THE MACAU METRO MONITOR, FEBRUARY 10, 2014
CASINOS RECORD A BRIGHT MOP8.3-BLN START TO MONTH Macau Business
Casino revenue for the first six days of this month reached MOP8.3 billion (US$1.04 billion), a run rate was MOP1.39 billion. In the first seven days of the Lunar New Year holidays last year revenue was MOP7.2 billion. Credit Suisse says mass-market gaming revenue in the first five days of the holidays was up to 25% YoY.
HOTEL STATS Macau Business
The Macau Government Tourist Office said the average occupancy rate of three-, four- and five-star hotels was 94.4%, 5.4% points higher than last year. Five-star hotels saw the biggest increase in their average occupancy, which rose by 6.3% points to 97.2%. The average room rate in three- to five-star hotels climbed by 17.5% to MOP2,387 (US$298).
SANDS RECORDS 1.8 MILLION VISITS DURING HOLIDAYS Macau Business
There were 1.8 million visitors to Sands China Ltd’s casino-resorts between January 31 and last Thursday. Its resorts had an average of around 260,000 visitors a day during the first week of the lunar year.
CHIMELONG RESORT DRAWS 500,000 IN FIRST 10 DAYS Macau Business
The Chimelong International Ocean Resort on Hengqin Island drew about 500,000 visitors during its first 10 days in business. A spokesman for the owners said the resort had up to 80,000 visitors a day during the Lunar New Year holidays, and that most were independent travellers from Zhuhai and elsewhere in the Pearl River Delta region. He said about 500,000 people had visited the resort between January 28 and last Thursday.
TAIPA FERRY TERMINAL TO BE OPERABLE IN Q2 OF 2014 Macau Daily TImes
After an almost five-year delay, the Infrastructure Development Office (GDI) finally confirmed that the first and second stages of construction of the Pac On Ferry Terminal in Taipa will finish in 2Q.
TODAY’S S&P 500 SET-UP – February 10, 2014
As we look at today's setup for the S&P 500, the range is 75 points or 3.45% downside to 1735 and 0.72% upside to 1810.
CREDIT/ECONOMIC MARKET LOOK:
- YIELD CURVE: 2.37 from 2.38
- VIX closed at 15.29 1 day percent change of -11.26%
MACRO DATA POINTS (Bloomberg Estimates):
- 12pm: Wasde commodities reports
- U.S. Rates Weekly Agenda
- FX Weekly Agenda
- President Obama meets with French President Hollande; to discuss U.S.-French business ties, proposed U.S.-EU free-trade agreement
- House Transportation and Infrastructure Cmte holds field hearing in Charlestown, W.Va., on Elk River chemical spill
- 10am: CFTC’s Technology Advisory Cmte holds public meeting focused on swap data reporting; CFTC’s concept release on automated trading; swap execution facilities
- 2pm: House Energy and Commerce panel holds hearing on drug shortages, with GAO Healthcare Director Marcia Crosse
- 2:30pm: House Transportation and Infrastructure panel holds roundtable discussion on public-private partnerships
- Geneva II peace talks and negotiations continue after the Jan 22 Conference; members of President Bashar al-Assad’s government and rebels are expected to resume talks in Geneva
WHAT TO WATCH:
- L’Oreal jumps as Nestle said to seek ways to reduce 29% stake
- James River Coal hires Perella Weinberg, may sell itself
- PBOC signals money-mkt volatility; China seeks to tame debt
- Hudbay makes offer to acquire Augusta Resources
- Intl Forest Products to acquire Tolleson Lumber for $180m
- Japan’s Dec. current-account deficit widens to record
- Forbes sale nears; Spice Grp, Fosun said to plan final bids
- Mandel tops best-earning hedge funds for second year
- AIG eyes acquisitions in Asia, Latin America: Figaro
- Barclays examining possible data theft from 27,000 customers
- China regulator said to order smaller banks to set aside funds
- Chinese regulator said to seek JPMorgan job for friend: NYT
- Swiss brace for sour EU relations on anti-immigration vote
- Boardwalk Pipeline (BWP) 6am, $0.31
- CNA Financial (CNA) 6am, $0.85
- Emera (EMA CN) Bef-mkt, C$0.42
- Hasbro (HAS) 6:30am, $1.22 - Preview
- Mercury General (MCY) 8:30am, $0.53
- Albany International (AIN) 5pm, $0.35
- American Capital (ACAS) 4pm, $0.24
- Amkor Technology (AMKR) 4:07pm, $0.14
- Compass Minerals International (CMP) 4:15pm, $1.77
- CYS Investments (CYS) 4:01pm, $0.35
- Flotek Industries (FTK) 4:15pm, $0.17
- Forward Air (FWRD) 4:05pm, $0.56
- Highwoods Properties (HIW) Aft-mkt, $0.73
- KapStone Paper and Packaging (KS) 4:15pm, $0.48
- Loews (L) 4:15pm, $0.70
- Masco (MAS) 5:09pm, $0.16
- Molina Healthcare (MOH) 4pm, $(0.19)
- Nuance Communications (NUAN) 4pm, $0.23
- Owens & Minor (OMI) 5pm, $0.50
- Pioneer Natural Resources (PXD) 4:01pm, $0.98
- Primerica (PRI) 4:02pm, $0.79
- Rackspace Hosting (RAX) 4pm, $0.14
