• run with the bulls

    get your first month

    of hedgeye free



Let them eat debt.”

-Dan Alpert


That’s how my friend Dan Alpert starts chapter 4 of a non-perma-bull book I have been reviewing as of late – The Age of Oversupply. It’s a play on Marie Antoinette telling those who were plundered by central planners in France to eat cake.


Ironically enough, it was on this day in 1793 that Marie was guillotined at the epicenter of the French Revolution. The People will only put up with negative real incomes and the all-time highs in cost of living for so long…


Right in the middle of our new bear cave (Hedgeye Headquarters in Stamford, CT), we have an office I painted pink (with fluffy white couches) that we call the Marie Antoinette Room. There’s a guillotine painted in black on the wall.


"Ebeta" - EL chart 2


Back to the Global Macro Grind


Yep, we do things a little differently over here. And thank God for that. If anyone who works for me bought the “bounce” in the Russell #Bubble (into yesterday’s close), we’d be having a little chat in the pink room today.


Newsflash: the world changed yesterday.


And I can’t for the life of me understand why money managers who haven’t been positioned for it for the last, say 3-6 weeks, wouldn’t respect that. There has never been a % move like that in the Treasury market (in that compressed window of time), ever. I call that part of the phase transition of market risk, The Waterfall.


The Waterfall isn’t ebola (or whatever bulls want to blame next). It’s levered-long hedge fund beta.


And until I get at least a dozen shorter-term hedge funds calling/emailing me (at the same time) and telling me we’re going to crash, we’re probably going lower.


“We”, in market terms – dammit I hate that word. This market isn’t we. That would include me, Mucker, as having some ownership in being long the US equity market. To be clear, I am long the Treasury Bond market – Long Bond style!


Back to the #behavioral point on fund manager positioning and sentiment…


Understand that this entire way down (-11.2% for the Russell 2000, -32% for the 10yr bond yield, -7.4% for the SP500), I have generally been asked about where “we bounce.”


The reason for that is pretty simple. In the Chart of The Day (exhibit 45 in our Q4 Macro Themes deck) you can see Hedge Fund Correlation to SP500 and Average Relative Performance (using a 60 month trailing correlation).


Punch-line: forget ebola – correlation to Ebeta for the levered-long beta chasing trade = +0.90-0.95


When the US equity market goes down, for real… that’s more dangerous than almost any data point you can give me other than the following 3-factor #Bubble chart (exhibit 52 in our Q4 Macro Themes deck) – Spread Risk:


  1. All-time low in credit spreads
  2. All-time low in cross-asset class volatility
  3. All-time high in debt outstanding


No, I didn’t need a one-on-one meeting with my favorite stock picker to come up with that… I am pretty sure that the CFO of the only company I hit the buy button on as of late in Real-Time Alerts (HCA) wouldn’t know what to do with it anyway.


Q: Who does?


A: No one


How could anyone tell you, with a straight face that, even though, they “don’t do macro”, they just know that buying the damn dip is going to work, in spite of coming off the all-time lows in volatility and highs in, well, everything?


To review why our call on rates really matters to cross asset class expectations (risk):


  1. Long-term rates shock consensus to the downside
  2. Yield Spread (leading indicator for US #GrowthSlowing) crashes -34% (10yr minus 2yr yield)
  3. Small caps, bank stocks, and anything illiquid credit junk gets slammed


In the non-it’s-different-this-time playbook, this is what is called an early-cycle slowdown. And from the all-time highs in debt outstanding, I don’t think piling on more of what hasn’t worked (Qe4) is going to make this better.


I am not trying to scare you, or be “not nice” about this. I like to be right as much as you do. “So”, I say, let whoever bought yesterday’s intraday bounce in the Russell #Bubble eat beta.


Tomorrow at 1PM EST I’ll be hosting a Hedgeye Flash Call#Bubble Or Bottom”, updating our Q4 Macro Themes. Ping if you’d like to participate.


