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(CORRECTED) MACAU JANUARY PROJECTION

Macau is off to a strong start, albeit only 5 days of data with average daily table revenues of HK$1,057MM up 19% over the comparable week last year.

 

 

We are currently projecting full month gross gaming revenues (GGR) of HK$32.0 to HK$33.5 billion or +23-28% growth YoY.  This is probably more aggressive than the Street.  Our model takes into account seasonally adjusted sequential trends and other adjustments and has proven to be more accurate, in our opinion.

 

Last January, GGR increased only 7% on slightly below normal hold with VIP revenue actually declining YoY.  Chinese New Year falls on January 31st in 2014 versus February 10th last year.  Most of the gaming business associated with the celebration typically occurs beginning on “New Year’s Eve” and for the subsequent 10-14 days.  January 2014 should get a slight boost over 2013 but not much on a relative basis since most of celebration falls in February of both years. 

 

Market shares are in the 2nd table but are meaningless after only 5 days of data.  We continue to expect LVS to be the biggest share gainer in the coming months with Wynn Macau also increasing share, particularly on the Mass side.  SJM, MGM, and MPEL could be at risk for minor share loss.

 

(CORRECTED) MACAU JANUARY PROJECTION - m1

 

(CORRECTED) MACAU JANUARY PROJECTION - m2


MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD

Takeaway: Commodity price increases and European interbank risk both cooled off in the latest week once again giving the green light to Financials.

Summary: Last week we flagged rising commodity prices as the single thorn in the side of the ongoing rally/recovery in US Financials. This week that thorn was pulled out as commodity prices dropped 2.2% in the latest week bringing the month-over-month change to a decline of 0.4%. Elsewhere, the US yield spread continues to widen while default probabilities continue to fall. The noted backup in European interbank risk we flagged last week also cooled off as Euribor-OIS dropped 1 bp this week. 

 

On a short-term basis, we see improvement outpacing decline by a ratio of 5 to 1 across our various risk measures, while on an intermediate term basis, improvement is leading decline by 5 to 3.

 

Financial Risk Monitor Summary

 • Short-term(WoW): Positive / 5 of 13 improved / 1 out of 13 worsened / 7 of 13 unchanged

 • Intermediate-term(WoW): Positive / 5 of 13 improved / 3 out of 13 worsened / 5 of 13 unchanged

 • Long-term(WoW): Positive / 3 of 13 improved / 1 out of 13 worsened / 9 of 13 unchanged

 

MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD - 15

 

1. U.S. Financial CDS -  Sallie Mae and Radian put up good weeks, as swaps tightened by 13 and 10 bps, respectively. Elsewhere in the US there was relatively little w/w action, though the bond guarantors did see their swaps widen slightly. 

 

Tightened the most WoW: SLM, WFC, RDN

Widened the most WoW: TRV, AGO, HIG

Tightened the most WoW: PRU, WFC, LNC

Widened the most/ tightened the least MoM: AGO, MBI, CB

 

MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD - 1

 

2. European Financial CDS - Most of Europe's banks saw their swaps tighten last week but Greek banks were notably wider with Alpha Bank and National Bank of Greece tacking on 24 and 38 bps, respectively. Italian banks continue to show the greatest improvement on a month-over-month basis. 

 

MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD - 2

 

3. Asian Financial CDS - Another mixed week for Asian Financial swaps. Indian banks reversed what had been a trend of steady improvement, rising an average of 16 bps last week while Chinese bank swaps were essentially unchanged.

 

MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD - 17

 

4. Sovereign CDS – Sovereign swaps tightened across the board last week. Portuguese, Italian and Spanish swaps tightened the most, falling 29, 21 and 19 bps, respectively. 

 

MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD - 18

 

MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD - 3

 

MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD - 4

 

5. High Yield (YTM) Monitor – High Yield rates rose 3.2 bps last week, ending the week at 6.01% versus 5.98% the prior week.

 

MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD - 5

 

6. Leveraged Loan Index Monitor – The Leveraged Loan Index rose 4.0 points last week, ending at 1840.

 

MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD - 6

 

7. TED Spread Monitor – The TED spread fell 1.2 basis points last week, ending the week at 17.2 bps this week versus last week’s print of 18.36 bps.

 

MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD - 7

 

8. CRB Commodity Price Index – The CRB index fell -2.2%, ending the week at 277 versus 283 the prior week. As compared with the prior month, commodity prices have decreased -0.4% We generally regard changes in commodity prices on the margin as having meaningful consumption implications.

 

MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD - 8

 

9. Euribor-OIS Spread – The Euribor-OIS spread tightened by 1 bps to 13 bps. The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. 

 

MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD - 9

 

10. Chinese Interbank Rate (Shifon Index) –  The Shifon Index fell 38 basis points last week, ending the week at 3.13% versus last week’s print of 3.51%. The Shifon Index measures banks’ overnight lending rates to one another, a gauge of systemic stress in the Chinese banking system.

