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Only 7% growth for January is disappointing but anecdotal evidence suggests strong Mass start to February.



More likely than not, low VIP hold played a role in the soft January that saw GGR grow only 7.3%.  Street consensus was for +13% and we were much higher earlier in the month.  So what are the explanations?

  • Low hold – we had heard even before the last week of January that some operators had experienced some bad luck
  • The placeholder strikes again – as we wrote about on 1/27/14 “MACAU WEEKLY PLACEHOLDER REEMERGES?”, the reported HK$775 million average daily table revenues for the 3rd week of January may have been a placeholder for incomplete data.  We’ve seen that number used many times with the following week as the catch up week.  For January, if the HK$775 was the correct number, that would imply the last 5 days of January generated an insanely low ADTR of HK$545. 
  • Macau volumes just fell off the cliff ahead of the Chinese New Year celebration

We think that a combination of low hold and slow volumes for the last 2 weeks of January contributed to the disappointing YoY growth.  While it’s possible that the last week was that bad, it is more likely the HK$775m reported as daily table revs in the 3rd week was indeed a placeholder.


So where does that leave Macau going forward?  If February bounces back to up 20% - our projection – not many will care that the pre-Chinese NY was softer than usual and VIP held low.  Why do we think February could be up 20%?

  • Our model predicts it – we quantitatively look at volume trends sequentially and seasonally and calendar adjust to project monthly revenues.  February faces a relatively easy comp at 12% last year.  Rolling Chip volume actually declined slightly last year.
  • Contacts suggest Mass is off the charts here in February.  Table minimums are higher and some casinos may have opened more than tables temporarily - surely the Cotai properties because they have the space. 
  • Junket biz is expected to accelerate later this week.

The disappointing January growth reported today will no doubt pressure the stocks.  Not sure they need to be bought today as the sentiment could linger until the next data point.  Upcoming data points should be the release of the January detail (later this week) which could reveal a low hold percentage and the first February weekly table revenues (Monday). 

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CHART OF THE DAY: GDP: Easy Comps vs. Hard Comps


CHART OF THE DAY: GDP: Easy Comps vs. Hard Comps - GDP Comps

Early Look

daily macro intelligence

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.

Do You Wish To Find Out?

“What we need is not the will to believe, but the wish to find out.”

-William Woodsworth


I know. I’m going all #behavioral on you this year. When combined with #history and #math, it gives me an edge. And god knows, I’m not the smartest player in this league – so I need one!


The aforementioned quote comes from the introduction in the latest #behavioral book we’ve been discussing in the office, Counterclockwise, by Harvard Applied Psych professor, Ellen Langer.


Langer’s research is unique in that she was really one of the first women (1st woman to ever get tenure in Psychology @Harvard) to break the ice on a lot of topics that make us think about how we think. Her most popular book was Mindfulness in 1989. She wrote Counterclockwise in 2009 and it’s relevant to how you think about your risk management day.


Back to the Global Macro Grind


Do you wish to find out why almost every major macro position that was working for you last year sucks for 2014 YTD? If I needed to believe that the Japanese-burning-currency thing was going to work, I could – but I’d be losing a lot of money on that.


Last night’s pathetic bounce in Japanese Equities (Nikkei +1.2% to -12.9% YTD) tells you all you need to know about Japanese consensus – all the locals (brokerage clients getting margin calls) were short Yen and long Mothers (as in the index Japanese dudes lever up on).


Most of Wall Street was in the same trade too. It was only 1 month ago today that the CFTC (futures and options) net short position in Japanese Yen hit all-time highs (-135,000 net short position in terms of contracts). This morning that net short position is -89,420 contracts.


Next to short Yen, what have been the other major consensus long/short positions in Global Macro options?

  1. LONG Oil – 3 month average = +363,977 net LONG contracts
  2. LONG SP500 (Index + E-mini) – 3 month average = +78,356 net LONG contracts
  3. SHORT US Treasuries – 3 month average = -115,078 net SHORT contracts

And how’s that going YTD?

  1. Brent Oil = DOWN -4.2% YTD (vs the CRB Commodities Index +2.5%)
  2. SP500 = DOWN -5.0% YTD
  3. 10YR US Treasuries = UP (with yields -13%, or 40 bps YTD)

Why? Do you want the answer that consensus needed to believe on December 31, 2013, or do you wish to believe what Mr. Macro Market is telling you about growth (hint: on the margin, with #InflationAccelerating, US growth is slowing)?


