prev

Just Charts: A Rare Weekly Sector Outperformance

Consumer Staples remains the worst performing sector year-to-date, down -1.5%, however the sector did outperform the broader market last week, rising +1.8% versus the S&P500 at +1.3%, and for the first time all year the XLP outperformed the SPX on a week-over-week basis!

 

Weighing on the sector, the Hedgeye U.S. Consumption Model is flashing predominantly red, as only 3 of the 12 metrics are flashing green.

 

Just Charts: A Rare Weekly Sector Outperformance - 1

 

From a quantitative set-up the sector remains broken across the immediate term TRADE and intermediate term TREND durations, our language for a bearish medium term sector outlook. You’ll see a similar bearish setup for most of the largest names in Consumer Staples.

 

Just Charts: A Rare Weekly Sector Outperformance - 2

 

We continue to believe that the sector is facing numerous headwinds, including:

  • U.S. consumption growth is slowing as inflation rises, in-line with the Macro team’s 1Q14 theme of #InflationAccelerating
  • The economies and currencies of the emerging market – once the sector’s greatest growth engine – remain weak with the prospect of higher inflation in 2014 eroding real growth
  • The sector is loaded with a premium valuation (P/E of 19.2x)
  • Less sector Yield Chasing as Fed continues its tapering program
  • The high frequency Bloomberg weekly U.S. Consumer Comfort Index has not seen any real improvement over the past 6 months, but expanded to -28.6 versus -30.6 in the prior week

Just Charts: A Rare Weekly Sector Outperformance - 3

Just Charts: A Rare Weekly Sector Outperformance - 4

 

 

Top 5 Week-over-Week Divergent Performances:


Positive Divergence:  SAFM +5.7%; NUS +4.3%; SAM +3.4%; HSH +2.8%; CHD +2.8%

Negative Divergence: HSY -1.7%; CPB -1.5%; MNST -1.1%; ABI -1%; FLO -0.9%

 

 

Last Week’s Research Notes

 

Earnings Calls This Week (in EST):

 

Monday (3/3): NUS 11am

Tuesday (3/4): -

Wednesday (3/5): BF/B 10am

Thursday (3/6): -

Friday (3/7): -

 

 

Matt Hedrick

Food, Beverage, Tobacco, and Alcohol

 

Howard Penney

Household Products

 

 

(o)

 

 

Quantitative Setup

 

In the charts below we look at the largest companies by market cap in the Consumer Staples space from both a quantitative perspective and fundamental aspect where we can offer one.  As you will see over time, sometimes our fundamental view does not align with the quantitative setup (though not often).

 

 

BUD – market beta can be a marvelous thing (until it goes bearish again); BUD rallies back above its TREND line (barely) of $103.52

Just Charts: A Rare Weekly Sector Outperformance - 5

 

DEO – unlike BUD, DEO tried to recapture $127.29 TREND support but failed

Just Charts: A Rare Weekly Sector Outperformance - 6

 

KO – bearish TREND firmly intact up at $39.97; one of the better looking big cap shorts on my quant screens

Just Charts: A Rare Weekly Sector Outperformance - 7

 

PEP – doesn’t look worse than KO, but it still looks bad – bearish TREND resistance intact up at $82.09

Just Charts: A Rare Weekly Sector Outperformance - 8

 

GIS – bearish to bullish reversal had some confirmation signals last week; watching TREND support of $49.27 closely

Just Charts: A Rare Weekly Sector Outperformance - 9

 

MDLZ – trying hard to recover its year-end markup momentum, but having some issues; needs to hold TREND support of 33.39 to remain bullish in our model

Just Charts: A Rare Weekly Sector Outperformance - 10

 

KMB – still the best looking long on our list; bullish TREND support intact with an immediate-term TRADE risk range to manage of 107.23-110.93 for now

Just Charts: A Rare Weekly Sector Outperformance - 11

 

PG – in spite of the market’s v-bottom beta bounce in FEB, Procter remains broken with TREND resistance overhead at 80.19

Just Charts: A Rare Weekly Sector Outperformance - 12

 

MO – despite last week’s ramp (on no volume), Altria remains bearish TREND @Hedgeye w/ resistance = $37.11

Just Charts: A Rare Weekly Sector Outperformance - 13

 

PM – still one of the ugliest quantitative setups in all of big cap consumer; TREND resistance remains overhead at 83.46

Just Charts: A Rare Weekly Sector Outperformance - 14


European Banking Monitor: Ukrainian Maelstrom

Below are key European banking risk monitors, which are included as part of Josh Steiner and the Financial team's "Monday Morning Risk Monitor".  If you'd like to receive the work of the Financials team or request a trial please email .