 

MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD - 10

 

11. Markit MCDX Index Monitor – Last week spreads tightened 1 bp, ending the week at 88 bps versus 89 bps the prior week. The Markit MCDX is a measure of municipal credit default swaps. We believe this index is a useful indicator of pressure in state and local governments. Markit publishes index values daily on six 5-year tenor baskets including 50 reference entities each. Each basket includes a diversified pool of revenue and GO bonds from a broad array of states. We track the 16-V1.

 

MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD - 11

 

12. Chinese Steel – Steel prices in China fell 0.5% last week, or 16 yuan/ton, to 3,491 yuan/ton. We use Chinese steel rebar prices to gauge Chinese construction activity, and, by extension, the health of the Chinese economy.

 

MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD - 12

 

13. 2-10 Spread – Last week the 2-10 spread tightened to 260 bps, -1 bp tighter than a week ago. We track the 2-10 spread as an indicator of bank margin directionality.

 

MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD - 13

 

14. XLF Macro Quantitative Setup – Our Macro team’s quantitative setup in the XLF shows 0.9% upside to TRADE resistance and 2.1% downside to TRADE support.

 

MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD - 14

 

Joshua Steiner, CFA

 

Jonathan Casteleyn, CFA, CMT

 


(CORRECTED) MACAU JANUARY PROJECTION

Macau is off to a strong start, albeit only 5 days of data with average daily table revenues of HK$1,057 up 19% over the comparable week last year. 

 

 

We are currently projecting full month gross gaming revenues (GGR) of HK$32.5 to HK$33.5 billion or +23-28% growth YoY.  This is probably more aggressive than the Street.  Our model takes into account seasonally adjusted sequential trends and other adjustments and has proven to be more accurate, in our opinion.

 

Last January, GGR increased only 7% on slightly below normal hold with VIP revenue actually declining YoY.  Chinese New Year falls on January 31st in 2014 versus February 10th last year.  Most of the gaming business associated with the celebration typically occurs beginning on “New Year’s Eve” and for the subsequent 10-14 days.  January 2014 should get a slight boost over 2013 but not much on a relative basis since most of celebration falls in February of both years. 

 

Market shares are in the 2nd table but are meaningless after only 5 days of data.  We continue to expect LVS to be the biggest share gainer in the coming months with Wynn Macau also increasing share, particularly on the Mass side.  SJM, MGM, and MPEL could be at risk for minor share loss.

 

(CORRECTED) MACAU JANUARY PROJECTION - m1

 

(CORRECTED) MACAU JANUARY PROJECTION - m2


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THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – January 6, 2014


As we look at today's setup for the S&P 500, the range is 35 points or 0.78% downside to 1817 and 1.13% upside to 1852.                                       

                                                                                        

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: 2.58 from 2.60
  • VIX closed at 13.76 1 day percent change of -3.30%

MACRO DATA POINTS (Bloomberg Estimates):

  • 10am: ISM Non-Mfg Composite, Dec., est. 54.5 (prior 53.9)
  • 10am: Factory Orders, Nov., est. 1.7% (prior -0.9%)
  • 11:00am: Fed to purchase $1b-$1.5b in 2036-2043 sector
  • 11:30am: U.S. to sell $28b 3-mo. bills, $26b 6-mo. bills

GOVERNMENT:

    • Senate to vote on confirmation of Yellen as Fed Chairman
    • Senate to consider unemployment benefit extension
    • FEMA’s David Miller delivers opening remarks at National Research Council meeting on flood insurance, 10:15am
    • Liz Cheney to end bid for Wyoming Senate seat, CNN, NYT report

WHAT TO WATCH:

  • Yellen poised for Senate confirmation amid taper pullback
  • JPMorgan’s Madoff case penalties may be announced Tues.: WSJ
  • Boeing to build 777X at Seattle hub as union drops pensions
  • Liberty’s Sirius deal may help finance TW Cable offer
  • Men’s Wearhouse starts tender for Jos. A Bank, nominates two
  • Carlyle, KKR said to be in $1.2b talks to buy Fleury
  • Teva said near to naming Vigodman CEO after Levin ouster
  • Intel CEO Krzanich gives preshow keynote for International CES
  • JPMorgan settles Pittsburgh bank suit probing U.S. deal
  • Google rolls out alliance to bring Android into car systems
  • GM’s OnStar in talks w/Chinese providers for 4G car services
  • Nvidia chip update narrows PC-smartphone gap to target gamers
  • Ford China deliveries surge 49% in 2013, overtaking Toyota
  • U.S. office rents increase in gradual market recovery: Reis
  • Apple changes board bylaws in step to address diversity issue
  • Bitcoin tops $1,000 again on Zynga accepting virtual currency

EARNINGS:

