VIDEO | Macau: Doubling Down on Bearish Thesis

In this exclusive interview Todd Jordan gives his insights from Macau.



David and Todd walk thought their 3 pronged negative thesis on Macau gaming (VIP slowdown as a result of a corruption crackdown, Mass deceleration and mass margin contraction) and the threat of further shrinking Mass margins. Todd highlights specific risks for LVS and MPEL and positives Galaxy.


Video | Q&A: McCullough Answers Questions on Gold | $GLD

Video | McCullough: Russell 2000 Is "Definitive Bubble"

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.

Keith's Macro Notebook 10/10: Oil | XLY | UST 10YR

Retail Callouts (10/10): DG, FDO, AMZN, NKE, ZQK

Takeaway: Shorting DG is still the best way to play FDO merger. AMZN finally going brick & mortar. Nike’s full court press. Finally a ZQK activist.



FDO - 4Q14 Earnings


Takeaway: Sales were in line, (comps +0.3% vs 0.1%E), but Gross Margins missed considerably (32.9%A vs. 34.3%E), EPS missed by 5.5%, and inventories grew at twice the rate of sales.  But best of all was the company's guidance or lack thereof. We'll paraphrase here…[1Q will be challenging, but the investments made in '14 will set up an accelerated rate of sales and margins throughout the year. But in light of the merger, we won't give any more guidance].


The way we see it, when there are two companies who are in a bidding war to buy your company, that's exactly when most retailers would pull every lever possible to print the best (and perhaps inflated) earnings number imaginable in order to get the best price for shareholders. That clearly was not the case here. That tells us that either 1) it actually was the case, and the real earnings stream would have been much lower, 2) FDO is so married to the idea of merging with DLTR that it is putting up worse numbers to discourage a DG bid, or 3) FDO is simply not managing the outcome (we have a hard time with that).


We still think that the best way to play this is to short Dollar General. IF DG 'wins' FDO, then it actually loses as it will be paying close to 13x EBITDA for a marginal asset. If it 'loses' then it gives up the equity value gained since it joined the bid, and the stock goes back to the low $50s. 


Retail Callouts (10/10): DG, FDO, AMZN, NKE, ZQK - chart1 10 10 14


AMZN - Amazon to Open First Brick-and-Mortar Site



  • "Amazon’s space at 7 West 34th St., across from the Empire State Building in Midtown, would function as a mini warehouse, with limited inventory for same-day delivery within New York, product returns and exchanges, and pickups of online orders."
  • "The Manhattan location is meant primarily to be a place for customers to pick up orders they’ve made online, but will also serve as a distribution center for couriers and likely one day will feature Amazon devices like Kindle e-readers, Fire smartphones and Fire TV set-top boxes, according to people familiar with the company’s thinking."


Takeaway: It's only taken 20 years. This door looks more like an Urban fulfillment center than  an actual store, but the framework could be in place for an actual retail presence. We have a hard time imagining what an AMZN store would look like. The breadth of the product offering is limitless, so selecting the right SKU representation at retail would be an interesting case study to watch. But, if any company has the information to make that happen it's AMZN. They've been studying shopper's behavioral habits since they set up a network of computers on retrofitted doors. Most likely AMZN will set up a presence to hawk its own items (Kindle, tablet, phones, set-top boxes, etc.), which would make sense given that most retailers have pulled the items from shelves in response to AMZN's bullying. We're not sure how sustainable that is given that outside of the Kindle - AMZN has been spinning its tires trying to find traction. In light of the news flow around SHLD this week, we think this article is worth a read ( It's more provocative than probable, but thought provoking nonetheless.


 NKE, Adi - Louisville’s Rick Pitino Says Shoe Companies Overinfluence Recruiting



  • "At issue, Mr. Pitino said, is the relationship between major sportswear makers and basketball programs for high-school students, from which top-flight colleges and universities recruit players. Coaches of youth programs affiliated with a specific shoe company tend to encourage athletes to attend colleges with the same sponsor, Mr. Pitino said."
  • "The Cardinals won the NCAA Division I National Basketball Championship in 2013. Still, Mr. Pitino said he believes rival sportswear maker Nike is 'winning the battle right now' for top high school recruits."


Takeaway: These comments by Mr. Pitino were just too good to pass up. He's basically saying 'thanks AD for signing a 5yr $39mm deal with Adidas this past April. Now nobody wants to come play ball for me." That $39mm,  by the way just so happens to be the 3rd most lucrative deal in all of college sports, behind Notre Dame and the University of Michigan. But, his logic does make sense. Between the Jordan Brand and Nike - NKE owns somewhere between 90%-95% of the basketball footwear market. Plus, college jerseys, footwear and apparel are more important than ever, evidenced by the glut of special jerseys on display on the field every fall Saturday on campuses across America. Nike owns this segment and recruits have taken notice.


ZQK - Quiksilver Shareholder Says Company’s Turnaround Plan is a Failure



  • "The 11-point turnaround plan announced by Andrew Mooney 16 months ago has thus far failed to deliver the desired results and, based on the deterioration in the company's core brands since that time has in actuality had a profound detrimental effect on the financial position and operating performance of the company, in my opinion."
  • "Other investors have come to the same conclusion, since the stock price is down roughly 80% this calendar year. Accordingly, it is time for the Quiksilver board to implement a new strategy in order to preserve shareholder value by commencing a process to sell the company."
  • "…I believe that the company's well known brands, global retail and wholesale presence and supply chain still have value. But, the only way to unlock this value for shareholders, and to maximize shareholder value consistent with the board's fiduciary duties, is to immediately pursue the sale of the company through a competitive bidding process."


