THE MACAU METRO MONITOR, NOVEMBER 13, 2013
MBS, RWS FINED FOR BREACHES OF SOCIAL SAFEGUARD MEASURE Channel News Asia
The Casino Regulatory Authority of Singapore (CRA) has fined MBS S$337,500 and RWS S$190,000. The authority said the fines are for breaches of social safeguard measures that it detected for the period of May 1, 2012 to December 31, 2012.
By law, the two companies need to keep certain groups of Singapore citizens and permanent residents from entering its casinos, including those without valid entry levies, those banned from entering the casinos by an exclusion order, and those under 21 years of age.
PARADISE ENTERTAINMENT SEES 35% SALES GROWTH ON CASINO BOOM Bloomberg
Paradise Entertainment, the supplier of gambling equipment in Macau, said it expects sales to grow at least 35% in 2014 as casino operators plan to buy more electronic table games to boost their profitability. Casino companies are ordering more electronic equipment and replacing lower-yielding betting tables with new games that allow more players to bet simultaneously, Chairman and Managing Director Jay Chun said. The new games would aid revenue next year when no new casino is scheduled to open, added Chun, who expects “strong replacement and new orders.” Paradise expects sales for its slot machines to rise above 40% next year.
Paradise Entertainment's biggest clients include Sands China, SJM Holdings and MPEL. Paradise Entertainment also manages the Kam Pek Paradise casino under the license of SJM. Located next to Casino Lisboa, Kam Pek Paradise casino has 37 gaming tables, more than 900 live multi-game machines and over 300 slot machines. It aims to operate two more casinos in the Chinese city, Chun said, without disclosing details.
The company currently accounts for 20% of the slot machine market in Macau and 60% of the electronic live table games market.
GOVT CAUTIOUS ON 2014 SPECIAL GAMING TAX TAKINGS Macau Business
Macau government expects revenue of MOP115.5 billion (US$14.4 billion) from the special gaming tax in 2014. The sum is 25% more than budgeted for 2013. The government tends to make conservative predictions about the growth of the gaming industry. Its revenue from the special gaming tax this year will probably be greater than the amount it expects to get next year. The proposed budget for next year envisages total revenue of MOP153.6 billion, 14% more than budgeted for this year, and spending of MOP77.6 billion, 6% less.
PACKAGE TOURS AND HOTEL OCCUPANCY RATE FOR SEPTEMBER 2013 DSEC
Visitor arrivals in package tour surged by 26.0% YoY to 944,188 in September 2013. Visitors in package tour mostly came from Mainland China (759,272), with 272,532 from Guangdong Province, followed by Taiwan (56,789); Hong Kong (35,650); and the Republic of Korea (35,610).
There were 98 hotels and guesthouses operating at the end of September 2013, providing 27,807 guest rooms, up by 6.7% YoY. The average length of stay of guests held stable as September 2012, at 1.3 nights.
TODAY’S S&P 500 SET-UP – November 14, 2013
As we look at today's setup for the S&P 500, the range is 20 points or 0.90% downside to 1766 and 0.22% upside to 1786.
CREDIT/ECONOMIC MARKET LOOK:
MACRO DATA POINTS (Bloomberg Estimates):
WHAT TO WATCH:
COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)
The Hedgeye Macro Team
Relied upon by big institutional and individual investors across the world, this granular morning newsletter distills the latest and most vital market developments and insures that you are always in the know.
This note was originally published at 8am on October 31, 2013 for Hedgeye subscribers.
“One day everything will be well, that is our hope. Everything’s fine today, that is our illusion.”
In German folklore a doppelganger is literally a paranormal double of a living person. More contemporarily, the word doppelganger is used to identify a person that closely resembles someone else either physically or behaviorally. As an example, some people have suggested that my doppelganger is Russell Crowe.
As it relates to the Federal Reserve, the biggest question facing investors currently is whether Janet Yellen will be a doppelganger, in terms of policy and communication, of current Chairman Ben Bernanke (more commonly known as The Bernank). Practically speaking, copying Bernanke’s behavior is likely to mean a continuation of QE Infinity.
