Chinese New Year (CNY) is off to a great start for the Macau casinos following a softer than expected January (hold issues in Jan?).  Daily table revenues averaged $1.464 billion, up 78% over comparable period last year.  The more appropriate comp is 3rd week of February last year when table revs averaged HK$1.107 billion – so peak CNY is up about 32%.  We should see one more week of fairly strong revenues related to the CNY celebration before the seasonal slowdown.  All in, we continue to project February YoY growth of around 20%, which could prove conservative.


For market shares, LVS is crushing it this month with MTD market share well ahead of trend as is Galaxy.  Those market share gains are coming at the expense of SJM, MGM, and MPEL.  While variances from normal hold are no doubt causing most of the share volatility this early in the month, we expect LVS primarily and Wynn secondarily, to be volume share gainers, with LVS showing the longer tail.  Indeed, the anecdotal feedback from the ground suggests terrific volumes at the LVS Cotai properties.





Silent Apprehension

This note was originally published at 8am on January 28, 2014 for Hedgeye subscribers.

“Wall St. was a street of vanished hopes, or curiously silent apprehension, and a sort of paralyzed hypnosis.”

-New York Times


Imagine that was the header for @NYT on the eve of America’s central economic planner in chief’s State of The Union. Newsflash: it’s not. That was the front page of the New York Times on the day after the 1929 US stock market crash.


John Coates cites the aforementioned headline in chapter 1 (The Biology of a Market Bubble) of The Hour Between Dog and Wolf and goes on to remind us that “research on body-brain feedback, even within physiology and neuroscience, is relatively new.” (pg 28).


So how are you feeling this morning? While you know that hope is not a risk management process, apprehension and paralysis are all part of the game. While it’s hard to sell`em on green and buy`em on red, fading your emotional state is often the precise action to take.


Back to the Global Macro Grind


I don’t know about you, but in the heat of the decision making moment I fade how I feel about markets a lot. Through 15 years of trial and error, I’ve learned to increasingly rely on multi-factor, multi-duration, risk management signals amidst the research noise.


Since I don’t have a dog (or wolf) in the fight in marketing a perma bullish or bearish position, I use the TRADE versus the TREND in order to tone down my testosterone. Yep, I’m a dude – keeping that under control matters!


To review our process lingo:

  1. TRADE is 3 weeks or less in duration
  2. TREND is 3 months or more in duration

The reason why I use “more” or “less” is because time in my model (days) varies inversely with volatility. In other words, if front-month volatility ramps +50% in a week, the number of days in my TRADE model falls, fast – and, if implied volatility (looking out on the curve) doesn’t confirm that immediate-term information surprise, I keep an above average amount of duration (time) in the TREND model.


That may or may not make sense to you. So to put it more simply:

  1. When both front-month and implied volatility are signaling lower-highs and lower-lows, a monkey can buy stocks
  2. When both front-month and implied volatility move from bearish to bullish TRADE and TREND, monkeys get killed

Momentum monkeys, I mean.


I know, I know. Every time I call someone a monkey, I trigger an emotional response. But, please, don’t be offended. I am a monkey too – I’m just one that tends to learn from the cage door being slammed on my fingers.


Volatility, of course, is the #1 risk factor that every major fund manager who has fallen from grace has messed up. Even the world’s best messed this up in bonds last June. Many more have already messed this up in Japanese and Emerging Market Equities YTD.


This is basically why I completely disagree with the concept of being an active “long-term investor” who doesn’t use an implied volatility risk management overlay. While it would be nice to wake up to sun and bananas at the zoo every day, reality is that every once in a while a storm rips the cages open and the tigers, who have been putting up with monkey-bull chirping for a year, are hungry.


Back to the actual levels, to keep this simple, let’s just focus on the inverse relationship between the SP500 and VIX:

  1. TRADE – SPX 1837 momentum support broke as 13.81 VIX resistance became immediate-term support
  2. TREND – SPX 1779 support was tested intraday yesterday (and held), but VIX 14.91 TREND is firmly intact

And here Mucker the monkey was covering oversold shorts (and buying one long, LVS) into the close as 1779 SPX held (which would be called a high-probability gamble - dealer shows a 6 in #BlackJack)… and the minute I saw Apple (AAPL) guide down, I thought it was going to be a gamble I’d pay for today (and deserve it).


But, the US Equity Futures are up 8-10 handles and I’ll play lucky on the open today instead. I won’t, however, confuse that with the next leg up in this market ripping to fresh all-time highs. Provided that 1837 SPX TRADE resistance and 14.91 VIX TREND support remain intact, I’ll be a seller again this morning on green (like we were in #RealTimeAlerts on the open yesterday).