 

---

 

Not So Fast:

Just when it was looking like it was safe to get back in the water. The Ukraine suddenly matters (a lot) to investors, with Europe off 2-3% and S&P 500 futures down ~20 handles. We've been, on the margin, arguing for a more defensive posturing in light of what had been rising interbank, systemic risk measures, rising commodity prices and falling yield spreads. The concerns were initially prompted by the EM fears that surfaced roughly a month ago. Since then we've been erring on the side of caution while the XLF has grinded a few percent higher. This morning, serendipitously, that call appears to have been right. The reality is that through the end of last week some of the risk measures we track were starting to flash the all clear, but in light of the Ukraine situation, we'll hold the line. It doesn't hurt to wait and watch in the short term.  

 

 

European Financial CDS - Aside from a few minor exceptions, European bank swaps were tighter last week, compressing by an average 3 bps (2 bps median decline). The month-over-month change in Europe is more impressive, as much of the Continent's banking system is now seeing double digit M/M declines.

 

European Banking Monitor: Ukrainian Maelstrom - zz. bankss

 

Sovereign CDS – Sovereign swaps across Europe tightened notably last week, while the rest of the world was largely uneventful with the US and Japan widening just one basis point. 

 

European Banking Monitor: Ukrainian Maelstrom - zz. sov 1

 

European Banking Monitor: Ukrainian Maelstrom - zz. sov2

 

European Banking Monitor: Ukrainian Maelstrom - zz. sov3

 

Euribor-OIS Spread – The Euribor-OIS spread tightened by 1 bps to 15 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. 

 

European Banking Monitor: Ukrainian Maelstrom - zz. euribor

 

Matthew Hedrick

Associate


Retail Callouts (3/3): JCG, SHLD, MW, JOSB, WMT, DKS, HD, FAST

Takeaway: Fast Retailing buying JCrew? GPS? Fake SHLD data breach. MW/JOSB finally dating. WMT makes it easier for people to not go in their stores.

EVENTS TO WATCH

  • RSH - Earnings Call: Tuesday 3/4, 10:00am
  • WMT - Raymond James Conference: Tuesday, 3/4 10:25am

 

COMPANY NEWS

 

9983, Jcrew - J. Crew in Talks to be Sold to Japan's Fast Retailing

(http://online.wsj.com/news/articles/SB10001424052702304709904579411430342472924?mg=reno64-wsj)

 

  • "The owners of J. Crew Group Inc. are in talks to sell the clothing retailer to Japan's Fast Retailing Co. for as much as $5 billion, a deal that would help the Asian company fulfill its ambition of becoming a global retailing powerhouse."
  • "Fast Retailing, which owns the Uniqlo apparel chain, approached J. Crew's management about potentially buying the private-equity-owned business, said people familiar with the matter. J. Crew is seeking upward of $5 billion for the business, one of the people said. It remained unclear whether Fast Retailing would pay that much and whether the two sides have yet discussed a price."

 

Takeaway: Fast Retailing has long been on the lookout for major US mall assets. One of the key players consistently in the running has been GPS. While that didn't sit too well with us, the reality is that others believed it. Fast Retailing is one of the few companies out there with a) the desire to own something as big as GPS, and b) the access to capital to get it done. Looks like that one is off the table for now (and for a very long time).  

 

SHLD - Sears Holdings Statement

(http://searsholdings.mediaroom.com/index.php?s=16310&item=137273)

 

  • "There have been rumors and reports throughout the retail industry of security incidents at various retailers, and we are actively reviewing our systems to determine if we have been a victim of a breach.   We have found no information based on our review of our systems to date indicating a breach."

 

Takeaway: Sears is so easy to pick on, but that doesn’t make it right to fabricate rumors about data security and integrity.

 

WMT - Sam's Club tests online subscription service

(http://www.fierceretail.com/story/sams-club-tests-online-subscription-service/2014-02-28)

 

  • "Sam's Club is testing a new online service called 'My Subscriptions' which allows shoppers to have repeat-purchase items delivered to their homes automatically. The goal of the program is to save customers time by renewing their stash of household and personal care items on an ongoing cycle."