    • Park Electrochemical (PKE) 6:30am, $0.28
    • Sonic (SONC) 4:01pm, $0.13

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • Copper Declines Amid Concern Demand Is Poised to Slow in China
  • Gold Swings Below 3-Week High as Investors Weigh Dollar, Demand
  • Gold Analysts Get Most Bullish in a Year After Rout: Commodities
  • Frost May Damage as Much as 15% of Florida Orange Crop, MDA Says
  • Brent Rises for First Time in Five Days on U.S. Cold Snap, Iraq
  • Sugar Extends Two-Week Low on Excess Supplies; Coffee Advances
  • ‘Polar Pig’ Threatens Coldest U.S. Weather in Two Decades
  • LME Hires Sloan from NYSE Euronext as COO, Head of Strategy
  • Cotton Imports by China May Tumble to Six-Year Low, Group Says
  • China Rejecting U.S. Corn as First Shipment From Ukraine Arrives
  • China Smog Drives Lump Ore to Record Premium: Chart of the Day
  • U.S. Winter-Wheat Plantings Rise to Six Year High, Survey Shows
  • Gold’s Point-Figure Signals Further Declines: Technical Analysis
  • U.S. Exporters Sell Wheat to Unknown Destination, Corn to Mexico
  • Wheat Extends Rally as Cold Weather Threatens U.S. Crop Outlook

THE HEDGEYE DAILY OUTLOOK - 5A

 

CURRENCIES

 

THE HEDGEYE DAILY OUTLOOK - 6A

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 


January 6, 2014

January 6, 2014 - Slide1

 

BULLISH TRENDS

January 6, 2014 - Slide2

January 6, 2014 - Slide3

January 6, 2014 - Slide4

January 6, 2014 - Slide5

January 6, 2014 - Slide6

January 6, 2014 - Slide7

January 6, 2014 - Slide8

 

BEARISH TRENDS

January 6, 2014 - Slide9

January 6, 2014 - Slide10

January 6, 2014 - Slide11
January 6, 2014 - Slide12

 


Macro Tea Leaves

Client Talking Points

JAPAN

They finally opened the Japanese stock market and it got tagged on up Yen. The Nikkei starts the year -2.4% as the crowd leans very long of it (and short Yen – futures/options contracts show a massive net short position of -143,384 Yen contracts).

CHINA

It's more #GrowthSlowing economic data out of China (Services PMI down to 50.9 in December versus 52.5 November). That took the Shanghai Composite down another -1.8% overnight to -3.3% to start 2014 year-to-date (versus -3.9% all in in 2013).

OIL

The biggest loser in Global Macro next to Thailand stocks last week was Oil (WTI -6.3%, Brent -4.7%). The US Dollar was +0.5%. That of course is a good thing for Consumption (US Consumer Discretionary was up +0.1% (XLY) on a down -0.5% S&P 500 week); Oil VIX ripped +31% on that over 20. Brent is back below our Hedgeye TAIL resistance of 108.89.

Asset Allocation

CASH 34% US EQUITIES 15%
INTL EQUITIES 15% COMMODITIES 6%
FIXED INCOME 0% INTL CURRENCIES 30%

Top Long Ideas

Company Ticker Sector Duration
GHL

Hedgeye's detailed and constructive view on the improving fundamentals in the M&A market with a longer term perspective is a contrarian idea at odds with the rest of the Street which is overly focused on short-term results. From an intermediate term perspective, M&A is poised to break out in 2014. We are witnessing record amounts of cash on corporate balance sheets, continued low borrowing costs and the first positive fund raising round for Private Equity in four years. Moreover, a VIX in secular decline (this has historically benefited M&A), recent incrementally positive data points from leading M&A firms that dialogue has improved, and an improving deal tally from Greenhill & Company (GHL) themselves coming out of the summer all bode favorably for GHL.  So is a budding European economic recovery that would assist a global M&A market that has been range bound over the past three years. GHL stands out as a leading beneficiary of these developments.

FXB

Our bullish call on the British Pound was borne out of our Q4 Macro themes call. We believe the health of a nation’s economy is reflected in its currency. We remain bullish on the regime change at the BOE, replacing Governor Mervyn King with Mark Carney. In its October meeting, the Bank of England voted unanimously (9-0) to keep rates on hold and the asset purchase program unchanged.  If we look at the GBP/USD cross, we believe the UK’s hawkish monetary and fiscal policy should appreciate the GBP, as Bernanke/Yellen continue to burn the USD via delaying the call to taper.

WWW

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.

Three for the Road

TWEET OF THE DAY

TREASURIES: 2.98% 10yr sitting right in the middle of a manageable 2.90-3.08% risk range @Hedgeye

QUOTE OF THE DAY

"The greatest mistake you can make in life is to be continually fearing you will make one." - Elbert Hubbard

STAT OF THE DAY

The world’s biggest economies will need to refinance $7.43 trillion of sovereign debt in 2014 as bond yields begin to climb from record lows, threatening to raise borrowing costs while nations struggle to bring down elevated budget deficits. Bloomberg


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