Keith had some colorful comments on Fox Business last night as it relates this idea of QE Infinity. The video is attached in the link below and Keith’s comment begin at around the 3:00 mark. As Keith notes, the biggest issue is that the Fed is confusing the market which has dramatically heightened interest rate volatility this year.
Paul Singer from Elliott Management made a similar statement in his letter to investment partners yesterday where he wrote:
“QE Infinity” has so distorted the prices of stocks and bonds that nobody can possibly determine what the investing landscape would look like, or what the condition of the economy and financial system would be, in the absence of Fed bond-buying.”
This is indeed the issue, namely that the economy and investors have become so accustomed to abnormal interest rate policy, that they have an incredibly difficult time determining what normal is anymore. Sadly, the new normal appears to be to wait for the Fed’s next whisper to the Wall Street Journal’s Jon Hilsenrath.
To be fair, for those that are into reading Federal Reserve tea leaves, there was communication other than whispers to Hilsenrath yesterday. Specifically, in its statement the Federal Reserve made three changes:
Maybe it is just me, but I’ve been reading English for a long time now and I have no idea what the implication is of those changes.
The fact is that the bogey that remains out there is 6.5% unemployment and if we take their word then the Fed will:
“. . . keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent.”
Although, even there, The Bernank has been quite dodgey as he has at times alluded to 7% being the bogey for altering monetary policy and other times suggesting he would lower the bogey to 6%. But if we accept the current 6.5% target, QE Infinity is likely to continue at the rate of $85 billion, give or take, for the for seeable future.
In the Chart of the Day, we’ve highlighted the growth of the Federal Reserve balance sheet since 2008 as a result of QE Infinity. In total, the Fed is almost at $4 trillion in assets on its balance sheet. Not to be the alarmist, but another reason that we may be in the low interest time zone for a lot longer than we realize is because of interest rate risk associated with the Fed’s balance sheet.
Ironically, some pundits (we won’t name names) have commended the Fed under Chairman Bernanke for being transparent and great at communicating. Sadly, it doesn’t take much more than the last 24 hours to understand that a) the Fed is as bad at communicating as ever and b) this is why investors are so confused. Frankly, we see no reason to believe that Yellen will be anything but Bernanke’s doppelganger on the communication front . . . and so the confusion will go on.
Sadly for stock operators, this confusion has led to an environment in which fundamentals for companies are, at times, ignored. As an example, let’s look at both earnings and sales results for SP500 companies:
In a nutshell, stock performance has had very little relation to fundamental performance in 2013. More simply, it has been a structurally tough year to isolate Alpha. But even there no one should be surprised, because it is a macro driven market. And if you don’t do macro, macro will do you.
Our immediate-term Risk Ranges are now:
UST 10yr Yield 2.47-2.60%
Keep your head up and stick on the ice,
Daryl G. Jones
Takeaway: Equity funds followed through on their prior weekly record with another strong inflow in the most recent 5 day period; Bonds were weak again
This note was originally published November 07, 2013 at 09:20 in Financials
Investment Company Institute Mutual Fund Data and ETF Money Flow:
Total equity mutual fund flow followed through after the record week last week with another strong inflow of $7.9 billion for the 5 day period ending October 30th, well above the 2013 weekly average inflow of $2.9 billion. Domestic equity mutual fund flow was $4.2 billion in the most recent period with world equity funds collecting $3.6 billion in new investor capital. Total equity mutual fund trends in 2013 now tally the aforementioned $2.9 billion weekly average inflow, a total reversal from 2012's $3.0 billion weekly outflow
Fixed income mutual funds continued persistent outflows during the most recent 5 day period with another $4.1 billion withdrawn from bond funds. This week's draw down worsened sequentially from the $2.3 billion outflow the week prior which has now forced the 2013 weekly average for all fixed income funds to a $798 million outflow which compares to the strong weekly inflow of $5.8 billion throughout 2012
ETFs experienced declining weekly subscriptions in the most recent 5 day period, with both equity and fixed income ETFs seeing smaller inflows week-to-week. Passive equity products took in $8.7 billion for the 5 day period ending October 30th, a sequential weekly decline, with bond ETFs experiencing a $551 million inflow, also a smaller inflow than the week prior. ETF products also reflect the 2013 asset allocation shift, with the weekly averages for equity products up year-over-year versus bond ETFs which are seeing weaker year-over-year results
For the week ending October 30th, the Investment Company Institute reported another strong weekly subscription within equity funds with another $7.9 billion inflow into total equity mutual funds. The breakout between domestic and world stock funds separated to a $4.2 billion inflow into domestic stock funds and a $3.6 billion inflow into international or world stock funds. Both results for the most recent 5 day period within stock funds were above the 2013 weekly averages, with the domestic stock fund 2013 weekly mean at just a $442 million inflow and world stock funds having averaged a $2.5 billion inflow during 2013. The aggregate inflow for all stock funds now sits at a $2.9 billion inflow, a complete reversal from the $3.0 billion outflow averaged per week in 2012.