- Regal-Beloit (RBC) 5:17pm, $0.84
- Sensient Technologies (SXT) 4:24pm, $0.63
- Toromont Industries (TIH CN) Aft-mkt, C$0.52
- Waste Connections (WCN) 4:05pm, $0.43
COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)
- Gold Demand in China Surges to Record as Bear Market Spurs Sales
- Rubber Inventories in Producing Countries to Drop on Drought
- Coffee to Soybean Wagers Climb on Brazilian Drought: Commodities
- Aluminum Faces Deficit in 2015 on Cutbacks, Sumitomo Says
- Brent Slips After Biggest Gain in Three Months Amid Libya Return
- Nickel Climbs Amid Speculation Ore-Export Ban Will Lift Prices
- Gold Gains to Two-Week High on U.S. Jobs as China Resumes Buying
- Wheat Falls Third Day Before USDA Report as Supply Seen Ample
- Sugar Drops 3rd Day in New York Before Possible India Decision
- Hedge Funds Boost Diesel Bets With Supply at Decade Low: Energy
- Rebar Declines for Second Day as Demand Weakens After Holiday
- California Ranchers Missing Beef Rally in Bid to Survive Drought
- Cheap Shale Gas Allows U.S. Refiners to Displace EU in LatAm
- Tin Exports From Indonesia Slump to Three-Month Low in January
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This note was originally published at 8am on January 27, 2014 for Hedgeye subscribers.
“The hour between dog and wolf, that is, dusk.”
Customer questions on Friday went something like this: ‘Keith, was that a bull or bear? Dog or wolf? What do you think?’ I don’t know. But I’m not in the business of walking up to a bear in the dark without a real-time gun! So let’s stay on our toes here and react accordingly. The best market calls are made by Mr. Macro Market, not me.
Ironically enough, last week I started reading the latest behavioral psych book to bubble up to the top of my pile, The Hour Between Dog and Wolf – Risk Taking, Gut Feelings and the Biology of Boom and Bust, by former Goldman/Deutsche trader, John Coates.
In his introduction, “it has been said of war that is consists of long stretches of boredom punctuated by brief periods of terror, and much the same can be said of trading” (Coates, pg 5). I’d say that if you were buying-the-damn-bubble #BTDB on Wednesday and Thursday of last week, Friday’s move, punctuated by a +45.8% VIX rip on the week, felt like terror.
Back to the Global Macro Grind…
First, instead of screaming bloody murder this morning, let’s contextualize where Friday’s -2.09% drop in the SP500 came from. In an intraday note (11:45 AM on Thursday January 23rd) I wrote a risk management note titled “Not #BTDB Today” and outlined 3 main issues that were signaling in our model:
- US Consumption #GrowthSlowing (rate of change vs. Q313’s sequential top)
- SP500 broke our immediate-term TRADE line of 1837 support
- US stocks making lower-highs (vs. all-time highs) and down YTD perpetuates performance chasing
In other words, this was very much a playbook 3-factor (History, Math, and Behavioral) line of reasoning that seems sound, after the fall:
- HISTORY: our Q114 Macro Theme of #InflationAccelerating has historically slowed consumption growth
- MATH: immediate-term TRADE signals matter in either confirming existing TRENDs or signaling new ones
- BEHAVIORAL: consensus is still in the business of chasing (buying) high and freaking out (selling) low
- The US Dollar (index) was down a full -0.9% last week (down -2.2% now in the last 6 months)
- The CRB Index (19 commodities) was +1.5% last week vs the SP500 -2.6%
- US Consumer Discretionary Stocks (XLY) are already down -4.98% YTD (vs SPX -3.1%)
And while, Janet Yellen’s new Fed will see no inflation this week (on a lag, after comping the all-time highs in food/commodity inflation of 2011-2012), real-time men and women trying to decide between dog and wolf see breakevens (inflation expectations rising) and Natural Gas +19.8% last week for what it is, on the margin, #inflationary.
Interestingly, but not surprisingly, so does Mr. Macro Market. Remember that down days for US stocks in 2014 have been #timestamped frequently by the following pattern: Down Dollar + Down Rates = Down Stocks.
That’s why the immediate-term TRADE correlations between the US Dollar and the SP500 are as follows:
- 15-day = +0.66
- 30-day = +0.43
In other words, if economic gravity still matters (it does), and the Dollar and Rates are signaling bear (on the slope of US economic growth), it’s probably a bear.
While everyone in the Barron’s Roundtable said it’s all about the Fed (you have to quantify less in making general groupthink statements), we continue to think that getting market beta right for the last few years has been more about getting the slope (rate of change) of GROWTH and INFLATION right.
