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July 17, 2014

July 17, 2014 - Slide1

 

BULLISH TRENDS

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BEARISH TRENDS

 

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THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – July 17, 2014


As we look at today's setup for the S&P 500, the range is 26 points or 1.14% downside to 1959 and 0.17% upside to 1985.                                  

                                                                                             

SECTOR PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

EQUITY SENTIMENT:

 

THE HEDGEYE DAILY OUTLOOK - 10

 

CREDIT/ECONOMIC MARKET LOOK:

  • YIELD CURVE: 2.03 from 2.04
  • VIX closed at 11 1 day percent change of -8.03%

 

MACRO DATA POINTS (Bloomberg Estimates):

  • 8:30am: Housing Starts, June, est. 1.020m (prior 1.001m)
  • 8:30am: Init Jobless Claims, wk 7/12, est. 310k (pr 304k)
  • Continuing Claims, week of July 5, est. 2.580m (prior 2.584m)
  • 8:30am: Building Permits, June, est. 1.03m (prior 991k)
  • 9:45am: Bloomberg Consumer Comfort, July 13, (prior 37.6)
  • 9:45am: Bloomberg Economic Expectations, July (prior 48.5)
  • 10am: Philadelphia Fed, July, est. 16 (prior 17.8)
  • 1:35pm: Fed’s Bullard speaks in Owensboro, Ky.

 

GOVERNMENT:

    • 6am: Quinnipiac poll results incl. Obama’s approval rating, 2016 presidential race
    • 10am: House Budget Cmte hearing Obama Overseas Contingency Ops. funding request
    • 10am: GM CEO Mary Barra before Senate Commerce panel on consumer protection, product safety and insurance
    • 10am: Justice Dept. officials at Sen. Foreign Relations Cmte on minors at the border
    • 10:30am: Senate Appros. Cmte marks up defense spending bil
    • 11:30am: House Speaker John Boehner holds news conference
    • U.S. ELECTION WRAP: Polls in Iowa, N.C., Mich., Colo.; 2Q Money

 

WHAT TO WATCH:

  • U.S. expands Russia sanctions to banks, energy, weapons cos.
  • Western cos. examine Russia businesses as sanctions spread
  • Putin says U.S. sanctions leading relations to “dead end”
  • Liberty Global buys ITV stake from BSkyB for $824m
  • Largest-ever Microsoft firings expected today: NYT
  • Starbucks sees more Apple-like shops; planning new flagship
  • Ford to debut 25 new models in Africa, Middle East by 2016
  • GM CEO Barra to face congressional questions for fourth time
  • >2m GM cars with same ignition switches safe: Reuters
  • VW planning task force to tackle technology updates in cars
  • S&P gain has investors worrying about bubble: Bloomberg poll
  • U.S. foreclosures drop to level preceding mortgage bust
  • LinkedIn reaches settlement with hackers over fake profiles
  • Microsoft says Xbox sales double in June after price cut

 

AM EARNS:

    • Alliance Data Systems (ADS) 7:30am, $2.73
    • AutoNation (AN) 6:15am, $0.87
    • Baker Hughes (BHI) 6am, $0.90 - Preview
    • Baxter Intl (BAX) 7am, $1.22 - Preview
    • Blackstone (BX) 7am, $0.72
    • Canadian Pacific Railway (CP CN) 7:30am, C$2.09 - Preview
    • Cypress Semiconductor (CY) 8am, $0.12
    • Danaher (DHR) 6am, $0.94
    • Dover (DOV) 7am, $1.28
    • Fairchild Semiconductor (FCS) 7:30am, $0.11
    • Fifth Third Bancorp (FITB) 6:30am, $0.43
    • KeyCorp (KEY) 6:30am, $0.26
    • M&T Bank (MTB) 8:01am, $1.90
    • Mattel (MAT) 6am, $0.18 - Preview
    • Morgan Stanley (MS) 7:15am, $0.56 - Preview
    • Philip Morris Intl (PM) 6:59am, $1.24 - Preview
    • PPG Industries (PPG) 8:11am, $2.78
    • Sherwin-Williams (SHW) 7am, $2.93
    • Snap-on (SNA) 7am, $1.68
    • Sonoco Products (SON) 7:30am, $0.65
    • UnitedHealth (UNH) 6am, $1.26 - Preview
    • Webster Financial (WBS) 7:55am, $0.51
    • WW Grainger (GWW) 7:30am, $3.10