And it’s not just a USA thing. As you can see in our Chart of The Day (where we show “Hard Growth Comps” for countries versus “Easy Comps”), Japan and the United States were setting up to slow from their 2013 momentum peaks irrespective of this US weather.


Oh, and by the way, the weather on the Merritt in Connecticut this morning isn’t what the dude in Tokyo is dealing with via his margin calls. Japan actually just reported a 16 year low in wages. When his government has a Policy To Inflate the dude’s cost of living, that is not good!


How does the Burning Your Currency thing work again?

  1. Government prints lots and lots of moneys
  2. Currency goes down, and purchasing power of The People goes down
  3. Real (inflation adjusted) consumption growth slows

Then pop a “consumption tax” on your people (Japan’s is pending) and what people who need to believe about “Abenomics” (that it’s good because the stock market was going up) isn’t aligned with what politicians “wish to find out” about economic reality.


Back to the wage inflation (or deflation) thing, I’ll show you what’s going on in the USA on our US Economics Flash Call this morning at 11AM EST. After seeing big time pressure on wages throughout the 2008 crisis, aggregate private sector wages are actually tracking up +5% on a 2-yr comp basis. .  If you need dial in details for the call, email .


I know your run of the mill academic doesn’t model the US economy how we do (we model it on a 1, 2, and 3 yr comparative basis so that we don’t get run-over by changes on the margin in trends), but that’s cool. It seems to work.


What seems to be a developing bearish to bullish reversal in a @Hedgeye TREND may not turn out to be a long-term reality. But can you afford to miss 3, 6, and 12 month accelerations and decelerations in big macro stuff like growth and inflation?


We can’t. And that’s all I have to say about that.


Our immediate-term Global Macro Risk Ranges are now (with intermediate-term TRENDs, bullish or bearish, in brackets):


SPX 1 (bearish)

Nikkei 14036-15004 (bearish)

VIX 15.49-21.63 (bullish)

USD 80.78-81.43 (neutral)

Gold 1 (bullish)


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Do You Wish To Find Out? - GDP Comps


Do You Wish To Find Out? - 556


TODAY’S S&P 500 SET-UP – February 5, 2014

As we look at today's setup for the S&P 500, the range is 47 points or 1.15% downside to 1735 and 1.53% upside to 1782.                       










THE HEDGEYE DAILY OUTLOOK - 10                                                                                                                                                                  



  • YIELD CURVE: 2.31 from 2.32
  • VIX  closed at 19.11 1 day percent change of -10.87%

MACRO DATA POINTS (Bloomberg Estimates):

  • 7am: MBA Mortgage Applications, Jan. 31 (prior -0.2%)
  • 8:15am: ADP Employment Change, Jan., est. 187k (prior 238k)
  • 10am: ISM Non-Mfg Composite, Jan., est. 53.7 (prior 53)
  • 10am: Fed’s Tarullo testifies on Volcker Rule to House Financial Services Committee
  • 12:30pm: Fed’s Plosser speaks in Rochester, N.Y.
  • 1:40pm: Fed’s Lockhart speaks in Birmingham, Ala.


    • 9:30am: House Energy and Commerce panel meets on protecting consumer data, with Neiman Marcus and Target executives and FTC Chairwoman Edith Ramirez
    • 9:30am: House Ways and Means panel hears from IRS Commissioner John Koskinen on issues including agency’s targeting of some tax-exempt organizations
    • 10am: House Financial Services Cmte meets on Volcker Rule, with witnesses from Fed, SEC, FDIC, CFTC
    • 10am: House Budget Cmte hears from CBO Director Doug Elmendorf on economic outlook
    • 2pm: House Financial Services panel holds hearing on annual report from Office of Financial Research


  • JPMorgan joins Morgan Stanley in settling U.S. mortgage suits
  • Sony said in talks to sell Japan PC unit to investor group
  • Apple joins Google in pressing high court to curb patent abuse
  • Gilead profit tops analysts’ ests. on Hepatitis C drug sales
  • 2nd storm strikes Northeast grounding planes, closing schools
  • Eurozone Dec. retail sales down 1.6% m/m; est. down 0.7% m/m
  • ICAP says rev. slipped 6% in final 3 mos. of 2013
  • AIG asks for delay in $8.5b Bank of America settlement
  • Sands leads Macau casino slump as Jan. rev. growth slowed
  • Goldcorp to delay buying shares in Osisko until judgment
  • Panasonic jumps most since 1974 after profit beats estimates
  • Swatch 2013 profit rises 17% on compensation from Tiffany
  • Dutch lender Rabobank said to consider sale of U.S. retail bank
  • Volcker Rule unity is implementation goal of interagency group
  • Buffett Railroad’s $5b investment plan tops Union Pacific
  • Blavatnik sued for $2b over TNK energy venture’s sale
  • "House of Cards" maker MRC said to get Guggenheim as owner
  • CtW presses Yahoo to revise hiring, compensation, WSJ reports
  • Goldman Sachs, Texas Pacific consider IPO for Ontex, Tijd says


