Poll of the Day Recap: 73% Believe Gold Is Heading to $1,500

Takeaway: 73% believe Gold is headed to $1500; 27% see downside towards $1100.

How high can gold go? If we’re right and the inflation-accelerating-slows U.S. growth setup is similar to 2011, gold can go a lot higher.


“Reality is that very few of the world’s savants made Gold one of their top Global Macro LONG positions in 2014,” Hedgeye CEO Keith McCullough wrote in today’s Morning Newsletter. “It’s still nowhere in the area code of consensus. And yesterday it broke out above @Hedgeye immediate-term TRADE resistance of $1285/oz.”


In the video below Keith discusses the key catalysts for continued momentum in Gold and what the breakout line will be important for further upside.



In the poll we asked: Whats the next stop for gold? $1100 or $1500


At the time of this post, 73% believe Gold is headed to $1500; 27% see downside towards $1100.


Those who see Gold heading higher to $1500 had this to say:

  • Since all the Fast Money guys are still bearish and skeptical about gold. I'm betting higher.
  • No matter what anyone says there is a price to pay for money printing & ZIRP rate policy & it can't be avoided by any power known to man.  It's really just about that simple.  Currency pricing power destruction is absolutely the worst thing a central banker can ever do and the FED/other central bankers have done a huge amount of it.  As the world moves away from dollars which it has & is, lots of this evidence exists, the world has huge excesses of dollars plus what the FED has printed out of thin air, the petro-dollars time is ending over the next few years & this will change the reserve currency status over time which will lower the dollar spending power even further, this can't be stopped now as leadership of the U.S. has made their bed.
  • The shorts have had their day in the sun. They've beaten gold into the dirt and with wars all over the world they try it again! China isn't selling back the hundreds of thousands of tons shipped their way in the last year. It's no time to be short even if you're in cahoots with the Fed.
  • $1500 is just a stop on the way to higher prices. Of all the experts nobody called the price of gold correctly lately.
  • Its building a great base so if this current run clears $1350 then we proceed to $1500 - next major resistance level.
  • See



Those who believe Gold is moving lower to $1100 reasoned:

  • Long-term TAIL prediction: The 2016 election cycle could be very hawkish (i.e. negative for both the Fed and Gold) if Brat's victory over Cantor is anything resembling a canary in the coal mine.
  • I simply don’t get gold investors .. demand is down and will go down more .. why invest in something that is in less demand.

Cartoon of the Day: Burning Dollar

Takeaway: Dollar debauchery is hurting Americans.

Cartoon of the Day: Burning Dollar - Burning dollar 06.20.2014

All-Time Highs: Can Food Prices Go Even Higher?

Takeaway: U.S. consumers are feeling the food inflation heat.

Editor's note: This is an excerpt from a research report released by Hedgeye Macro on 6/19.


We continue to field arguments against the inflationary read-through on the commodity squeeze. Sharp increases in livestock and poultry prices over the last ten years in the face of stagnant wage growth, a decline in savings rates, and a declining U.S. dollar illustrate this reality in staggering fashion.


All-Time Highs: Can Food Prices Go Even Higher? - benchart


If Janet Yellen’s commentary earlier this week is any indication, the Fed will continue to promote yield-chasing from financial intermediaries and those lucky enough to hold equities and fixed assets. The PCE survey from the BLS reports the top quintile of income earners takes 66% of the aggregate income in the basket from interest, dividends, and investment related income. Needless to say, a majority of Americans consume meat.


2013 Meat Consumption Per Capita (KG/Person):

  • United States: 106.9
  • China: 53.5
  • World Average: 34.9

The average consumer we have continuously highlighted is reaching insolvency. Median net income margins have consistently compressed over the last five years to about 1.38% with savings rates decreasing over the same period.