 

Takeaway: This is a tough one. On one hand, we see why Sam's is doing this, and it makes sense -- minimize the time between purchases of essential items. But on the flip side, the comp at warehouse clubs is driven not just by regular purchases of consumer staples, but by all the discretionary items that consumers buy that they didn't otherwise plan to buy -- simply because they see something interesting at a good price on the shelves. Simply put, they've got to get people in the stores. We were similarly perplexed when Wal-Mart started beta-testing its 'curbside pickup' program, where people order online and pickup at the front of the store. Again, WMT needs to boost traffic and therefore discretionary purchases. 

 

MW, JOSB - Men's Wearhouse Announces Non-Disclosure Agreement With Jos. A. Bank

(http://ir.menswearhouse.com/press-releases/detail/1284)

 

  • "The Men's Wearhouse today confirmed that it entered into a non-disclosure agreement with Jos. A. Bank Clothiers on Saturday night, March 1, 2014, under which the companies have agreed to exchange certain confidential information and to work in good faith to evaluate a potential combination, and that Men's Wearhouse has received a draft merger agreement from Jos. A. Bank."
  • "Men's Wearhouse noted that its existing cash tender offer for $63.50 would provide Jos. A. Bank shareholders with a substantial premium and immediate value, and that as previously announced, Men's Wearhouse is prepared to increase its offer price to $65 per share if Jos. A. Bank can demonstrate or Men's Wearhouse can discover additional value through discussions or limited due diligence."

 

Takeaway: These two are finally sitting down to work out their marital problems. This thing has been such a circus side-show that our expectations are extraordinarily low for a resolution. But if we had to predict an the outcome with the greatest probability, we'd say MW takes out JOSB for $65.  If all else fails, JOSB loses a third of its market cap.

 

OTHER NEWS

 

DKS - Modell’s CEO impersonated Dick’s exec in spy scheme: suit

(http://nypost.com/2014/02/28/modells-ceo-impersonated-dicks-exec-to-spy-suit/)

 

  • "The CEO of the Big Apple-based Modell’s chain has been sued by big-box rival Dick’s Sporting Goods, which charges that Modell impersonated a Dick’s exec earlier this month as he spied on a store in Princeton, NJ."
  • "Modell...claimed to be a Dick’s senior vice president as he persuaded employees to give him access to the backroom of the store and grilled them about the business, the suit alleges."
  • "Modell told store workers he was scheduled to meet with Dick’s CEO Ed Stack at the store, and appeared to be particularly interested in a 'ship from store' program that delivers goods to customers’ homes from nearby locations, the suit said."

 

Takeaway: #funny

 

HD - Home Depot’s New President Said to Be Groomed as CEO

(http://www.bloomberg.com/news/2014-02-28/home-depot-s-new-president-said-to-be-groomed-as-ceo.html)

 

  • "Home Depot Inc.’s promotion of Craig Menear to president of its U.S. retail division is part of a succession plan for Chief Executive Officer Frank Blake, according to a person with knowledge of the situation."
  • "Menear, 56, is the leading candidate to become the next CEO of the largest U.S. home-improvement chain, said the person, who asked not to be named because the talks are private. There isn’t a timeline for the succession, the person said. Menear joined Home Depot in 1997 and served as executive vice president of merchandising before his promotion, the Atlanta-based company said yesterday in a statement."

 

 

 

 

 


Attention Students...

Get The Macro Show and the Early Look now for only $29.95/month – a savings of 57% – with the Hedgeye Student Discount! In addition to those daily macro insights, you'll receive exclusive content tailor-made to augment what you learn in the classroom. Must be a current college or university student to qualify.

MONDAY MORNING RISK MONITOR: UKRAINIAN MAELSTROM

Takeaway: While some of our key indicators are showing improvement, ongoing developments in the Ukraine support our call to stay on the sidelines.

*********************************************************************************** 

"Legging into Legg Mason"

Invitation to Best Ideas Long Conference Call Tomorrow

 

Please join us tomorrow, March 4th at 1 pm EST for a conference call detailing our newest Long idea in Financials, Legg Mason (LM).

