LEISURE LETTER (09/29/2014)



  • Sept 29 - Oct 2: G2E Las Vegas
  • Tuesday: Sept 30: Frontline video on Macau 
  • Tuesday, Sept 30:
    • JPM Securities: FCH, AHT
    • DB Leveraged Finance: WYNN, MGM, CHH, FCH, RHP
    • TAG Fall Consumer Conf: LVS, WYN, MTN
  • Wednesday: Oct 1
    • DB Leveraged Finance: PENN, BYD, SGMS
    • TAG Fall Consumer Conf: LVS, WYN


MGM & 2282:HK (GGRAsia) Hundreds of MGM China Holdings Ltd casino employees on Sunday protested for higher salaries and changes to the company’s bonus policies. The protest was officially called by a group of MGM China employees and was supported by labor activist group Forefront of the Macao Gaming. Organizers said about 500 people joined the demonstration, while the police put the figure at 240. The workers demanded equal pay for equal work and a full smoking ban inside casinos. Protest organizers said that if their demands were not met, they would consider organizing new demonstrations during the upcoming National Day “Golden Week” holiday, starting on October 1.

Takeaway:  Analysts have raised labor forecasts but are the high enough? 


MPEL – Melco Crown (Philippines) Resorts Corp on Monday said there is not yet any opening date for its casino resort City of Dreams Manila. “Please be informed that aside from previous disclosures to the exchange stating that City of Dreams Manila is set to open this year, there is nothing fixed or concrete to report at this time,” Melco Crown Philippines said in a filing to the Philippine Stock Exchange. Melco Crown Philippines said in Monday’s filing it would disclose updates on the opening date of City of Dreams Manila “when a material event occurs”. The US$1.2-billion casino resort will feature up to approximately 365 gaming tables, 1,680 slot machines and 1,680 electronic table games upon opening. 

Takeaway: Back in July, we warned investors we were hearing the opening would be delayed until December. 


PENN & GLPI– Polk County District Court Judge Eliza Ovrom heard final oral arguments from (PENN) Argosy Sioux Fall's Attorney Mark Weinhardt and other attorneys in the complex, multi-party case. The Argosy wants Ovrom to overturn a series of actions by the Iowa Racing and Gaming Commission, restore the gambling boat's state license and take away the license the Argosy claims was improperly awarded to the Hard Rock Hotel & Casino Sioux City.  Iowa Assistant Attorney General John Lundquist, who represented the IRGC, argued while Murray was given multiple chances to change events, that doesn't apply to the Argosy case, he said. "The law doesn't give (Argosy) the opportunity to keep coming back to this court and asking for relief and asking for relief until it gets the answer that it wants," Lundquist told Ovrom.

Takeaway: Argosy trying to regain its license despite testifying it failed to renew its licensing agreement in a timely manner. 


WYNN – suing prominent short-seller Jim Chanos for slander. Mr. Wynn and his company are suing Mr Chanos, founder of New York hedge fund Kynikos Associates LP, in the United States and the plaintiffs allege that sometime in April Mr. Chanos falsely accused Mr. Wynn and his company of violating the US Foreign Corrupt Practices Act, and are claiming an unspecified amount of damages.

Takeaway: If nothing stuck with Fairfax Financial, it's not likely to stick here.  


BEL:PM – announced the unitary price for the 3.26 billion shares in Premium Leisure Corp that Belle is selling at PHP1.65/sahre (US$0.02). Belle agreed to sell up to 490 million additional shares of Premium Leisure for the over-allotment option. The overall shares equal to almost 12% of Premium Leisure’s outstanding shares. The sale will reduce Belle’s stake in the firm to slightly above 77%.


H – has outlined a series of ambitious targets for 2020 to reduce water and energy use and boost sustainability in other areas, with the aim of becoming a blueprint for the sector.  The targets include cutting energy use and greenhouse gas emissions per square meter by 25%, reducing water use per guest night by 25-30% and recycle waste sent to landfills by a minimum of 40%. The company also pledged to source more than 50% of its seafood sustainably, use LEED or an equivalent certification for new projects and ask suppliers to have sustainability policies in place by 2017.

