The Best of This Week From Hedgeye

Takeaway: Here's a quick look at some of the top videos, cartoons, market insights and more from Hedgeye this past week.


Why We're Still Bearish on European Equities and the Euro

Hedgeye macro analyst Matt Hedrick explains why we remain bearish on European equities (via EZU) and the Euro (via FXE) and tells us that today’s weak economic data from Europe remains consistent with our bearish take on the region.

Steiner: Why We Remain Bearish on Housing 

Hedgeye managing director Josh Steiner highlights why we remain bearish on the U.S. housing market. 


At The Beach

The Best of This Week From Hedgeye - Beach volume

Is the bull in danger of getting burned?


Muscle vs. Russell

The Best of This Week From Hedgeye - Russell2000 TLT

The 2014 Macro Score: Long Bond $TLT +14% vs Russell 2000 -2%.


 Take The Fed's Growth Forecasts At Your Own Risk

The Best of This Week From Hedgeye - chart4

“Year after year we have had to explain why the global growth rate has been lower than predicted.” -Fed vice chairman Stanley Fischer


Is Long High-Yield A Strong Hand?

The Best of This Week From Hedgeye - chart5

In Thursday's Chart of the Day, we highlight a point that many asset allocators have been focused on over the past few weeks, which is that high yield bonds, even despite the recent rally, have sold off sharply from the highs of the year.   As a result, the spread between high yield and comparable duration treasuries is literally at its widest of the year. 


 Geopolitical Threats

Tension and turmoil around the globe. Which do you think is the bigger market threat right now? 


Cartoon of the Day: Housing

Cartoon of the Day: Housing - Housing cartoon 08.07.2014 

High frequency housing data continues to corroborate the sea of red currently blanketing our housing compendium.  As we’ve highlighted repeatedly, we’re inclined to remain bearish on the housing complex until the slope of HPI deceleration inflects.

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 78.66%

LEISURE LETTER (08/15/2014)



  • Aug 19-21:
    • Hedgeye Cruise Pricing Update
  • Aug 19:
    • Galaxy Entertainment Group 2Q results 5 am


MGM & 2282:HK – In a change of tone regarding the current state of the gaming business in Macau, Grant Bowie, CEO of MGM China said that China's moves to strengthen capital controls represent "a significant policy shift" that has made Chinese visitors to Macau "more circumspect."  He noted the two channels for getting cash out in Macau are being squeezed. First UnionPay tightened checks on suspicious transactions in the territory to combat money laundering. Second, junkets are facing pressure from casinos and regulators to disclose the names of their customers.

Takeaway:  comments that could've been made last month. 


MPEL & MCP:PM – Melco Crown (Philippines) Resorts Corp said the company and its subsidiaries had a total manpower of 2,480 employees as of June 30, 2014, up from 340 employees at the end of March.  The company also expects to increase its work force by 107% at the end of the third quarter and an additional 3% by year end as it readies the property for opening. 

Takeaway: The hiring process is in full swing for a late 2014 opening. 


AYA:TSX Amaya Gaming Group – in its earning release disclosed it completed the acquisition of of Oldford Group Limited, parent company of the Rational Group, one of the world's largest online gaming companies and owner and operator of the PokerStars and Full Tilt brands on August 1, 2014, approximately two months ahead of the anticipated timeline.  And subsequent to the quarter, Amaya completed the integration of its Casino Gaming System for websites of several major online casino operators including's websites in Europe, Cherry AB's websites, Ultimate Gaming in New Jersey, and Rational Group's Full Tilt Poker. Amaya also launched new online and mobile casino games for its customers and completed the integration of new games from multiple third-party suppliers onto Amaya's Casino Gaming System including IGT, Bally Technologies and SHFL, and Leander.

Takeaway: The new big kid on the online gaming block.


GENM:MK – Police found skimming devices fitted to four automated teller machines (ATM) to steal bank card data of users in Genting Highlands since February. The most recent case was detected at 4pm on Aug 7, while the other three cases were detected in February, May and June. The initial investigation found the syndicate fitted the skimming devices and installed wireless CCTV cameras to the machines to steal users' pin numbers and card data before making fake ATM cards to withdraw money. 