On the fixed income side, bond funds continued their weak trends for the 5 day period ended October 30th with outflows staying persistent within the asset class. The aggregate of taxable and tax-free bond funds booked a $4.1 billion outflow, a sequential deterioration from the $2.3 billion lost in the 5 day period prior. Both categories of fixed income contributed to outflows with taxable bonds having redemptions of $3.3 billion, which joined the $789 million outflow in tax-free or municipal bonds. Taxable bonds have now had outflows in 17 of the past 22 weeks and municipal bonds having had 22 consecutive weeks of outflow. While the sharp outflows that marked most of the summer and the start of the third quarter have moderated, the appetite for bonds has hardly rebounded. The 2013 weekly average for fixed income fund flows is now a $798 million weekly outflow, a sharp reversal from the $5.8 billion weekly inflow averaged last year.
Hybrid mutual funds, products which combine both equity and fixed income allocations, continue to be the most stable category within the ICI survey with another $2.0 billion inflow in the most recent 5 day period. Hybrid funds have had inflow in 18 of the past 20 weeks with the 2013 weekly average inflow now at $1.6 billion, a strong advance versus the 2012 weekly average inflow of $911 million.
Exchange traded funds booked inflows on both sides of the ledger with equity ETFs posting a $8.7 billion inflow, a sequential decline from the very strong $13.0 billion subscription the week prior. The 2013 weekly average for stock ETFs is now a $3.4 billion weekly inflow, a 50% improvement from last year's $2.2 billion weekly average inflow.
Bond ETFs managed an inflow for the 5 day period ending October 30th with a $551 million subscription, also a sequential decline from the week prior which netted a $1.3 billion inflow for passive bond products. Taking in consideration this most recent data, 2013 averages for bond ETFs are flagging with just a $308 million average weekly inflow for bond ETFs, much lower than the $1.0 billion average weekly inflow for 2012.
Jonathan Casteleyn, CFA, CMT
Joshua Steiner, CFA
Takeaway: Chinese policymakers appear committed to ignoring the risks embedded throughout the country’s financial system.
How trite of me to send you a note in the late afternoon thrashing the 3rd Plenary Session of the 18th CPC Central Committee. Surely by now you’ve been pelted with sell-side notes and media headlines berating it for its lack of specificity on the reform front.
As such, we’ll spare you the details and a long-winded summary of our likes and dislikes; we really couldn’t put one out if we tried – the actual policies are to be designed by a hand-picked reform task force in the weeks and/or months ahead. For now, all we have are more questions than answers.
A short-winded summary of our likes and dislikes:
If you’re not yet familiar with our seminal concerns surrounding the structural headwinds to Chinese (and global) economic growth embedded throughout the Chinese banking sector, we think it is important that you review the summary piece we published last Friday, “PREVIEWING CHINA’S THIRD PLENARY SESSION: CREDITHOLICS ANONYMOUS?” (11/8), as well as our 61-page slide deck titled, “ARE YOU SHORT CHINA [AND OTHER EMERGING MARKETS] YET?” (6/12).
If it seems as if we’re no longer comfortable with NOT being bearish on China, then we’d say that is an accurate depiction of our fundamental bias at the current juncture.
Please feel free to email us if you have follow-up questions that you’d like us to address.
Have a great evening,
Associate: Macro Team
Hosted by Hedgeye CEO Keith McCullough at 9:00am ET, this special online broadcast offers smart investors and traders of all stripes the sharpest insights and clearest market analysis available on Wall Street.