Takeaway: Going green to make green


H – agreed to pay $1 million to 98 Boston-area housekeepers who were fired five years ago and replaced by lower-paid, outsourced workers, at the time triggering a backlash that drew national attention -- and a stern scolding from Governor Deval Patrick. The agreement with Local 26 comes as Hyatt is vying to operate a 1,000-room hotel at the expanded Boston Convention & Exhibition Center planned in South Boston. 

Takeaway: Hyatt making nice with the Boston union as a way to secure future growth in the city.


CCL/NCLH – Ebola Fears Prompt Cruise Ships to Cancel West Africa Port Stops (Cruise Critic)

Three cruise lines, Regent Seven Seas, Seabourn and Fred Olsen, have canceled port calls in West Africa, due to the outbreak of Ebola in the region.  Seven Seas Mariner will overnight in Tenerife and call on Lanzarote instead of Dakar, Senegal, on October 17 and 18, on its 21-night Lisbon to Miami cruise. Fred. Olsen has also substituted stops in Dakar and Banjul, Gambia, with longer time in the Canary Islands for its November and December itineraries on Braemar. Seabourn substituted ports in Spain on Sojourn's Barcelona to Cape Town itinerary.

Takeaway:  Itineraries shifting 


CCL  Water Spout Causes Emergency Protocol on Costa Fascinosa (Cruise Critic)

Water spout in the Mediterranean caused Costa Fascinosa to list suddenly, causing emergency procedures to go into effect.  A "very limited" number of passengers asked for medical help, the line said, but no serious injuries were reported. The ship's voyage to the Greek Isles is still underway.

 Takeaway:  Minor incident 


CCL – Australians booking with Cunard in 2015 +40% (Seatrade Insider)
Comments from Cunard international development director David Rousham:

  • Australia is now the cruise line’s third largest source market after the UK and the US, with a far higher proportion of first-time Cunard cruisers than any other country.  
  • 61% of Australian guests booked on cruises on Queen Mary 2 this year had been newcomers to the brand, compared to an average of 38% across other nationalities.   
  • 39% of Australians on Queen Victoria had been first-time Cunard customers, more than double the average of 18% for other nations. Onboard Queen Elizabeth this year, newcomers have accounted for 43% of Australian guests, compared to an average of 29% for other nationalities.
  • Demand for world cruises is particularly strong, with Australia ranking as the second largest source market on the cruise line’s three 2014 voyages, representing 28% of guests compared to Britain at 40% and the US at 18%.
  • Fly-cruise program doing well

Takeaway:  Optimistic commentary on Australia but the spotlight will be on whether the UK momentum is sustainable for Cunard.


RCL -  Royal Caribbean International will kick off a five-day WOW Sale Sept. 27 that offers on-board credits up to $200 per stateroom, 50% reduced deposits and combinability with other deals.  New individual and named group bookings made in the US and Canada with required deposit from Sept. 27 through Oct. 1 offer $50 on-board credit per stateroom for cruises up to five nights, $100 on-board credit per stateroom for six- to nine-night sailings and $200 on-board credit per stateroom for cruises 10 nights and longer.  The WOW sale applies to all open Royal Caribbean International sailings, based on availability, except Quantum of the Seas and Anthem of the Seas.

Takeaway:  Another WOW sale


Insider Transaction:

SGMS - CFO Scott Schweinfurth exercised 5,914 options and then surrendered 1,914 shares on September 25, 2014.   


China Tax Cuts – (China Securities Journal) China may announce measures including tax cuts to manage economy with targeted easing approach as 3Q economic growth expected to slow.

Takeaway: Reserve rate and tax cuts, China pursuing all measures to stimulate growth.  Could growth be slower than the 7.5% forecast?


Tokyo Casino Outlook Clouded  (Reuters) Plans to open Japan's first casino in Tokyo before the 2020 Olympics are becoming increasingly unlikely, with developers facing skyrocketing building costs and a city government that no longer considers casino development an economic priority.  Previous Tokyo governors had supported plans for a casino. Current governor Yoichi Masuzoe, who took office in February, however, said in June that pursuing a casino was "not at the top" of his agenda. Tokyo government officials say the governor appears to be overwhelmed by preparations for the 2020 Olympics, and has put the casino plans on the backburner.

Takeaway: Japan is in the stocks...