Takeaway:  These are the guys (Consac) that pushed for a sale of Vitacost and Bebe. Regardless of who is calling for a sale, it's near impossible for anyone to argue with their logic. Quiksilver simply should not be a stand-alone public company. With barely $300mm in equity value, the market seemingly agrees. The most surprising thing to us is that companies like VF Corp and Kering don't see what we do.




GIII - Cyber Attacks Spread: Bass & Co. Latest Hit



  • "The company said it discovered that an unauthorized person had connected a small data capture device to one of the cash registers in its store on International Drive in Orlando [Fla.].' The device recorded information from payment cards, including cardholders’ names, card numbers, expiration dates, verification codes and e-mail addresses, if they were provided.  Just one register was targeted in the attack."


LEISURE LETTER (10/10/2014)

Tickers: RCL, SNOW


  • Oct 15: LVS 3 earnings 4:30 pm , pw 12611335
  • Oct 16: Hedgeye cruise pricing survey (mid-October)


GENTING UK – Phil Ivey has lost his case against a British casino he accused of improperly withholding his winnings.  Britain’s High Court ruled that Genting Casinos UK does not have to pay him the 7.7 million pounds (USD12.4 million) he was seeking.  He claims he won the money during two days of playing baccarat at Crockfords, a Mayfair casino that is part of the Genting group, in August 2012.


RCL– is offering two new sales in one. Book any Royal Caribbean cruise (excluding Quantum of the Seas or Anthem of the Seas) before the end of October, and you can take advantage of these two offers: 1) Buy one guest, get one guest for 50% off; and 2) When booking air accommodations through ChoiceAir, get an additional 5% off the first and second guests. The new cruise deal is good for bookings made between October 2 - 31, 2014 on all ships excluding Quantum of the Seas, Anthem of the Seas and all China departures. 


SNOW – Steamboat Ski Resort is suing Utah tourism officials, claiming a $1.8 million campaign designed to lure tourists in the lucrative winter sports industry away from Colorado violates their Ski Town, U.S.A. trademark because Salt Lake City is marketing itself as Ski City US. 

Takeaway: The battle for skiers and marketing identity intensifies.


Japan's Gaming Enabling Legislation – (Reuters) Contrary to recent stories, Japan's pro-casino lawmakers are set to tweak a proposed bill on casino legalization to address concerns of a possible spike in gambling addiction, but have agreed to not propose banning Japanese nationals from casinos

Takeaway: We look forward to moving beyond the talk and posturing and finally having floor debate commence.


Macau Golden Week Jewelry Sales(Macau Business Daily) Chow Sang Sang Holdings International Ltd. saw sales in its five jewelery stores in Macau rise more than 10% during National Day Golden Week, with more than 90% of customers hailing from the mainland.  By comparison, Chow Sang Sang sales in Hong Kong being declined 6% to 8% during the period, negatively impacted by the Occupy Central movement.

Takeaway: A sales increase of up 10% seems disappointing given Mainland Chinese visitation increased 17% during Golden Week.


Indiana Gaming Law Changes Sought – Leaders from Indiana’s ailing gambling industry pleaded their case before lawmakers Wednesday, looking for ways to attract more customers and beat back competition from out of state that has sprung up in recent years. Three of their top requests are for lawmakers include: 1) to allow riverboat casinos to move ashore,  2) allow table games two racinos, and 3) eliminating the tax on free play. 

Takeaway: Regional gaming operators seeking relief from the cannibalization of new land based casinos in Ohio and well as video gaming in Illinois. 


Best Western Launches Brand Extensions – announced plans for two new brands: Vib, a lifestyle hotel concept targeting millennial travelers; and BW Premier Collection*, a soft brand.  The company’s global pipeline includes more than 400 properties, 35% of which are in North America. Half of the North American pipeline are new-build hotels and include 26 Best Western properties, 106 Best Western Plus hotels and 10 Best Western Premier properties.

Takeaway: Another hotelier attempts to court millennials.


Atla Remains a No Boarder Mountain – Earlier this year a group of snowboarders filed a discrimination lawsuit against Alta, claiming they were being turned away not because they present a risk to skiers with whom they share the terrain but because they are perceived as being rowdy and obnoxious. A federal judge dismissed the suit, basically saying that the right to snowboard is not guaranteed by the equal protection clause of the Constitution. The only other U.S. resorts that ban snowboarding are Deer Valley, also in Utah, and Mad River Glen in Vermont.

Takeaway: Ski purists rejoiced Alta with the ruling the mountain will remain free of Boarders.


El Niño – the Climate Prediction Center agency of the National Weather Service said on Thursday, the El Niño weather phenomenon is expected to occur in the next 1-2 months and last into next spring in the Northern Hemisphere, although the El Niño will likely be less strong than forecasted three months ago.

Takeaway: We've been talking about El Niño since May and we hope for a stronger pattern which would result in warmer weather, a positive for consumer spending.


Hedgeye remains negative on consumer spending and believes in muted inflation, a Quad Four set-up.  Following a great call on rising housing prices, the Hedgeye Macro/Financials team is 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.

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 80.46%
  • SHORT SIGNALS 78.35%