On the GROWTH front, this week’s Macro Calendar will show you more #GrowthSlowing (on the margin):
- TUESDAY: Durable Goods should slow in December versus November’s +3.4%
- THURSDAY: Q413 US GDP should slow to 3-something percent vs Q313’s +4.12% sequential peak
- FRIDAY: PMI for January could easily slow form December’s frothy 60.2
Oh, and your illustrious open market committee of forecasting the weather (on a lag) at the Federal Reserve may well taper again on Wednesday into #GrowthSlowing too. Never mind dog or wolf – that’s just dumb.
Our immediate-term Global Macro Risk Ranges are now:
*= new TREND change (in brackets)
*UST 10yr Yield 2.72-2.79% (bearish)
SPX 1779-1825 (bullish)
*Nikkei 14678-15169 (bearish)
*VIX 14.91-20.41 (bullish)
*USD 80.19-80.79 (bearish)
Best of luck out there today,
Keith R. McCullough
Chief Executive Officer
Takeaway: The January employment data was soft on balance but again offered a bevy of talking points for the bull & bear contingents.
Editor's note: This complimentary research note was written by Macro Analyst Christian Drake and originally published on February 07, 2014 at 13:36 in Macro. For more information on how you can subscribe to Hedgeye click here.
This morning’s Employment data for January confirmed the slowdown observed in December and, on balance, was a disappointment versus Nonfarm Payrolls consensus at +180,000.
For the record, we highlighted (in detail) the emergent deceleration in the domestic, fundamental macro data in our "Flash Call" on Wednesday. We would direct you to that for a fuller discussion of the data and how to be positioned for (on the margin) #InflationAccelerating and#GrowthDecelerating. For a link to the presentation and replay ping firstname.lastname@example.org.
BULL/BEAR: The January employment data was soft on balance but again offered a bevy of talking points for the bull & bear contingents.
On the BEAR side, the Establishment Survey was weaker for a second month with Non-farm and Private payrolls increasing +113K (vs. +180K exp.) and +142K (vs. +185K exp), respectively.
Further, there was no meaningful, positive revision to the December figures which were revised +1K to +75K.
With the NFP numbers now beginning to decelerate on a Trend (3M/6M) basis the implications for prospective policy adjustments become more substantive.
On the BULL side, the incremental improvement in the unemployment rate to 6.6% was a function of positive dynamics, specifically higher employment and higher labor force participation.
The Household Survey showed a strong gain in employment with an estimated +638K jobs added in January with Total Unemployed dropping -115K sequentially.
The labor force participation rate increased to 63% from 62.8% as the net change in the labor force (+523K), driven by the positive change in employment, increased at a premium to the +170K increase in the Civilian Population.
Overall, despite the ongoing decline in the U-3 rate, the preponderance of labor market metrics remains largely middling – expect the Fed to highlight that reality and increase discussion around an inflation floor or similar as we move toward breaching the unemployment ‘target’ on the downside.
SEASONALITY: The marked deceleration in the reported, seasonally adjusted payroll numbers is, perhaps, even more remarkable given that seasonality should be serving to buttress the numbers as we build towards the positive peak in seasonality in February.
INDUSTRY EMPLOYMENT: Construction and Manufacturing were the notables, reversing last month’s weakness, gaining +48K and +21K, respectively
The laggards were Retail (-13K) and Education and Health Services (-6K). In fact, Healthcare saw a net decline in employment MoM for the first time since July 2003!
GOVERNMENT EMPLOYMENT: Federal Gov’t Employment Declined -12K MoM (-4K ex-Postal Service). State & local Government lost -17K jobs in December, but on a year-over-year basis growth remains positive at +0.17%.
HOURS & WAGES: Hours and wages, which shouldn’t show material distortion from weather, were largely flat sequentially. Weekly hours worked held at 34.4 while hourly earnings grew +1.9% YoY – note that the longer-term trend in wage growth is ~ +3% and with PCE growth running at +3.6% as of the latest December reading, wage growth has some heavier lifting to do to maintain the current pace of household spending.
WEATHER: Unlike last month, employees out of work due to bad weather wasn’t an upside outlier in January. BLS reported that 262K individuals missed work due to inclement weather in January, which compares to the longer-term January average of ~250K.
CES Benchmark Revision: The BLS revised the total nonfarm employment level for March 2013 upward by 369K with the total level of NFP employment for year-end 2013 revised from 136.9M to 137.4M, or a positive revision of ~500K.
Employment By Age: Employment growth by age accelerating sequentially for all age cohorts except 20-24 year olds. Despite the sequential improvement from -0.9% YoY to -0.5%, 45-54 Yr. olds remain the lone age demographic still mired in negative employment growth. With the exception of a few months in mid-2012, 45-54 years olds have yet to see positive job growth in any post-recession month according to BLS data.
Christian B. Drake
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Takeaway: Here are Hedgeye CEO Keith McCullough's refreshed levels for our high-conviction stock ideas.
Trade :: Trend :: Tail Process - These are three durations over which we analyze investment ideas and themes. Hedgeye has created a process as a way of characterizing our investment ideas and their risk profiles, to fit the investing strategies and preferences of our subscribers.
- "Trade" is a duration of 3 weeks or less
- "Trend" is a duration of 3 months or more
- "Tail" is a duration of 3 years or less
Anything longer than 3 years is unpredictable