Our immediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 2.01-2.22%


RUT 1038-1080

VIX 19.55-27.99

USD 84.76-85.79

Gold 1

Best of luck out there today,



"Ebeta" - Chart of the Day


TODAY’S S&P 500 SET-UP – October 16, 2014

As we look at today's setup for the S&P 500, the range is 56 points or 1.58% downside to 1833 and 1.42% upside to 1889.                                                   














  • YIELD CURVE: 1.73 from 1.83
  • VIX closed at 26.25 1 day percent change of 15.18%


MACRO DATA POINTS (Bloomberg Estimates):

  • 8am: Fed’s Plosser speaks in Allentown, Pa.
  • 8:30am: Initial Jobless Claims, Oct. 11, est. 290k (pr 287k)
  • Continuing Claims, Oct. 4, est. 2.380m (prior 2.381m)
  • 9am: Fed’s Lockhart speaks in New Brunswick, N.J.
  • 9:15am: Ind. Production, m/m, Sept., est. 0.4% (prior -0.1%)
  • 9:45am: Bloomberg Consumer Comfort, Oct. 12 (prior 36.8)
  • 10am: Philly Fed Business Outlook, Oct., est. 19.8 (pr 22.5)
  • 10am: NAHB Housing Market Index, Oct., est. 59 (prior 59)
  • 10am: Fed’s Kocherlakota speaks in Billings, Mont.
  • 10am: Freddie Mac mortgage rates
  • 10:30am: EIA natural-gas storage change
  • 11am: U.S. to announce plans for auction of 3M/6M bills, 30Y TIPS
  • 12:45pm: Fed’s Bullard speaks in Washington
  • 12:45pm: Fed’s Yellen attends event in Chelsea, Mass.
  • 4pm: Net Long-term TIC Flows, Aug. (prior -$18.6b)



    • Senate, House out of session
    • Obama Says Response Team to Be Dispatched for Any Ebola Case, cancels trip to R.I., N.Y.
    • Sec. of State Kerry delivers remarks at reception in honor of Eid, then working dinner w/ Foreign Affairs Policy Board
    • 10am CFTC Chairman Massad to Keynote Managed Funds Assn’s Outlook 2014 Conference in N.Y.
    • 12pm: House Energy and Commerce Oversight and Investigations Subcmte hearing on Ebola; CDC’s Frieden, National Institute of Allergy and Infectious Disease at NIH’s Fauci to testify
    • 12:30 p.m.: Michael Huerta, FAA administrator, speaks to Aero Club ofWashington
    • U.S. ELECTION WRAP: Guns & Democrats; $1b Ads; Grimes Takes Hit



  • Some in Ebola Trials Wouldn’t Get Tested Drugs Under U.S. Plan
  • New Ebola Patient’s Trip Raises Concern on U.S. Spread of Virus
  • U.S. House of Representatives panel holds hearing on Ebola
  • Obama Says Response Team to Be Dispatched for Any Ebola Case, cancels trip to R.I., N.Y.
  • Apple Event: IPad, Mac Updates, Potentially Larger IPad
  • AbbVie Board Recommends Shareholders Vote Against Shire Deal
  • Dark Pools Said to Direct Orders Elsewhere as U.S. Volume Surged
  • Netflix Skids on User Slowdown as HBO Plots Web Competition
  • EBay Holiday Sales Forecast Misses Estimates After Data Breach
  • AmEx Profit Tops Analysts Estimates as Card Spending Climbs
  • Las Vegas Sands Profit Tops Estimates on Mass Market Revenue
  • Tesla Facing Possible Ban on Direct Automobile Sales in Michigan
  • IPO Outlook Dims as Zoosk, GoDaddy Said to Mull Punting to 2015
  • Dow Says World Carbon Market Needs Less Intervention to Succeed
  • Citigroup’s Mexico Unit Fined $2.2m Over Loan Controls
  • Oracle Sued Over Antitrust Claims Echoing Apple-Google Suit
  • Apple Told to List Items to Keep Secret in GT Advanced Case
  • Banker Pay Clampdown in Europe Puts Firms at Risk in Talent Race