 

Participant Dialing Instructions:

  • Toll Free Number:
  • Direct Dial Number:
  • Conference Code: 824597#
  • Materials: CLICK HERE (Slides will be available approximately one hour prior to the start of the call)

*********************************************************************************** 

 

Not So Fast:

Just when it was looking like it was safe to get back in the water. The Ukraine suddenly matters (a lot) to investors, with Europe off 2-3% and S&P 500 futures down ~20 handles. We've been, on the margin, arguing for a more defensive posturing in light of what had been rising interbank, systemic risk measures, rising commodity prices and falling yield spreads. The concerns were initially prompted by the EM fears that surfaced roughly a month ago. Since then we've been erring on the side of caution while the XLF has grinded a few percent higher. This morning, serendipitously, that call appears to have been right. The reality is that through the end of last week some of the risk measures we track were starting to flash the all clear, but in light of the Ukraine situation, we'll hold the line. It doesn't hurt to wait and watch in the short term.  

 

Key Points:

* 2-10 Spread – Last week the 2-10 spread tightened to 233 bps, -9 bps tighter than a week ago, and the 10-year yield is down a further 4 bps this morning.

 

* Euribor-OIS Spread – The Euribor-OIS spread tightened by 1 bps to 15 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. 

 

* CRB Commodity Price Index – The CRB index rose 0.2% last week, ending the week at 302. As compared with the prior month, commodity prices have increased 6.7%. We generally regard changes in commodity prices on the margin as having meaningful consumption implications.

 

* TED Spread – The TED spread fell 0.9 basis points last week, ending the week at 18.8 bps this week versus last week’s print of 19.7 bps.

 

* High Yield (YTM) – High yield rates fell 16.2 bps last week, ending the week at 5.60% versus 5.77% the prior week.

 

Financial Risk Monitor Summary

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

 • Intermediate-term(WoW): Positive / 7 of 13 improved / 3 out of 13 worsened / 3 of 13 unchanged

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

 

MONDAY MORNING RISK MONITOR: UKRAINIAN MAELSTROM - 15

 

1. U.S. Financial CDS -  Swaps tightened for 24 out of 27 domestic financial institutions. Wells Fargo and Allstate went wrong the way last week, but by a mere +1 bps, and GS was unchanged. Otherwise the US Financials were tighter across the board.

 

Tightened the most WoW: SLM, AGO, COF

Widened the most WoW: WFC, ALL, GS

Tightened the most WoW: BAC, PRU, AGO

Tightened the least MoM: TRV, AXP, AON

 

MONDAY MORNING RISK MONITOR: UKRAINIAN MAELSTROM - 1

 

2. European Financial CDS - Aside from a few minor exceptions, European bank swaps were tighter last week, compressing by an average 3 bps (2 bps median decline). The month-over-month change in Europe is more impressive, as much of the Continent's banking system is now seeing double digit M/M declines.

 

MONDAY MORNING RISK MONITOR: UKRAINIAN MAELSTROM - 2

 

3. Asian Financial CDS - It was another mixed, though largely unexceptional week for Asian financials. Two out of three Indian banks were notably tighter, while in China the Export-Import Bank widened by 11 bps. Across Japan, the only notable mover was Nomura at +11 bps.

 

MONDAY MORNING RISK MONITOR: UKRAINIAN MAELSTROM - 17

 

4. Sovereign CDS – Sovereign swaps across Europe tightened notably last week, while the rest of the world was largely uneventful with the US and Japan widening just one basis point. 

 

MONDAY MORNING RISK MONITOR: UKRAINIAN MAELSTROM - 18

 

MONDAY MORNING RISK MONITOR: UKRAINIAN MAELSTROM - 3

 

MONDAY MORNING RISK MONITOR: UKRAINIAN MAELSTROM - 4

 

5. High Yield (YTM) Monitor – High Yield rates fell 16.2 bps last week, ending the week at 5.60% versus 5.77% the prior week.

 

MONDAY MORNING RISK MONITOR: UKRAINIAN MAELSTROM - 5

 

6. Leveraged Loan Index Monitor – The Leveraged Loan Index rose 1.0 point last week, ending at 1850.

 

MONDAY MORNING RISK MONITOR: UKRAINIAN MAELSTROM - 6

 

7. TED Spread Monitor – The TED spread fell 0.9 basis points last week, ending the week at 18.8 bps this week versus last week’s print of 19.69 bps.