880:HK SJM (GGRAsia & Macau Business) SJM is the latest casino operator targeted by casino labor group Forefront of the Macao Gaming after hundreds gathered on Thursday outside of the firm’s human resources offices to protest against the company’s pay and promotion policies. Approximately 1,000 people attended the protest - an unconfirmed headcount as police did not comment. Many of the protesters had their faces covered. It is not clear how many were workers from SJM Holdings. The labor group demanded SJM Holdings increase by approximately 10% across the board the pay of casino floor staff.

Takeaway: Interesting because Forefront previously indicated it would not protest against local (non-American) operators.


MTN – Utah Third District Court Judge Ryan Harris is expected to receive arguments today from Park City Mountain Resort and Vail Resorts on how to calculate the value (amount) of the bond which would serve as security and allow Park City to continue using Talisker’s acreage while PCMR pursues its appeal. Talisker and Vail (which control the litigation on behalf of Talisker) will argue they are entitled to at least the amount of money Park City has been earning by using its land. Utah law provides for treble damages in such landlord-tenant disputes as a spur for tenants to leave property they no longer have the right to occupy. Judge Harris is expected to set the amount after an Aug. 27 hearing.

Takeaway: Despite the ongoing litigation, the real question is who will operate The Canyons this winter. 


RCL – Celebrity gives instant credit in onboard booking program (Seatrade Insider)  

Celebrity Cruises' on-board booking program is now giving an instant on-board credit of $50 to $500. When passengers book a future cruise while on board, they can immediately receive the credit or they have the option to use it on a future cruise.  The offer is combinable with one of the benefits from the year-round 'Evergreen 123Go!' promotion—a choice of a free Classic Beverage Package, free gratuities or up to an additional $300 in on-board credit. 

Takeaway:  Another driver for Celebrity's strong onboard performance.



CHH – CEO Stephen P. Joyce sold 44,463 shares of stock in a two step sales with 17,811 shares sold on August 11 at an average $48.58/share and 26,652 shares sold on August 12 at an average $49.12/share.  The 44,463 shares were an exercise of employee stock options granted on May 1, 2008 at $26.55/share with a May 1, 2015 expiration date.  Mr. Joyce now directly owns 110,704 shares of the company’s stock as well as a beneficial interest in 269,279 options.


BYD – Director William Boyd sold 5,000 shares at $10.20 each.  He now owns 24,960 shares directly and 2.087 million shares through various trusts.


Takeaway: More insider selling by lodging executives and Boyd


Cosmopolitan Las Vegas Results – grew revenue almost 17 percent in the second quarter and trimmed its quarterly loss. Overall revenue was $200.1 million, highlighted by a 67.6% increase in gaming revenue. Hotel revenue grew 13.5%, food and beverage revenue was up 2.5% and other revenue increased 12%.

Takeaway:  Another operator with stellar Strip revenues in 2Q


Upstate New York Gaming Expansion – Applicants for four state casino licenses in upstate New York will make public presentations before the New York Gaming Facility Location Board Sept. 8-9. The Location Board will also host three public comment events in September to allow the public in each eligible region to comment in support of or in opposition to any proposal within their respective region.  The public comment events will be:


• 8 a.m. to 8 p.m. Wednesday, Sept. 24, at the Hotel Ithaca, 222 S. Cayuga St., Ithaca.


• 8 a.m. to 8 p.m. Monday, Sept. 22, Albany Holiday Inn Turf, 205 Wolf Road, Albany.


• 8 a.m. to 8 p.m. Tuesday, Sept. 23, in The Grandview, 176 Rinaldi Blvd., Poughkeepsie.

Takeaway:  The award process gets into full swing.


JW Marriott Ihilani Ko Olina (Oahu) Resort & Spa (Pacific Business News) is scheduled to temporarily close early next year and undergo an extensive renovation which is likely to reopen under Four Season Hotels. The Resort Group is repurchasing the Ihilani from Cornerstone Real Estate Advisors after the agreement with Marriott International is up at the end of this year. The hotel management company recently registered a new business in Hawaii under "FS Ko Olina Inc."

Takeaway: A loss for the Marriott system and significant win for Four Seasons.