    • Allergan (AGN) 9am, $1.34 - Preview
    • Arrow Electronics (ARW) 8am, $1.62
    • Automatic Data Processing (ADP) 7:30am, $0.77
    • Brookfield Infrastructure (BIP) 7:30am, $0.35
    • Coca-Cola Enterprises (CCE) 7:30am, $0.52
    • Cognizant Technology (CTSH) 6am, $1.15 - Preview
    • Estee Lauder (EL) 7:30am, $1.06 - Preview
    • Humana (HUM) 6am, $0.92
    • Intact Financial (IFC CN) 6am, C$1.21
    • Lazard (LAZ) 7am, $0.60
    • Level 3 Communications (LVLT) 8am, $0.13
    • Magellan Midstream (MMP) 8:02am, $0.82
    • Merck (MRK) 7am, $0.89 - Preview
    • Nasdaq OMX (NDAQ) 7am, $0.67
    • Radian Group (RDN) 7am, $0.02
    • Ralph Lauren (RL) 8:01am, $2.51 - Preview
    • Time Warner (TWX) 7am, $1.15 - Preview


    • Akamai Technologies (AKAM) 4:01pm, $0.52
    • Allstate (ALL) 4:05pm, $1.37
    • Atmel (ATML) 4:05pm, $0.10
    • CBRE Group (CBG) 4:05pm, $0.66
    • Cincinnati Financial (CINF) 4:05pm, $0.73
    • Credicorp (BAP) 6pm, $2.33
    • Everest Re Group (RE) 4:05pm, $5.06
    • Fiserv (FISV) 4:01pm, $0.81
    • FleetCor Technologies (FLT) 4:01pm, $1.06
    • FMC (FMC) 4:30pm, $0.92
    • Green Mountain Coffee Roasters (GMCR) 4pm, $0.90
    • IAC (IACI) 4:05pm, $0.91
    • Kimco Realty (KIM) 4:01pm, $0.13
    • Lincoln National (LNC) 4:10pm, $1.28
    • Marathon Oil (MRO) 4:03pm, $0.71
    • NXP Semiconductor (NXPI) 8pm, $0.95
    • O’Reilly Automotive (ORLY) 6:30pm, $1.32
    • Pandora Media (P) 4:01pm, $0.07
    • Plains All American Pipeline (PAA) 4:05pm, $0.70
    • Prudential Financial (PRU) 4:07pm, $2.23
    • SolarWinds (SWI) 4pm, $0.34
    • Standard Pacific (SPF) 4:02pm, $0.14
    • Stericycle (SRCL) 4:02pm, $0.96
    • Tesoro (TSO) 4:40pm, $0.31
    • TriQuint Semiconductor (TQNT) 4:02pm, $0.13
    • Twitter (TWTR) Aft-Mkt, $(0.02) - Preview
    • Walt Disney (DIS) 4:15pm, $0.91 - Preview
    • XL Group (XL) 4:01pm, $0.82
    • Yelp (YELP) 4pm, $(0.03)


  • WTI Rises a Second Day as U.S. Freeze Seen Curbing Fuel Supplies
  • Mitsui Mining Boosts Zinc Fee 70% as China Consumption Rises
  • Sugar Prices Post Longest Rally in Five Months on Supply Concern
  • Rubber Seen Needing Further 20% Drop to Drain Global Stockpiles
  • Korean Coffee Lovers Luring Brazilian Arabica Sales: Commodities
  • Wheat Slides Amid Speculation Snow Cover Will Shield U.S. Crop
  • Gold Gains as Investors Weigh Economy Concerns, Physical Demand
  • Natural Gas Retreats After Gains; CME Raises Margins for Trading
  • NYSE Liffe Said to Review Cocoa, Coffee Trade as Prices Diverge
  • India Said to Consider 75% Increase in Sugar Export Subsidy
  • French Refiners Lost 700 Million Euros in 2013 as Margins Shrank
  • Rubber Declines to 17-Month Low Amid Chinese Demand Concerns
  • Copper Smelters Win Amid Mine Production Glut: Chart of the Day
  • Zinc Rebounds From Longest Slump in 25 Years on Supply Outlook


























The Hedgeye Macro Team















Takeaway: URBN bold FW launch. RSH not closing enough stores. Top Shop = Big Idea. AdiBok, Iverson not MJ. UA/Adi drop gloves. UK prices down, rev up.