 

MONDAY MORNING RISK MONITOR: UKRAINIAN MAELSTROM - 7

 

8. CRB Commodity Price Index – The CRB index rose 0.2% last week, ending the week at 302. As compared with the prior month, commodity prices have increased 6.7%. We generally regard changes in commodity prices on the margin as having meaningful consumption implications.

 

MONDAY MORNING RISK MONITOR: UKRAINIAN MAELSTROM - 8

 

9. Euribor-OIS Spread – The Euribor-OIS spread tightened by 1 bps to 15 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: UKRAINIAN MAELSTROM - 9

 

10. Chinese Interbank Rate (Shifon Index) –  The Shifon Index fell 1 basis points last week, ending the week at 1.75% versus last week’s print of 1.76%. 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: UKRAINIAN MAELSTROM - 10

 

11. Markit MCDX Index Monitor – Last week spreads tightened -3 bps, ending the week at 73 bps versus 76 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: UKRAINIAN MAELSTROM - 11

 

12. Chinese Steel – Steel prices in China fell 1.0% last week, or 32 yuan/ton, to 3,302 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: UKRAINIAN MAELSTROM - 12

 

13. 2-10 Spread – Last week the 2-10 spread tightened to 233 bps, -9 bps tighter than a week ago. We track the 2-10 spread as an indicator of bank margin pressure.

 

MONDAY MORNING RISK MONITOR: UKRAINIAN MAELSTROM - 13

 

14. XLF Macro Quantitative Setup – Our Macro team’s quantitative setup in the XLF shows 0.2% upside to TRADE resistance of $21.75 and 1.7% downside to TREND support of $21.34.

 

MONDAY MORNING RISK MONITOR: UKRAINIAN MAELSTROM - 14

 

Joshua Steiner, CFA

 

Jonathan Casteleyn, CFA, CMT

 


March 3, 2014

March 3, 2014 - Slide1

 

BULLISH TRENDS

March 3, 2014 - Slide2

March 3, 2014 - Slide3

March 3, 2014 - Slide4

March 3, 2014 - Slide5

March 3, 2014 - Slide6

March 3, 2014 - Slide7

March 3, 2014 - Slide8

March 3, 2014 - Slide9

 

BEARISH TRENDS

 

March 3, 2014 - Slide10

March 3, 2014 - Slide11
March 3, 2014 - Slide12

March 3, 2014 - Slide13


THE LEISURE LETTER (3/3/2014)

CZR dominates the company news today. February blockbuster in Macau.

 


EVENTS TO WATCH:   

TODAY

  • CZR announces $2.2b asset sale to CACQ 
    • 8:30am call: ; pw: 3889366
  • HOT – at  2:15 p.m. Raymond James Institutional Investor Conference
  • HLT – 3:35 pm Citi Global Property CEO Conference

Tuesday, March 4

  • CONEXPO-CON/AGG – Las Vegas thru Friday
  • PEB –  8:50 a.m. Citi Global Property CEO Conference           
  • HST – 9:30 a.m. Citi Global Property CEO Conference
  • SHO – 10:10 a.m. Citi Global Property CEO Conference
  • MAR – 11 a.m. Raymond James Institutional Investor Conference
  • HOT – 2:15 p.m. Raymond James Institutional Investor Conference
  • DRH – 4:15 p.m. Citi Global Property CEO Conference

Wednesday, March 5

  • STAY – 7:30 a.m. Citi Global Property CEO Conference
  • LHO – 9:30 a.m. Citi Global Property CEO Conference
  • RHP – 10:10 a.m. Citi Global Property CEO Conference
  • FCH – 11:30 a.m. Citi Global Property CEO Conference
  • HT – 12:10 p.m. Citi Global Property CEO Conference
  • MAR – Mitsubishi Seattle Consumer Conference
  • BYD – 4Q13 earnings, after market close, 5pm conf call

COMPANY NEWS

CZR – The company held the inaugural lighting of The Las Vegas High Roller for media and locals on Friday evening.  The world's largest observation wheel is the centerpiece of the $550 million Linq located on the Las Vegas Strip. The High Roller is scheduled to be open later this year.

Takeaway:  We saw a preview of the High Roller two weeks ago and were impressed its grandeur, brilliantly colored lighting scheme and striking appearance in the Las Vegas skyline.  It should be a draw.

CZR – More restructuring and negative Q4 pre-announcement.  