Germans favor shorter cruises, ocean pricing holds while river pricing drops (Seatrade Insider)

According to e-hoi, a German booking portal, Germans are choosing shorter ocean and river cruises, and are becoming increasingly price sensitive when booking a river cruise.  The Baltic, Northern Europe, the Caribbean and the Canary Islands all gained market share among the top destinations while the Mediterranean—although still the favorite—lost share.  In the ocean segment, the average cruise price remained stable at €1,266 (1H 2014), compared to €1,261 in 2013. The average cruise duration dropped from 10.1 days to 9.8 days, resulting in a 2% increase in the daily rate, from €115 to €117.  The age of river cruisers remains older than that of ocean cruisers: 61.6 years compared to 53.6 years.

Takeaway:  German ocean pricing has been stable but underperforming the rest of Europe this year. 


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.

Is Bad News Good Again?

Client Talking Points


One of these major economies in the West is not like the others (the one that’s had austerity and a #StrongCurrency). UK GDP accelerates again to +3.2% year-over-year in Q2 and while that might be a sequential peak (for now), it certainly beats the USA’s sub 1% 1H14 annualized number.


Sell the bounce. There’s nothing in it that changes our view (i.e. not one line of resistance in the DAX, CAC, MIB, etc. has been breached to the upside) – looking forward to putting European Equity shorts back on in #RealTimeAlerts as we get the signals.


UST 10YR Yield hits a fresh year-to-date low this morning at 2.39% as the #YieldChasing associated with US #Q3Slowing is obvious again. The Yield Spread (10s minus 2s) is at +197bps wide – that’s a fresh year-to-date low too and why we signaled SELL in KRE (banks) again on green yesterday.

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

Hologic is emerging from an extremely tough period which has left investors wary of further missteps. In our view, Hologic and its new management are set to show solid growth over the next several years. We have built two survey tools to track and forecast the two critical elements that will drive this acceleration.  The first survey tool measures 3-D Mammography placements every month.  Recently we have detected acceleration in month over month placements.  When Hologic finally receives a reimbursement code from Medicare, placements will accelerate further, perhaps even sooner.  With our survey, we'll see it real time. In addition to our mammography survey. We've been running a monthly survey of OB/GYNs asking them questions to help us forecast the rest of Hologic's businesses, some of which have been faced with significant headwinds. Based on our survey, we think those headwinds are fading. If the Affordable Care Act actually manages to reduce the number of uninsured, Hologic is one of the best positioned companies.


The level of activism in the restaurant industry has never been more rampant.  In the past year alone, we’ve seen CBRL, DAVE, DRI, BJRI and BOBE attract largely uninvited attention from these investors. BOBE has a long history of mismanagement, evidenced by flawed strategic rationale, an excessively bloated cost structure and severe underperformance relative to peers.  Fortunately, its poor operating performance presents a tremendous opportunity. We believe activist investor Sandell has identified significant, largely feasible, opportunities to enhance shareholder value.  Particularly, we see tremendous upside value in selling the foods business, transitioning to an asset light model and refocusing capital allocation.


Fixed income continues to be our favorite asset class, so it should come as no surprise to see us rotate into the Shares 20+ Year Treasury Bond Fund (TLT) on the long side. In conjunction with our #Q3Slowing macro theme, we think the slope of domestic economic growth is poised to roll over here in the third quarter. In the context of what may be flat-to-decelerating reported inflation, we think the performance divergence between Treasuries, stocks and commodities may actually be set to widen over the next two to three months. This view remains counter to consensus expectations, which is additive to our already-high conviction level in this position.  Fade consensus on bonds – especially as growth slows. As it’s done for multiple generations, the 10Y Treasury Yield continues to track the slope of domestic economic growth like a glove.

Three for the Road


GOLD (our only remaining long idea in Commodities) flat at $1313 this morn = +9.2% YTD



In this world a man must either be an anvil or hammer.

- Henry W. Longfellow


U.S. auto loans surge to 8-year high. Home loans tumble to 14-year low.

CHART OF THE DAY: Hedgeye Housing Compendium, Not Pretty

CHART OF THE DAY: Hedgeye Housing Compendium, Not Pretty - Compendium 081314


In today's Chart of the Day, we highlight a table from our housing team summarizing recent data points in housing.  Of the 22 housing data points we track regularly, 18 of them are worse in the most recent period.


Enter your email address to receive our newsletter of 5 trending market topics. VIEW SAMPLE

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.