Protest in Hong Kong – (BBC) On Saturday and Sunday, thousands of pro-democracy protesters are blocking Hong Kong's streets, shutting down the territory's business hub and ignoring appeals to leave. Protesters - a mix of students and supporters of the Occupy Central pro-democracy movement - are angry at Beijing's plans to vet candidates for Hong Kong's 2017 leadership elections. They want a free choice of candidates when they cast their ballots for the chief executive - something Beijing says is out of the question. More than 200 bus routes have been cancelled or diverted; some subway exits in protest areas have been blocked. Several banks have suspended operations in affected areas. 

Takeaway:  The protests were large and further protests are expected during National Day. As a result, officials with the Hong Kong city government canceled the planned October 1st National Day fireworks show.  Could some Hong Kong visitors stay longer in Macau?


Macau Unemployment Rate remained stable at 1.7% between June and August.

Takeaway: and most of the "unemployed" are probably making money somewhere...


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.

Commodities Weekly Sentiment Tracker

Note: Using the z-score in the tables below as a coefficient of variation for standard error helps us flag the relative market positioning of the commodities in the CRB Index. It is not intended as a predictive signal for the reversion to trailing twelve month historical averages. For week-end price data, please refer to “Commodities: Weekly Quant” published at the end of the previous week. Feel free to ping us for additional color.    



1.       CFTC Net Futures and Options Positioning CRB Index: The Commodities Futures Trading Commission (CFTC) releases “Commitments of Traders Reports” at 3:30 p.m. Eastern Time on Friday. The release usually includes data from the previous Tuesday (Net Positions as of Tuesday Close), and includes the net positions of “non-commercial” futures and options participants. A “Non-Commercial” market participant is defined as a “large speculator.” We observe the weekly marginal changes in the overall positioning of “non-commercial” futures and options positions to assess the directionally-biased capitulation risk among those with large, speculative positions.


The ROB GASOLINE, COCOA, AND NAT. GAS markets experienced the most BULLISH relative positioning change in the CRB week-over-week.

The COTTON, SUGAR, HEATING OIL, AND COPPER markets experienced the most BEARISH relative positioning change in the CRB week-over-week:


Commodities Weekly Sentiment Tracker - chart1 cftc positioning


2.       Spot – Second Month Basis Differential: Measures the market expectation for forward looking prices in the near-term.

  • The SUGAR, CORN, AND WHEAT markets are positioned for HIGHER PRICES near-term
  • The LEAN HOGS, RBOB GAS, AND COCOA markets are positioned for LOWER PRICES near-term

Commodities Weekly Sentiment Tracker - chart2 spot 2nd month


3.       Spot – 1 Year Basis Differential: Measures the market expectation for forward-looking prices between spot and the respective contract expiring 1-year later.

  • The CORN, SUGAR, AND WHEAT markets are positioned for HIGHER PRICES in 1-year  
  • The LEAN HOGS, RBOB GAS, WTI CRUDE, AND COCOA markets are positioned for LOWER PRICES in 1-year  

Commodities Weekly Sentiment Tracker - chart3 spot 1yr


4.       Open Interest: Aggregate open interest measures the amount of opened positions in all actively traded futures contract months. Open interest can be thought of as “naked” or “directionally-biased” contracts as opposed to hedgers scalping and providing liquidity. Most of the open interest is created from large speculators or participants who are either: 1) Producers/sellers of the physical commodity hedging their cash market exposure or 2) Large speculators who are directionally-biased on price.


Commodities Weekly Sentiment Tracker - chart4 open interest         


Ben Ryan



Keith's Macro Notebook 9/29: China | USD | Russell 2000

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 80.43%
  • SHORT SIGNALS 78.34%

Retail Callouts (9/29): DG, BBBY, M, SPLS, WMT, UA, AMZN

Takeaway: DG, M, SPLS: added Short on Ideas List. BBBY added Long. WMT Sat meeting now Optional.



Retail Callouts (9/29): DG, BBBY, M, SPLS, WMT, UA, AMZN - chart1 9 29


This week's changes

Several changes this morning...three shorts, one long.