    • Alliance Data Systems (ADS) 7:30am, $3.31
    • Baker Hughes (BHI) 6am, $1.13 - Preview
    • Baxter Intl (BAX) 7am, $1.31 - Preview
    • BB&T (BBT) 5:45am, $0.72
    • Blackstone (BX) 7am, $0.71
    • ClubCorp (MYCC) 7am, $0.10
    • Cypress Semiconductor (CY) 8am, $0.16
    • Danaher (DHR) 6am, $0.89
    • Delta Air Lines (DAL) 7:30am, $1.18
    • Dover (DOV) 7am, $1.31
    • Fairchild Semiconductor (FCS) 7:30am, $0.21
    • Fifth Third Bancorp (FITB) 6:30am, $0.43
    • First Republic (FRC) 7am, $0.86
    • Goldman Sachs (GS) 7:35am, $3.21 -Preview
    • Marriott Vacations (VAC) 8am, $0.80
    • Mattel (MAT) 6am, $1.02 - Preview
    • Orbital Sciences (ORB) 6am, $0.28
    • Philip Morris Intl (PM) 6:59am, $1.33 - Preview
    • PPG Industries (PPG) 8:11am, $2.76
    • Snap-On (SNA) 7am, $1.62
    • Sonoco Products (SON) 7:30am, $0.68
    • Supervalu (SVU) 8am, $0.11
    • UnitedHealth (UNH) 6am, $1.53 - Preview
    • Webster Financial (WBS) 7:55am, $0.52
    • Winnebago (WGO) 7am, $0.46
    • WW Grainger (GWW) 7:30am, $3.29 -Preview



  • Advanced Micro Devices (AMD) 4:15pm, $0.04 - Preview
  • Athenahealth (ATHN) 4:01pm, $0.27
  • Capital One Financial (COF) 4:05pm, $1.94
  • Cepheid (CPHD) 4:05pm, ($0.16)
  • Crown Holdings (CCK) 5:03pm, $1.21
  • Cytec Industries (CYT) Aft-mkt, N/A
  • Google (GOOGL) 4:02pm, $6.53
  • People’s United Finl (PBCT) 4:03pm, $0.21
  • QLogic (QLGC) 4:15pm, $0.22
  • SanDisk (SNDK) 4:05pm, $1.33
  • Schlumberger (SLB) 4:05pm, $1.47 - Preview
  • Stryker (SYK) 4pm, $1.14 - Preview
  • Wintrust Financial (WTFC) 5:01pm, $0.78
  • Xilinx (XLNX) 4:20pm, $0.56




  • LME to Run London Platinum to Palladium Fixings Replacement
  • Copper Demand Seen by CRU Slowing as China’s Imports Set to Drop
  • Trading Metals for Music Shows Shrinking Job Market: Commodities
  • WTI Crude Oil Falls Below $80 for First Time Since June 2012
  • Lead to Tin Fall to Lowest in More Than a Year on Demand Concern
  • Gold Falls From 5-Week High as Sales Seen to Cover Other Losses
  • Corn Slides as Drier U.S. Weather Puts Focus Back on Record Crop
  • Coffee Harvest in Indonesia Seen Heading for Record on Rainfall
  • End to Oil Rout Seen by BofA as $80-a-Barrel Gains Support
  • Citigroup Sees $1.1 Trillion Stimulus From Oil Bear Market Rout
  • Palm Declines to Three-Week Low as Biofuel Demand Eases on Crude
  • Oil Bear Market Shows Saudis Still Pick Winners in Shakeout
  • More Iron Ore Supply Coming in Wake of 37% Price Plunge
  • Dow Says World Carbon Market Needs Less Intervention to Work

























The Hedgeye Macro Team


















ICI Fund Flow Survey - Taxable Bond Bleeding Continues - BlackRock Puts Up Soft Equity Results

Takeaway: Dislocation at PIMCO continued last week with BlackRock signaling weak retail and institutional equity trends in yesterday's earnings

Investment Company Institute Mutual Fund Data and ETF Money Flow:


The most recent weekly ICI fund flow survey relayed the ongoing distribution within the taxable bond fund category as a result of the reshuffling of the cards among the major bond fund managers with the Bill Gross departure from PIMCO. Taxable bonds lost another $4.6 billion last week according to the ICI which brings the money in motion from the Gross transfer to over $25 billion over the past two weeks. According to several sources, Gross' new home Janus Capital (JNS), has collected just $60 million of these funds up for grabs which still doesn't foote with the stock's recent strong move up in market value. We are still looking to Janus' conference call next Thursday October 23rd to understand the compensation award to Gross versus his new assets-under-management win potential. While JNS stock has corrected over 12% since September 26th, we still see more downside should the company have awarded a large comp structure to Gross without requisite inbound assets to offset new operating costs. In addition, the earnings print from asset management juggernaut BlackRock (BLK) yesterday displayed weakness in both retail equity mutual fund flows as well as institutional equity fund flows which we think is a negative read through for T Rowe Price (TROW). While there are some ideosyncrasies between the two franchises (mainly that institutionally, BLK is in the midst of a fundamental equity restructuring), we point out however that over the past 6 quarters that both T Rowe and BlackRock fund flow trends have not decoupled from each other. In addition, we highlight that both active mutual fund only managers Janus and T Rowe continue to swim upstream against ongoing market share gains by passive ETFs trends which continue to be fairly robust on a year-to-date basis versus active management mutual fund trends. Thus we continue to be cautious on TROW as we are forecasting negative organic growth in its upcoming earnings print on October 23rd versus the Street's ongoing positive growth estimates (see our Best Ideas research below)   


ICI Fund Flow Survey - Taxable Bond Bleeding Continues - BlackRock Puts Up Soft Equity Results - BLK TROW chart


ICI Fund Flow Survey - Taxable Bond Bleeding Continues - BlackRock Puts Up Soft Equity Results - ETF share


Hedgeye Best Ideas TROW Short Research 

Hedgeye Best Ideas JNS Short Research


In the most recent 5 day period ending October 8th, total equity mutual funds put up moderate inflows with $1.0 billion coming into the total equity fund category according to the Investment Company Institute. The composition of the inflow continued to be weighted towards International stock funds with a $1.6 billion inflow buffering another outflow of $533 million in U.S. stock funds. The inflow into International stock funds made it a perfect 40 for 40, i.e. inflows in all 40 weeks of 2014. Conversely, domestic trends continue to be very soft with now 23 of 24 weeks of outflow now totaling over $57 billion lost. The running year-to-date weekly average for all equity fund flow continues to decline and now settles at a $1.1 billion inflow, now well below the $3.0 billion weekly average inflow from 2013. 


Fixed income mutual fund flow had another drawdown in the most recent ICI data succumbing to more net selling from the dislocation at large bond fund manager PIMCO. Total bond funds lost another $3.7 billion last week with the distribution focused with the taxable bond fund category which lost another $4.6 billion last week. Despite the taxable outflow, intermediate term trends are still quite positive however for taxable fixed income with 29 of the past 35 weeks having had positive subscriptions. Municipal or tax-free bond funds in the most recent survey put up a $895 million inflow, making it 34 of 35 weeks with positive subscriptions. The 2014 weekly average for fixed income mutual funds now stands at a $1.1 billion weekly inflow, an improvement from 2013's weekly average outflow of $1.5 billion, but still a far cry from the $5.8 billion weekly average inflow from 2012 (our view of the blow off top in bond fund inflow). 


ETF results were mixed during the week with substantial outflows into equity funds but subscriptions in passive fixed income products mopping up the ongoing redemption in taxable bond funds. Equity ETFs suffered a $6.2 billion redemption while fixed income ETFs put up a $4.6 billion subscription, the biggest inflow in almost 5 months. The 2014 weekly averages are now a $1.7 billion weekly inflow for equity ETFs and a $946 million weekly inflow for fixed income ETFs. 