I know that playing the game across durations isn’t for everyone. But this is what I do. And I like it. I can assure you that the longest of “long-term” investments you can ever make is starting your own company with all of your own money. And for me at least, that investment requires absorbing 24/7 risk management, apprehension, and pain – if you want the long-term to last longer, that is.


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


SPX 1758-1822

VIX 14.91-20.41

USD 80.18-80.79

Pound 1.64-1.66 (bullish)

NatGas 4.58-5.15

Gold 1240-1272


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Silent Apprehension - Chart of the Day


Silent Apprehension - Virtual Portfolio

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In preparation for TRIP's FQ4 2013 earnings release tomorrow, we’ve put together the recent pertinent forward looking company commentary.




  • Since we rolled this out to 100% of our traffic in early June, we've driven more clicks per meta session and better downstream partner conversion, and although pricing remains choppy, we've seen a modest uptick in meta revenue per session. We continue to work on improving onsite and partner conversion, running multiple tests every week, and we expect more gains in this area.
  • We'll have lapped the transition completely by the end of Q2 next year, and so the whole transition piece will be behind us and it will be continued growth based on our hotel shopper numbers, and the rest of our ongoing conversion improvements that we work on every week.
  • For partners, coverage is strong and bidding frequency is up.


  • According to Skift, Tripadvisor halted its TV campaign in the US market in January.
  • We are seeing some positive signs from this campaign, but it is too early to gauge the overall effectiveness.
  • We spent a couple of million in Q2, maybe a couple of million more at the end of September Q3 when we launched the campaign. And by the time Q4 finishes, we'll probably have spent close to $30 million or so.
  • We wanted to go heavy in order to be able to detect a lift that we felt comfortable that we could correlate with the specific TV spend. And we've been in market a lot in October and that will continue in November as well. And I'll report back in early Q1 with a more definitive, hey look, this is what we've learned from everything we were doing in TV.
  • Argentina is a relatively small market for us, so we thought we would be able to see it a stronger signal for the TV spend. France and Spain, key European markets for us. Picked two as opposed to going broad based and the U.S. is home market where we have the most traffic, hey, will we be able to see the results that we're looking for.


  • Sort of 2014 and if you look at how TripAdvisor historically delivers projects, it's perhaps we're known as faster than some other companies. I think earlier part of 2014 than later part of 2014 because it is kind of the next best thing we feel we can do on the mobile front. We have a lot of installs. We're still pre-installed on Samsung S4. We've got new native apps, Android and iPhone, that just rolled out, nice engagement we're seeing on both of those, but we're missing that booking functionality, so that's the clear next phase for our mobile strategy.


  • So meta over and done with (mid-2014), mobile less of a headwind. In international, will remain a bit of a headwind. Hopefully, we can acknowledge that as an ongoing headwind, but make it up elsewhere in the company as we improve our overall monetization of the site.


  • Our brand strength and our conversion numbers in the U.K. is outstanding, arguably sort of best in the world, and Brits like to travel a lot, so that's good for us; Australia is a pretty strong market for us; Japan has some structural weaknesses in terms of the commission rates that the local players are able to collect on hotels. And so, when the local OTA isn't making as much money on the bookings, they can't pay us as much, but we continue to grow in all of our markets. Europe, the Northern European markets are better than the Southern European markets. I don't think that has anything to do with TripAdvisor per se. I just think that's the macroeconomic climate for all travel providers.


  • We view it as a tremendous market. We still continue to invest in China, and so we still have a couple of points-of-sale that are growing in China. We like the investment, we're well positioned for the future, we're not commenting on the overall timeframe when that turns profitable, but it positions us well down the road with that growing market or worse comes to worse, we could curtail our investments and take those dollars and put them elsewhere.


The Chinese New Year celebration is providing the kick start we thought.  Here are the trends and comps.


  • According to Lusa, Macau daily GGR reached HK$1.34 billion for the 1st six days of Chinese New Year 2014.  Compared with the daily HK$999MM for the 1st seven days last Chinese New year, that translates into 35% growth in daily GGR on a CNY basis.  On a calendar basis, daily revenue may have come close to doubling.
  • CNY GGR usually picks up 7-14 days after the new year i.e. Jan 31, 2014.  Hence, GGR may be even higher for this coming week.  
  • The chart below shows very easy comps for the 1st half of February due to calendar differences.
  • The 2nd half of February laps last year’s CNY pickup and will be considerably more difficult at HK$1,030 ADTR.  But if we use December as a ‘normal’ run rate without any holiday distortions, we shouldn’t see a precipitous decline.
  • We continue to believe February could generate 20% YoY growth


[video] Kaboom! Kaiser's High-Conviction SHORT Idea Crushed

Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.52%
  • SHORT SIGNALS 78.67%