  1. We moved Dollar General form the Short Bench to the Top Short list. This one is simple. It's not a good business. It's expensive in its own right. But it's captured $3bn in EV since it announced it is stepping into the bidding process for Family Dollar.  If it 'wins' Family Dollar, it loses -- as it will have a bigger but lower quality portfolio and will have to divest the best stores in the portfolio. If it loses the bid, then the $3bn in equity value goes away.
  2. We added BBBY to the Long Bench. The company has missed for the better part of two years, and last week's print was a potential turning point. At its core, this is a quality management team with an outstanding track record. We rarely like to add a long after a positive print. But after disappointing for so long, it's unrealistic to assume that the first positive surprise will be the last.
  3. We moved Macy's two notches higher on our Short Bench. Same story, just getting closer to where we're willing to get louder from a timing perspective.
  4. We added Staples to the Short Bench. We've shorted this one several times in the past. Re-vetting it now.



Tuesday (9/30)

  • WAG - Earnings Call: 8:30am




WMT - Walmart’s new CEO has made its iconic Saturday morning meeting optional



  • "Walmart’s Saturday morning meetings have been a long-term fixture for the company. Once a month at 7:30 on a Saturday morning, the US retail giant’s top executives gather in an auditorium at its Bentonville headquarters. The required meetings have been described (paywall) as 'part evangelical revival, part Oscars, part Broadway show.' People bring their kids, and there’s a company cheer and awards for associates, as well as a more serious rundown of sales figures."
  • "But according to a recent speech by Walmart’s SVP of change management, Celia Swanson, one of new CEO Doug McMillon’s first actions as CEO was to make those Saturday meetings optional—for the first time in the company’s history."


Takeaway: It's been a while since Walton wrote, "If you don't want to work weekends you shouldn't be in retail." And the Saturday morning meeting has morphed from a deep dive on numbers into a dog and pony show complete with celebrity acts. The meetings moved from weekly to monthly in 2008 and now are optional for all. It may just be a sign of the times - heck even Baseball, hotdogs, apple pie, and Chevrolet have become passé. But, according to the report McMillon has taking the onus upon himself to reinvigorate an institution that has more or less become irrelevant.


UA - Kevin Plank Invests in Knot Standard



  • "Kevin Plank...has made an investment in online bespoke men’s wear firm Knot Standard through his personal investment arm, Sagamore Ventures."
  • "Founded in 2010 by Matthew Mueller, Knot Standard offers handmade suits using 3D imaging to obtain exacting measurements. The etailer is also unusual in that there are physical showrooms in various cities New York City; Dubai; Washington, D.C.; Dallas; Houston and Los Angeles. The new funding round will enable the four-year old firm to expand its showroom locations, as well as online offerings over the next six to 12 months."


Retail Callouts (9/29): DG, BBBY, M, SPLS, WMT, UA, AMZN - chart2 9 29


Takeaway: Since the early days of Plank investing in racehorses, Plank's investment portfolio has grown to include real business that actually make money. The bespoke suit business is one that has actually proven to be fairly lucrative. In most instances, there's at least one in-person measuring session, after which customers can go online and buy suits at will. This model works reasonably well for menswear, where sizing is fairly standard. Sizing standards are unfortunately not the same with women.


M - Macy’s, Inc. to Hire 86,000 Seasonal Associates in 2014



  • "Macy’s, Inc. today said it plans to hire seasonal associates for approximately 86,000 positions at its Macy’s and Bloomingdale’s stores, call centers, distribution centers and online fulfillment centers nationwide for the 2014 holiday season. The company’s 2014 season hiring plan compares to approximately 83,000 in 2013 (an increase of about 3.6 percent)."
  • "In 2014, approximately 10,000 of the 86,000 total seasonal positions will be based in the direct-to-consumer fulfillment megacenters in Martinsburg, WV; Goodyear, AZ, Portland, TN, and Cheshire, CT, and well as in product-specific fulfillment centers in Sacramento, CA, Stone Mountain, GA, Secaucus, NJ, and Joppa, MD."
  • "About 1,125 associates will be hired to interact with customers via telephone, email and online chat at customer service centers in Mason, Ohio; Clearwater, FL; Tempe, AZ; and St. Louis, MO."
  • "Approximately 3,000 positions will be assigned to work in the fulfillment areas of Macy’s and Bloomingdale’s stores that are equipped to fill and ship orders directly to customers, as well as to support the Buy Online Pickup in Store service available in every location.
  • More than 850 persons will be hired across the country to support the 88th annual Macy’s Thanksgiving Day Parade®, Santalands and other iconic holiday events."