Takeaway:  Caesars Entertainment sells $2.2b of asset s to Caesars Growth Partners.  Meanwhile, the core business remains awful with Q4 EBITDA now expected to be roughly 10% below consensus.

INDUSTRY NEWS

GAMING               

Feb GGR DSEC

GGR soared to MOP 38.007 billion (US$ 4.76 billion, HK$ 36.90 billion) in February, up 40.3% YoY.

Takeaway:  So much for worrying about the January "weakness".  YTD, GGR grew 24%.  We would caution that the math suggests march will show a significant deceleration in growth.  April should also look relatively slow.

 

'Certain' govt won't grant all tables for Cotai projects: Tam Macau Daily Times

Secretary for Economy and Finance Francis Tam Pak Yuen said the government would not grant all gaming tables the casino operators have requested for their new resorts in Cotai – at least until 2022. That hands the problem on to someone else, as the former factory boss is expected to retire from his post within 12 months, after serving as economy secretary since the handover from Portuguese administration in 1999.  Tam said, “We do not rule out that the projects can get all the tables they have requested – namely 500-700 tables each – 10 years later... As you all know there will be no more land zoned for gaming after the completion [of the resorts] in 2016-17.”

Takeaway:  We're not too worried about the table cap.  The casinos should get enough tables.  Tam's commentary can be read to indicate that annualized growth in tables won't exceed 3% - that doesn't mean that in certain years, the number of table games could increase more than 3%.  Limiting new suppply beyond what is planned is a positive.

 

Saipan Casino Legislation -  Gaming legislation was introduced today in Saipan.  The proposed legislation allows one casino license holder on Saipan and requires $30 million payment upfront and $15 million every year thereafter until the duration of the license.  The license is for 25 years, with the option to extend for another 15 years or a total of 40 years.

Takeaway:  Asia gaming expansion good for LVS, WYNN, Genting, and to a lesser extent, MGM and MPEL.


Atlantic City Visitation – The number of visitors to Atlantic City fell in 2013, dropping to 26.7 million visitor trips last year, down 2 percent from the 27.2 million in 2012 - reflecting the eighth straight year of declines in a resort town that depends on tourists and casino gamblers for its livelihood.  Atlantic City’s visitor numbers peaked at nearly 35 million in 2005 and have declined every year since then.

Takeaway:  While a number of US commercial airlines have announced additional service to AC for beginning later this spring, it's hard to imagine AC posting any meaningful growth in the coming years. 

MACRO

Hedgeye remains negative on consumer spending and believes in more inflation.  Following  a great call on rising housing prices, the Hedgeye Macro/Financials team is turning decidedly less positive. 

Takeaway:  We’ve found housing prices to be the single most significant factor in driving gaming revenues over the past 20 years in virtually all gaming markets across the US.

 

MACRO MEDLEY: SOFT WITH A SIDE OF MIDDLING

  • The softness in New Durable & Capital Goods Orders extends itself in January.  The labor market continues to improve but at a slowing rate. 
  • Durable Goods declined for two consecutive months for the first time since October 2011 as January New Orders declined -1.0% MoM, unable to comp Decembers -5.3% MoM decline
  • The great 2014 capex resurgence narrative remains in a holding pattern as Core Capex Orders growth retraced Decembers MoM decline but posted its first YoY decline in 10 months.
  • Meanwhile, the preponderance of domestic, fundamental macro data continues to suggest slowing growth – a trend the market continues to discount as utilities, bonds, and gold/commodities continue to outperform pro-growth leverage.
  • After last week’s counter-trend move to 4-weeks of steadily deteriorating improvement in the initial claims data, this morning’s data again reflects a deceleration in the rate of improvement in the domestic labor market. 
  • On a seasonally-adjusted basis, initial jobless claims rose 14k to 348k from 334k WoW, as the prior week's number was unrevised lower by 2K. Meanwhile, the 4-week rolling average of seasonally-adjusted claims was flat WoW at 338K.

Takeaway:  Macro teaming up with demographics and bad weather as headwinds against US gaming.


get free cartoon of the day!

Start receiving Hedgeye's Cartoon of the Day, an exclusive and humourous take on the market and the economy, delivered every morning to your inbox

By joining our email marketing list you agree to receive marketing emails from Hedgeye. You may unsubscribe at any time by clicking the unsubscribe link in one of the emails.

next