Last Ten Years:

  • USD Index: -9.8%
  • Trailing 1-year U.S. Personal Savings Rate: -9%
  •  S&P GSCI Livestock Index: +69%
  • U.S. Private Sector Avg. Hourly Earnings (Real): -43% 

All-Time Highs: Can Food Prices Go Even Higher? - Beef cartoon 06.18.2014

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Keith's Macro Notebook 6/20: COMMODITIES GOLD UTILITIES

Retail Callouts (6/20): COH, SKX, NKE

Takeaway: COH Analyst Day takeaway. SKX sues AdiBok for violating patent. NKE adds EBAY CEO to board.



COH - Analyst Day Takeaway


Takeaway: Coach is a name we’ve been short more often than not. I’ve been debating whether the bear case is too widely accepted. Apparently not. As they guided  2015 NA comps down in the 20s during yesterday's analyst day. The brand is being completely repositioned, and anyone buying today will need to wait 3-5 years to see if it’s working.  Only question in my mind is that it has a 3.85% dividend yield. Balance sheet has no debt, and there’s a 70% gross margin to backstop the dividend. Being cheap isn’t enough for me to want to buy a dead brand. It had a 3.5% yield a week ago – that seemed cheap too.


SKX - Skechers Sues Reebok for Patent Breach



  • "Skechers USA Inc. has filed a lawsuit against Reebok International for selling footwear that infringes on its GoWalk product line."
  • "Skechers is claiming that Reebok is selling the copycat products under the name 'Reebok Walk Ahead RS.' Reebok’s U.S. head of media relations could not be immediately reached for comment."


Retail Callouts (6/20): COH, SKX, NKE - Chart 1 6 20 14


Takeaway: Yea, the shoes look pretty similar, and who knows SKX may actually win this one. I mean they both look like glorified water shoes. But seriously? Talk about the pot calling the kettle black.


NKE, EBAY - John Donahoe Named to Nike Inc.'s Board



  • "John Donahoe, EBay Inc.'s president and chief executive officer, was named to Nike Inc.'s board Thursday."
  • "'John’s executive management experience in digital commerce, technology, strategic planning, and marketing for a global brand makes him an excellent addition to our board,' said Philip Knight, Nike co-founder and chairman."


Takeaway: sales accounted for about 2% of NKE's sales in 2013, or about 12% of total DTC sales. E-commerce will never play a huge part in the NKE sales algorithm because of the 80/20 split between wholesale and retail, but this is an area where the company needs to improve. Bringing in Donahoe should help.




FDO - Icahn Letter to Family Dollar CEO Howard Levine


  • "Although we appreciated the cordial nature of our discussion at last night’s dinner, it was apparent that we have a strong difference of opinion as to the future of our company."
  • Family Dollar has consistently underperformed its peers on most, if not all, operating metrics (same store sales, total revenue growth, sales per store, sales per square foot, operating margins, capital structure efficiency, etc.) and faces growing competition. In addition, the company’s shares have underperformed not only the shares of its peers but also the S&P 500 index over the last 1-year and 3-year periods.
  • "But perhaps more importantly, we believe that for a number of reasons we discussed last night it is imperative that Family Dollar be put up for sale immediately."


GIL - Gildan Activewear Announces Agreement to Acquire Marketer and Manufacturer of

Branded Sheer Hosiery, Legwear and Shapewear



  • "Gildan Activewear Inc. today announced that it has signed a definitive agreement to acquire substantially all of the assets of Doris Inc. (Doris), a marketer and manufacturer of branded sheer hosiery, legwear and shapewear products to retailers in Canada and the United States. The initial purchase price is approximately CDN $110 million (U.S. $101.4 million), with possible additional contingent payments of up to CDN $10 million (U.S. $9.2 million), which are based on the achievement of targets for growth in sales revenues. The purchase consideration will be paid in cash and will be financed out of Gildan’s bank credit facility. "
  • "Revenues of Doris for the year ended March 31, 2014 amounted to approximately CDN $95 million (U.S. $87.6 million), and adjusted EBITDA for the same period amounted to approximately CDN $14 million (U.S. $12.9 million), so that the acquisition is expected to be immediately accretive to Gildan’s earnings in fiscal 2015."