GIL - Earnings Call: Wednesday 2/5 5:00pm




UK shop prices fall for ninth consecutive month



  • "Prices in Britain's shops fell at the fastest rate in more than seven years in January as retailers resorted to aggressive discounting on clothing, furniture and electrical goods…"
  • "Shop price deflation accelerated to 1% last month from 0.8% in December according to the British Retail Consortium/Nielsen shop price index…"
  • "It was the ninth consecutive month of falling prices and the sharpest deflation rate on record since the series began in December 2006."


Takeaway: Interesting to see that prices are down at a time when retail sales are finally showing signs of life, and retailers and brands that operate in the UK are almost uniformly reporting positive business trends.




URBN - Free People Unleashes Footwear



  • "Free People will unveil its in-house footwear line to the wholesale market this week."
  • "Retailing for $168 to $428, the leather booties, boots, mules, flats and heels in neutral colors reflect the rustic-meets-boho vibe of Free People's clothing line."
  • "In addition to wholesale, Free People will offer the in-house label in its own 90 boutiques across the country, as well as on its e-commerce site. The label already has started testing styles via e-commerce, and Meehan said the response has been positive."

RETAIL CALLOUTS (2/5): URBN, RSH, ADIBOK, UA, WMT, +MORE...   - chart1 2 5


Takeaway: Not sure if these are the coolest things ever, or the ugliest things ever. But it's a bold statement by Free People -- and we'll take a bold statement (even if it fails) over a safe bet any day.


RSH - RadioShack to Close About 500 Stores Within Months



  • "According to people familiar with the matter, RadioShack is planning to close around 500 locations in the coming months. It isn't clear which of RadioShack's roughly 4,300 stores will be closed and when exactly the closings will begin."


Takeaway: They forgot to mention this in that 1980s redux Super Bowl ad that drove the stock up 8%. The reality is that this is probably the right move. We'd rather see 1,000 modern stores that sell 'must have' products, than 4,300 old, antiquated stores with grumpy employees trying to sell batteries, extension cords, and circuit board components. 


ADDYY, UA - Adidas Sues Under Armour Over Patents



  • "Adidas AG sued rival Under Armour Inc. on Tuesday, alleging it infringed on 10 Adidas patents used in the German company's fitness tracking system called miCoach."
  • "The complaint alleges that MapMyFitness and other products from Under Armour resemble Adidas's own products too closely. The German company claims Under Armour willfully infringed on its patents and seeks a jury trial. The patents cover functions like real-time workout data transmission and automated route mapping."
  • "Adidas also charges that Under Armour's director of innovation and research—formerly Adidas's senior innovation engineering manager—had direct knowledge of Adidas's patents. Adidas declined to name the person."


Takeaway: While we can't comment on any direct patent infringement or what the innovation head knew, or shared, we can say that there are a couple dozen applications and systems out there to track fitness levels according to various metrics. So few brands in that space have truly original thoughts and products anymore. We're not saying there's not a lot of cool and commercial stuff out there. But simply that so much of it mimics technology that's already being used by others. Unless there's blatant copying of specific Adi patents (which we'd think UA's risk management would have avoided like the plague), we'll be very surprised if AdiBok comes out ahead on this one. 


ADDYY - Reebok Launches New Marketing Campaign 



  • "Reebok launched its new, fully-integrated marketing campaign – 'Live With Fire', continuing the...brand's mission to change how people perceive and experience fitness."
  • "The 2013 'Live With Fire' campaign celebrates people whose lives have been transformed through their active lifestyle and in doing so unifies the brand's marketing of its fitness and lifestyle business. In addition to featuring Reebok's core pillars of Training and Running, the campaign reinforces Reebok's commitment to women's fitness through the introduction of its Dance and Yoga collections, as well as a renewed focus on Walking."

