
    • 2pm: Brookings Inst. discussion on military consequences of sequestration, with Pratt & Whitney’s Jay DeFrank, Booz Allen Hamilton’s Jack Mayer


  • Payroll gains in U.S. probably cooled amid government shutdown
  • Elan, Wyeth investors seek to block SAC’s plea deal
  • Boeing ready to seek place for 777X work outside of Seattle
  • Boeing says 787-9 development on track; 787-10 progressing
  • McDonald’s Oct. sales seen improving on new products
  • Adobe user data found on web after security breach: Reuters
  • Microsoft heir apparent said to mull move away from Windows
  • Priceline 4Q adj. EPS view trails est.; new CEO named
  • Disney falls after ESPN division registers rare profit decline
  • Danaher, Blackstone said to unite on J&J unit bid: Reuters
  • Airlines collecting data on passengers for study, WSJ says
  • Wal-Mart wage protest leads to 50 arrests, Reuters says
  • France cut to AA vs AA+ at S&P; outlook to stable vs negative
  • MSCI announces results of semiannual index review
  • U.S. Budget, Japan Growth, BOE Forecasts: Wk Ahead Nov. 9-16


    • Air Canada (AC/A CN) 6am, $1.04
    • Apollo Investment (AINV) 7:30am, $0.21
    • Aqua America (WTR) 7:30am, $0.36
    • Bankers Petroleum (BNK CN) 8am, $0.07
    • Brookfield Asset Mgmt (BAM/A CN) 6:01am, $0.56
    • Cablevision (CVC) 8:30am, $0.12 - Preview
    • Covidien (COV) 6am, $0.90
    • Crosstex Energy (XTEX) 6:30am, $(0.15)
    • DiamondRock Hospitality (DRH) 7:30am, $0.19
    • Eldorado Gold (ELD CN) 7am, $0.07
    • Emera (EMA CN) 7:10am, $0.35
    • EW Scripps (SSP) 7:30am, $(0.05)
    • Halozyme Therapeutics (HALO) 7am, $(0.16)
    • HMS Holdings (HMSY) 7:30am, $0.23
    • Leap Wireless Intl (LEAP) 9am, $(1.20)
    • Lions Gate Entertainment (LGF) 7am, $0.06
    • Magnum Hunter Resources (MHR) 7am, $(0.18)
    • Osisko Mining (OSK CN) 7am, $0.05
    • Telus (T CN) 6am, $0.54 - Preview
    • Tesoro Logistics (TLLP) 4:30pm, $0.49


  • Corn Trades Near Three-Year Low Before U.S. Reports Bigger Crop
  • Copper Trade Most Bullish in Eight Months on China: Commodities
  • WTI Crude Trades Near Five-Month Low as Supply Outpaces Recovery
  • Copper Swings Between Gains and Drops Amid European Slowdown
  • Gold Trades Above Three-Week Low in London Before U.S. Jobs Data
  • Cocoa Extends Drop as West African Harvest Advances; Sugar Rises
  • Rebar Posts Weekly Decline as Shanghai Curbs Housing Purchases
  • China’s Soybean Imports Fall to Six-Month Low as Supply Declines
  • Corn Bottoming as Bear Traders Look for Exit: Chart of the Day
  • Two Indian Refiners Forego Iran Oil as Rival Gets Free Shipping
  • New Iron Ore Supply May Create Surplus in 2014: Bear Case
  • Southwest to United Boosted by Fading Jet Rally: Energy Markets
  • Gold Fields’ Holland Says 400 Ghana Jobs May Be Cut by Year-End
  • Commodities May Drop 11% to Lowest Since ’10: Technical Analysis


























The Hedgeye Macro Team














Monsters, Inc.

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

"Whoever fights monsters should see to that in the process he does not become a monster.  And if you gaze long enough into the abyss, the abyss will gaze back at you."

- Nietzsche 


Yesterday I was flying out to San Francisco and the United Flight I was on lacked two key things: access to the Internet and/or a choice in movies.  As a result, I was stuck watching Monsters, Inc. 


For those of you that have progeny perhaps you've seen it already? I'm still in the bachelor camp, so don't regularly watch Pixar cartoons.  I also have to sadly report, it wasn't all that scary, though it was cute and funny. 


The movie did, however, make me think about a few things that currently scare me about the U.S. economy. In no particular order, my biggest fears are:


1) The Federal Reserve - We certainly harp on the Federal Reserve and rightfully so as an un-elected and largely unaccountable body with the power to influence the global economy is very scary.  Our biggest concern is the excesses that are being built into the system because of elongated, extreme monetary policy. 