ANF - Report: Abercrombie installing in-store mobile charging stations



  • "Abercrombie & Fitch is reportedly rolling out charging stations for mobile phones and tablets in its stores. According to TheStreet, there are currently two Abercrombie & Fitch stores with mobile charging stations installed, and the retailer plans to roll out the stations at several more Abercrombie and Hollister stores by the end of the year."
  • "Abercrombie is also providing lockers so customers can leave their mobile devices to charge without worrying about them being stolen."

LEISURE LETTER (06/20/2014)

Tickers:  WYNN, RHP, RLJ, SHO


  • Friday June 20:  2014 Asia Cruise Forum (Taiwan)
  • Tuesday June 24:  CCL F2Q CC;


G13 / Genting Singapore – Genting Singapore delayed the June 24 ground-breaking for it’s planned casino in South Korea's Jeju Island until the third quarter of 2014 with a scheduled opening in 2017. Despite the fully planned and widely-marketed ground-breaking, the Company said the rescheduling is to allow the company the opportunity to brief the newly-elected governor of Jeju and his team on the casino's development plans and its contribution to Jeju Island.

TAKEAWAY: An unfortunate delay for Genting Singapore, but it would seem there's more to the story than simply getting to know the newly-elected governor of Jeju. 


163:HK, Emperor International Holdings –  Vanessa Fan Man Seung, an executive director of Emperor International said, “The impact of Macau shortening mainland tourists’ stay could be digested within a short time."  She also said that in the long term, tourist visits and spending will continue to increase in Macau.  In her opinion, the smoking ban on casino policy will only trigger a short-term impact.

TAKEAWAY:  There continues to be relatively little concern over the new transit visa permit rules and updated smoking ban.


WYNN – Anthony Gattineri, the last of the three owners of WYNN’s casino site consented to signing a pledge that FBT Everett Realty, has no secret owners.  Previously, the state gaming commission indicated it wouldn’t issue WYNN a license unless all of FBT’s owners signed the pledge.

TAKEAWAY: A positive step forward in the process. 


RHP – announced the addition of an additional senior secured $400 million Term Loan B to its existing credit agreement. The new term loan matures in January 2021. The Term Loan B was fully drawn at closing and bears interest at a rate equal to LIBOR plus 300 bps, subject to a LIBOR floor of 0.75%.  The proceeds received from the Term Loan B may be used, as the Company may determine, to repay revolving loans under the Company's existing credit facility and to repay the Company's outstanding 3.75% convertible notes or to settle, in whole or in part, the warrant transactions entered into in connection with the issuance of the 3.75% convertible notes.

TAKEAWAY: A modest simplification of the balance sheet if RHP is able to settle the entire warrant transactions.


RLJ – sold a non-strategic hotel, the 194-room Holiday Inn Austin NW Arboretum Area in Austin, Texas, for approximately $13.5 million, or $70,000 per key or approximately a 7.9% capitalization rate on the Hotel’s 2014 net operating income, fully loaded for pending capital expenditures.

TAKEAWAY:  Kudos to management for executing on its capital recycling strategy to enhance its portfolio through the disposition of assets that are not in line with the Company’s overall long-term investment thesis.


SHO – made a two part acquisition and financing announcement:

  1. a contract to acquire the 544-Room Wailea Beach Marriott for $325.7 million ($596,800 per key) or 16.9x forecasted 2014 Hotel EBITDA of $19.3M and a 5.2% capitalization rate on 2014 forecasted Hotel net operating income. 
  2. announces 18 million share secondary offering through JPMorgan

SHO expects to fund the acquisition, in part, with $60 million of common stock issued directly to the seller - an affiliate of Blackstone Real Estate Partners IV (the "Seller") at a price of $14.87 per share and the Company expects to fund the balance of the purchase price with proceeds from the issuance of common stock.   Also, SHO expects to receive operational support from Marriott International, the Hotel manager, during a planned renovation of the Hotel in 2015 and 2016.  o The company expects this acquisition will be additive