 

PM EARNS:

    • Advanced Micro Devices (AMD) 4:15pm, $0.03
    • Athenahealth (ATHN) 4:01pm, $0.22
    • Capital One Financial (COF) 4:05pm, $1.82
    • Celanese (CE) 5pm, $1.24
    • Google (GOOG) 4:02pm, $6.25 - Preview
    • Intl Business Machines (IBM) 4:07pm, $4.31 - Preview
    • People’s United Financial (PBCT) 4:03pm, $0.20
    • Resources Connection (RECN) 4pm, $0.18
    • Schlumberger (SLB) Aft-Mkt, $1.36 - Preview
    • Seagate Technology (STX) 4:01pm, $1.10
    • Skyworks Solutions (SWKS) 4:15pm, $0.80
    • Stryker (SYK) 4pm, $1.08 - Preview

 

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • Gold Gains on Russia Sanctions as Palladium Reaches 13-Year High
  • Thai Sugar Output Seen Climbing to Record as Farmers Shun Rice
  • LNG Cargoes to U.K. Drive Biggest Price Drop Since ’09: Freight
  • Palm Reserves in Indonesia Drop to Two-Month Low as Output Falls
  • WTI Crude Rises to Four-Day High on Stockpile Drop; Brent Gains
  • China Three Years Late on Installing Offshore Wind Farms: Energy
  • Rio CEO Sees Iron Ore Trading Around $100 as Profit Gains
  • Rubber Rises Most in Three Weeks as China Demand Concerns Ease
  • Most Industrial Metals Drop for Second Day on Rising Supplies
  • Corn Drops as U.S. Crop Outlook Boosts Global Supply Prospects
  • India June Coal Imports Rise 4% Y/Y to 16.1 Mln Mt: Interocean
  • China June Copper Output Rises 1.4% M/M to 623,000 Tons
  • China Grid-Related Copper Demand Seen Near 15% of Total: Goldman
  • California Almonds Saved by Using Water for Veggies: Commodities

 

THE HEDGEYE DAILY OUTLOOK - 5

 

CURRENCIES


THE HEDGEYE DAILY OUTLOOK - 6

 

GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 3

 

THE HEDGEYE DAILY OUTLOOK - 4

 

EUROPEAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - 7

 

ASIAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - 8

 

MIDDLE EAST

 

THE HEDGEYE DAILY OUTLOOK - 9

 

 

The Hedgeye Macro Team

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


LVS 2Q 2014 CONF CALL

Not one of LVS's finest. Even on a hold adjusted basis, Macau EBITDA was disappointing. Singapore estimates look like they are heading lower - the macro isn't good.

 

 

CONF CALL

  • Pleased with quarter
  • "Includes the impact of the initiation of a "14th month" special bonus accrual for non-management employees in Macao. Absent this accrual, Adjusted Property EBITDA would have been approximately $29 million higher both in Macao and on a consolidated basis, and Adjusted Earnings per Diluted Share would have been $0.03 higher."