 RETAIL CALLOUTS (2/5): URBN, RSH, ADIBOK, UA, WMT, +MORE...   - chart2 2 5


Takeaway: Is Reebok still seriously parading around Allen Iverson as a brand spokesperson? The guy hasn't played in four years (three years if you count that year he played in Turkey -- we don't think that counts as it relates to relevance to the US consumer). It's clear that AdiBok is trying to immortalize the guy in the same way that Nike grew Michael Jordan's brand and persona long after he stopped playing. As much as we're surprised that the Jordan Brand still remains so relevant after all these years, the reality is that Iverson wasn't Jordan on the court, off the court, and his relevance in the mind of urban consumers never approached MJ levels.


Top Shop - Topshop Signs Lease for Fifth Ave. Flagship



  • "Topshop…[is planning] a 40,000-square-foot flagship at the corner of Fifth Avenue and 49th Street."
  • "The new store, currently occupied by Lacoste and adjacent to Rockefeller Center, will be the second-largest Topshop unit after Oxford Circus in London, which measures 90,000 square feet."
  • In addition to the uptown store, Topshop will open four new units across the U.S., in San Diego, Houston, Atlanta and Washington, over the next 12 months. All, with the exception of D.C., will also have Topman spaces. Topshop owner Sir Philip Green will be investing $40 million to $50 million in building and fitting out all the new stores."
  • "In an interview here, Green said the long-awaited uptown opening in Manhattan is part of a continued push into the U.S. market, where he aims to generate $1 billion dollars in revenue from the Topshop and Topman brands."


Takeaway: This is the story most likely to go unnoticed by US investors, but one that is likely to emerge as one of the biggest US retail ideas over the next two years.  Contrary to what the name suggests, this retailer sells a lot more than just tops. It has a full assortment including tops, denim, coats, shoes/boots, belts, handbags, jewelry, and more. It's not that assortment that is so threatening to US brands, but rather the price. Jeans for $70. Purses for $30. Boots for under $100, and Jewelry for less money than it costs to buy a  cheeseburger near the new 5th Ave flagship. The prices aren't quite as low as H&M, but the quality is definitely higher.


WMT - Wal-Mart sets C$500 million Canada expansion, rival shares fall



  • "Wal-Mart Stores Inc will invest about C$500 million ($452.35 million) this year to expand in Canada…"
  • "Wal-Mart's investments for the coming fiscal year, which are slightly higher than the C$450 million it earmarked last January for expansion in Canada, include more than C$376 million for store projects, C$91 million for distribution networks to expand fresh food capability and C$31 million for e-commerce."
  • "[Walmart] said it planned to complete 35 supercenter projects in Canada by January 31, 2015, adding one million square feet of retail space…"


Takeaway: On one hand, this is a drop in the bucket for WMT. This is a company that will spend nearly $14 bn in capex this year. But on the flip side, at least it shows WMT's commitment to growing in a market that others, like Sears, are leaving.


Asics - Asics Results Up on Weaker Yen, Running Boom



  • "Management lifted its guidance for operating profit for the full year to 25.5 billion yen, or $252 million, from 24.5 billion yen, or $242 million, at current exchange rates."
  • "Asics reported a 19.6 percent rise in net income for the nine months ended Dec. 31 to 15 billion yen, or $148 million. Total revenues for the period rose 25.1 percent to 238.3 billion yen, or $2.3 billion."
  • "By area, sales in the Asia-Pacific region showed the most gains, growing 74.1 percent currency-neutral. The Americas rose 37.1 percent, Europe gained 36.4 percent and the domestic Japanese market advanced 4.2 percent."




Senate Passes Farm Bill



  • "The massive legislation provides billions of dollars in funding to broadly implement farm safety-net policies and conservation and food stamp programs over five years."
  • "The measure establishes the Pima Agriculture Cotton Trust Fund, which would run through 2018 and provide $16 million in funding annually. It essentially restores the Cotton Trust Fund, which expired in 2009 and suspended duties on imported cotton shirt fabric, and provided grants to cotton shirt manufacturers and yarn spinners in the U.S. It was created to offset an inverted tariff — the U.S. duty on imported finished cotton shirts was lower than the tariff on cotton shirt fabrics, which impacted the competitiveness of U.S.-based cotton shirt makers."
  • "It remains to be seen whether the legislation will resolve a long-standing cotton subsidy dispute with Brazil and bring U.S. cotton programs into line with World Trade Organization requirements but lawmakers said it should, by eliminating direct payments of about $580 million a year to cotton farmers, ending countercyclical payments and modifying the export guarantee program."

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