Takeaway: M is steady when it comes to Holiday hiring plans. Consistently taking it's seasonal work force up about 3%-4% annually. Of course, these numbers say nothing about hours worked per employee, etc. But, put into context the M number implies about 102 new employees per store, compared to Kohl's at 60 and WMT US at 15. About 15% will be used to bulk up the e-commerce side of the business…that seems low to us. Plus an additional 1% brought in to keep blown up Snoopy dogs from flying away at the Thanksgiving day parade. These releases are all about public relations after all - intended to flaunt the good each retailer is doing for the US economy and job reports rather than a leading indicator for Holiday performance.







  • "PRADA S.p.A. announces that Ms. Miuccia Prada Bianchi and Mr. Patrizio Bertelli, who are the Chief Executive Officers, as well as Executive Directors and substantial shareholders of the Company, have just been informed by the Italian Judicial Authority of the existence of an ongoing examination according to Article  of Legislative Decree n. 74/2000 regarding the accuracy of certain past tax filings by them as individuals in respect of foreign owned companies."


AMZN - Amazon’s Grocery Delivery Business Coming to New York City



  • "Amazon is preparing to start its Fresh grocery delivery business in New York City as early as next month, according to two people who have been briefed on the plans, as the online retailer takes more aggressive steps toward making its same-day delivery service national."
  • "The company has been building up its food inventory in a warehouse in Avenel, N.J., with the goal of launching its grocery delivery business in New York City as early as October, one of these people said. The warehouse is located about 20 to 25 miles from Manhattan, in a part of New Jersey near Staten Island, New York."


Hong Kong Protests Rattle Retailers



  • "Central Hong Kong descended into chaos on Sunday as pro-democracy protesters converged on barricades as hundreds of police cordoned off streets and walkways and tensions flared amid the arrest of several lawmakers. Police used tear gas to disperse demonstrators."
  • "The protests happen to coincide with this week's National Day holidays — a key shopping season. Mainland Chinese travelers are likely to avoid the city due to planned protests in the city, so the downtrend in retail sales in the former British colony is set to extend beyond its six-month slide."


Aldi vows to fight on in supermarket price war as UK profits leap 65%



  • "Aldi has vowed to maintain the supermarket price war that has drawn legions of cost-conscious shoppers to its aisles as it announced a 65% increase in its UK profits."
  • "The German discounter said it would respond to price cuts from competitors with further discounts and claimed that attempts by rivals to match its budget approach had only served to boost sales."


PBY - Pep Boys President & CEO Mike Odell Resigns - Director John Sweetwood Named Interim CEO



  • "The Pep Boys – Manny, Moe & Jack, the nation's leading automotive aftermarket retail and service chain, announced the resignation of President & CEO and Director Mike Odell. Director John Sweetwood was named interim CEO, effective immediately."
  • "Mr. Sweetwood has served on Pep Boys’ Board of Directors since 2002 and is currently the President of Woods Investment, LLC, a private real estate investment firm.

European Banking Monitor: Swaps Widen Across the Board

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 




European Financial CDS - Swaps widened sharply across the European bank complex last week. Spanish and German banks were among the most changed. Sberbank of Russia rose 40 bps to 380 bps and is now up 71 bps m/m. 


European Banking Monitor: Swaps Widen Across the Board - chart1 Financials CDS


Sovereign CDS – Sovereign swaps widened across the board last week. Italian sovereign swaps widened by 21.6% (+19 bps to 107). Japanese swaps rose 6 bps to 39 bps (+19%).


European Banking Monitor: Swaps Widen Across the Board - chart2 sovereign CDS


European Banking Monitor: Swaps Widen Across the Board - chart 3 sovereign CDS


European Banking Monitor: Swaps Widen Across the Board - chart 4 sovereign CDS


Euribor-OIS Spread – 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. The Euribor-OIS spread was unchanged last week at 13 bps.


European Banking Monitor: Swaps Widen Across the Board - chart5 euribor ois spread


Matthew Hedrick 



Ben Ryan





Takeaway: The Hedgeye Macro Playbook is a daily 1-page summary of our core ETF recommendations, investment themes and noteworthy quantitative signals.

CLICK HERE to view the document. In today’s edition, we highlight:


  1.  The breakdown across various pocket of the Fixed Income & Yield Chasing primary asset class
  2. Our preference for large-cap Consumer Staples (XLP) in lieu of Utilities (XLU) on the long side going forward


Best of luck out there,



Darius Dale

Associate: Macro Team

Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.