TAKEAWAY:  First, we now know why insiders at every level of Sunstone management were selling stock over the past 30 days or so.  Second, interesting that Marriott will offer financial relief to Sunstone during the renovation.  Third, SHO management gets the award for taking wordsmithing to a new level with the use of “expects this acquisition to be additive” – not to be confused with “accretive”…


Macau Junket Jitters -

  • Macau junket investor Amax International Holdings Ltd says it filed a litigation suit against its associate Greek Mythology (Macau) Entertainment Group Corporation Ltd in a local court on Wednesday in relation to its failure to provide its annual accounts to shareholders.
  • Six VIP rooms have been vacated by junkets in two major casinos.  Larger junket operators are stepping in and absorbing remaining capacity.  This fact has prompted the decision of some smaller junket operators to abandon three VIP rooms in Wynn Macau and three VIP rooms in City of Dreams.   

TAKEAWAY: Could this be the psychological bottom for junket related issues?  We believe junket issues are now yesterday's news story.


Macau Slot Machine Issue - A businessman, Ip Choi Peng, claimed that he had won a game on a slot machine in a Cotai casino on April 18. However, one of the symbols in the winning combination suddenly disappeared. Another similar incident took place five days later when he was playing at a NAPE casino. Again, he alleged that the slot machine malfunctioned and only showed half of the symbols in a winning combination. Ip Choi Peng has claimed that DICJ “coordinated” in these two incidents, and added that both casinos privately offered to find a solution via discussion.  He questioned why the casino managers would want to talk to him if the two incidents were truly caused by machine failures.

TAKEAWAY: We believe the slot machines and games in question were Aristocrat – and this issue could pose a long-term risk to the company.


Macau Visitation Penalties - Visitors who exceed the maximum time for which they are permitted to stay in Macau will be fined up to MOP500 per day (previously MOP200/day), following the amendment of the Administrative Regulation on the Entry, Stay and Residence Permit.  Statistics show that the number of overstaying cases has increased from around 32,000 in 2012 to more than 42,000 in 2013.

TAKEAWAY: Govt's serious about these visitation rules.


Massachusetts Gaming - A Mohegan Sun-commissioned poll says that Boston area residents prefer its proposed casino at Revere to Wynn Resorts’ Everett proposal by 55 to 22%.  Residents also oppose repeal of Massachusetts’ casino law by 58 to 35%. The pol covered Suffolk, Middlesex, Norfolk, Essex and Worcester counties.

TAKEAWAY: The media and public relations battle in an attempt to sway the Massachusetts Gaming Commission as well as public perception. 


Atlantic City - Revel, warned staff it will close this summer, as soon as August 18, if a buyer cannot be found.  

TAKEAWAY: Back in January of this year, it was widely reported Caesar's Entertainment (CZR) was considering a bid for the casino


Atlantic City Gaming - In a recent poll conducted by the Fairleigh Dickinson University, 57% of New Jersey gamblers chose Atlantic City when asked about their preferred gambling destination, 12% of those asked would gamble in New York while 31% of the study participants could not decide or refused to answer the question. 

TAKEAWAY: Atlantic City's appeal to gamblers appears to be waning.


New Gaming Equipment Company - the Nevada Gaming Commission approved a license for Gamblit Gaming, a start-up gaming equipment company that plans to combine traditional slot machines with entertainment-style video games. The company hopes to seek approval for use of the games in Nevada casinos in the first half of 2015. Following the commission meeting, Gamblit's CEO said the company expects to partner with a larger slot machine manufacturer to bring the games into market.

TAKEAWAY: The Company previously indicated it will develop game content targeting the 21-45 year old cohort group.  If successful with content development, this would be a positive for gaming.


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.

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