MACAU

  • VIP experiencing a slowdown
  • 3 VIP headwinds mentioned by Adelson:  
    • Tightening liquidity conditions in Chinese economy and junket system
    • Real estate market slowdown 
    • General uncertainty and caution in economy
    • We also think disappearance of Huang Shan who owed ~$1.3 billion had an impact.
  • LVS gaming revenue mix:  44% VIP/ 56% non-VIP
  • Market gaming revenue mix:  60% VIP/ 40% non-VIP
  • World Cup 'clearly' had an impact on June GGR
  • June Macau Revenues were -20% relative to May similar to 2010
  • Continue to invest in premium direct 
    • Experienced lower VIP decline than junket volume
  • Reduced VIP capacity by 28%; increased mass table capacity by 14%
  • Impacted by low hold in premium mass segment
  • Competitors lag behind on the integrated resort model
  • Four Seasons mall:  highest grossing mall per sq ft in the world ($5,500); Bal Harbour Miami second place at $3,500
  • Confident LVS will continue to grow

SINGAPORE

  • Invest in premium mass 

OTHER

  • Interest in Japan/Korea 
  • Bought back $320m of stock in Q2

 

Q & A

  • VIP only 17% of EBITDA 
  • Macau VIP:  back end consumer demand is soft
  • Have seen more VIP Chinese customers into Vegas
  • Macau:  Pulling back on VIP credit but not concerned from a risk perspective 
  • Have enough money for current stock repurchase program 
  • World Cup impacted mass business, especially in June; poor mass mix -  premium mass (higher mass mix %)  did fine but margins a little lower than pure mass
  • Q3 will be better
  • Premium mass demographics has some overlap with VIP demographics but ultimately, is a different audience
  • Premium mass has 38% margins
  • Want to increase more room comps
  • Singapore relationship: the bigger the hold, the lower the rolling chip volume
    • What about Q1 2012 where hold was 3.6% and volume grew 25%?
    • What about Singapore macro? It's deteriorating. 
  • Singapore:  cautious on lending credit
  • Dragons Palace:  will take 3 months to fully ramp
  • Macau competitors can't focus on mass because they don't have enough tables
  • Macau:  no margin erosion
  • Parisian: construction has stopped, pending govt approvals to be received shortly.  Planned opening date unchanged at end of 2015.
  • Smoking ban:  'VIP' definition still unclear.  All VIP rooms will be allowed smoking.  Believe public estimates 2-3% impact on revenues.
  • St. Regis:  will open in Summer 2015
  • Four Seasons condo titles:  licensing process with Macau govt
  • Board approved construction to spend $33m to put smoking facilities in
  • Four Seasons mall:  Dont' need the money from selling Four Seasons right now.  More focused on Parisian. No restrictions from government.
  • Would love to build another hotel in Singapore
  • CFO search:  no external hire

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Poll of the Day Recap: 59% voted that the VIX will stay asleep through Labor Day

“Global asset markets continue to be in deep REM sleep,” Daryl Jones, Hedgeye Director of Research wrote in today’s Morning Newsletter. “U.S. equity volatility is literally at an all-time low and well below the 20-year mean of 20.05.”.

 

As we recently highlighted in our Q3 Macro Themes presentation, volatility has been at generational lows across asset allocations and continues to tick lower. U.S. equity volatility is literally at an all-time low and well below the 20-year mean of 20.05. Fixed income volatility is also literally at an all-time low and the current reading is 54.03, which is in the 1.5% percentile versus the long run mean of 99. And JPM Global foreign exchange volatility index is at 5.45 versus the long run mean of 10.6. We see the risk increasing the more you push the ball under water.

 

Poll of the Day Recap: 59% voted that the VIX will stay asleep through Labor Day - Lion sleeping
 

In today’s poll we asked: Is volatility ($VIX) going to wake up or stay asleep through Labor Day?

 

At the time of this post, 59% voted that the VIX will stay asleep through Labor Day, 41% believe it will wake up.

 

 


Cartoon of the Day: A Broken Economy

Cartoon of the Day: A Broken Economy - Yellen duct tape 7.16.2014

 

Janet Yellen isn’t the fix for what ails the US economy.

 

SUBSCRIBE TO CARTOON OF THE DAY.

 


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