The economy is growing and the unemployment rate is in decline, but we remain at the zero bound in interest rates.  Admittedly the policy has helped to inflate some asset classes, such as housing, that were a major anchor on the banking system.  Unfortunately, this extreme monetary policy has created an economy and set of markets that are highly sensitive to central bank actions. 


In the chart of the day, we highlight this point by looking at the volatility that is occurring in the interest rate market. As an example, rates on the 10Y spiked ~37% in 3Q13.   This is as substantial a move we've seen on a percentage basis in fifty years. Further, in the wake of Bernanke’s confused policy communication on Sept 18th, we’ve seen a marked reversal in 10Y treasury yields with rates declining -17% off peak levels. 


2) Macro Data - Admittedly it's odd for a macro analyst to be scared of macro data, but I am and here's why - it is often grossly inaccurate. 


An example from our research earlier this week was a note I wrote on gold (somewhat of a meaningful asset class). The note took a deeper look at a letter gold bug Eric Sprott wrote to the World Gold Council on supply and demand in the global gold market. 


Sprott's thesis is that the global supply and demand numbers for gold grossly overstate the excess supply of gold in the world. In fact, Sprott thinks that in the year-to-date we are running at a supply deficit of some 503 tonnes.


Meanwhile the World Gold Council's projections for the year-to-date suggest the world is over supplied by a tune of 217 tonnes.  If we annualize both sets of projections, the difference between them is a notational value of some $50 billion dollars.  Not exactly chump change !


If you are one of those people that like to invest based on concrete date, like me, you must be scared of some macro data at times as well.  If you believe Sprott, then you should be buying gold hand over fist, and if you believe the World Gold Council, you should be selling. 


While we do like it when we get concrete data that informs us, as it relates to gold we'll stick with our sneaky correlation models, which show a very tight correlation to the Federal Reserve balance sheet and prevailing, forward policy expectations.  Interestingly, for the first time in a year, gold is actually looking like a buy in our quant model.  Scary indeed!


3) U.S. Economy - Coming out of the Great Recession, the U.S. outperformed many of its western peers in both labor market and broader economic improvement.  From here, though, there a few reasons to be scared. 


The equity markets domestically have been on a tear and are literally registering new all-time highs – but, of course, with highs in equities and expanding multiples come high expectations for forward fundamentals.  A few things that might not be so rosy on the U.S. over the next few months include:


1)   Debt and debt ceiling - The uncertainty on the recent debt ceiling debacle led to a meaningful decline in consumer confidence and a slowing in economic activity.  There is now a series of dates from December to February, that investors will be watching to see if there will be another debt ceiling scare or government shutdown.  In markets, confusion breeds contempt.

-  December 13th – the date when a House-Senate committee will report back on negotiations on a longer term budget deal;

-  January 15th – the date on which the government is now open until subject to another budget agreement being reached; and

-   February 7th – the next debt ceiling.


2)   Corporate earnings – The results from U.S. corporate this quarter haven’t been terrible, but they certainly haven’t been gangbusters either.  As of yesterday, 52% of companies are seeing sales accelerate, 51% are seeing earnings accelerate, and 47% are seeing operating margins expand.  That sounds good, but the translation is that over half of corporate America is seeing earnings, revenue and margins decelerate.


3)   Financials – We’ve already become more cautious on the financial sector over the last couple of days as we’ve taken Franklin Templeton off our Best Ideas as we see the outflow from bond funds slowing.  More broadly, as the yield curve narrows, this is negative for banks generally.  Borrowing short and lending long doesn’t pay in a narrow yield curve environment.  In the year-to-date, financials has been a market leader up 26%, the second best sector after consumer discretionary.  If this reverses, it will be hard for the SP500 to march higher.


Halloween is only six days away, so I don’t want to scare you too much . . . Boo! Or do I?


Our immediate-term Global Macro Risk Ranges are now as follows:


SPX 1733-1754

VIX 12.02-15.01

USD 78.81-79.74

Euro 1.36-1.38

Yen 97.06-98.63

Gold 1320-1363


Enjoy the weekend.


Keep your head up and stick on the ice,


Daryl G. Jones

Director of Research


Monsters, Inc. - 10Y Yield CoD


Monsters, Inc. - Virtual Portfolio

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