The net of total equity mutual fund and ETF trends against total bond mutual fund and ETF flows totaled a negative $6.1 billion spread for the week (-$5.2 billion of total equity outflow versus the $896 million inflow within fixed income; positive numbers imply greater money flow to stocks; negative numbers imply greater money flow to bonds). The 52 week moving average has been $3.5 billion (more positive money flow to equities), with a 52 week high of $27.2 billion (more positive money flow to equities) and a 52 week low of -$37.5 billion (negative numbers imply more positive money flow to bonds for the week). The 52 week moving average chart displays the declining demand for all equity products (funds and ETFs) for the safety and security of fixed income. 


Mutual fund flow data is collected weekly from the Investment Company Institute (ICI) and represents a survey of 95% of the investment management industry's mutual fund assets. Mutual fund data largely reflects the actions of retail investors. Exchange traded fund (ETF) information is extracted from Bloomberg and is matched to the same weekly reporting schedule as the ICI mutual fund data. According to industry leader Blackrock (BLK), U.S. ETF participation is 60% institutional investors and 40% retail investors.   


ICI Fund Flow Survey - Taxable Bond Bleeding Continues - BlackRock Puts Up Soft Equity Results - ICI chart 1

ICI Fund Flow Survey - Taxable Bond Bleeding Continues - BlackRock Puts Up Soft Equity Results - ICI chart 2



Most Recent 12 Week Flow in Millions by Mutual Fund Product:


ICI Fund Flow Survey - Taxable Bond Bleeding Continues - BlackRock Puts Up Soft Equity Results - ICI chart 3


ICI Fund Flow Survey - Taxable Bond Bleeding Continues - BlackRock Puts Up Soft Equity Results - ICI chart 4


ICI Fund Flow Survey - Taxable Bond Bleeding Continues - BlackRock Puts Up Soft Equity Results - ICI chart 5


ICI Fund Flow Survey - Taxable Bond Bleeding Continues - BlackRock Puts Up Soft Equity Results - ICI chart 6


ICI Fund Flow Survey - Taxable Bond Bleeding Continues - BlackRock Puts Up Soft Equity Results - ICI chart 7



Most Recent 12 Week Flow Within Equity and Fixed Income Exchange Traded Funds:


ICI Fund Flow Survey - Taxable Bond Bleeding Continues - BlackRock Puts Up Soft Equity Results - ICI chart 8


ICI Fund Flow Survey - Taxable Bond Bleeding Continues - BlackRock Puts Up Soft Equity Results - ICI chart 9A



Net Results:


The net of total equity mutual fund and ETF trends against total bond mutual fund and ETF flows totaled a negative $6.1 billion spread for the week (-$5.2 billion of total equity outflow versus the $896 million inflow within fixed income; positive numbers imply greater money flow to stocks; negative numbers imply greater money flow to bonds). The 52 week moving average has been $3.5 billion (more positive money flow to equities), with a 52 week high of $27.2 billion (more positive money flow to equities) and a 52 week low of -$37.5 billion (negative numbers imply more positive money flow to bonds for the week). The 52 week moving average chart displays the declining demand for all equity products (funds and ETFs) for the safety and security of fixed income. 



ICI Fund Flow Survey - Taxable Bond Bleeding Continues - BlackRock Puts Up Soft Equity Results - ICI chart 9 




Jonathan Casteleyn, CFA, CMT 




Joshua Steiner, CFA

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.

October 16, 2014

October 16, 2014 - Slide1



October 16, 2014 - Slide2

October 16, 2014 - Slide3

October 16, 2014 - Slide4




October 16, 2014 - Slide5

October 16, 2014 - Slide6 

October 16, 2014 - Slide7

October 16, 2014 - Slide8

October 16, 2014 - Slide9

October 16, 2014 - Slide10

October 16, 2014 - Slide11


Takeaway: Finally, an acknowledgement that premium mass margins under pressure. 2015 estimates way too high - any relief rally could be short lived

Slight Q3 miss from reduced Street numbers but conference call commentary the more important driver. Singapore disappointing.


LVS 3Q 2014 CONF CALL NOTES - lvs1


LVS 3Q 2014 CONF CALL NOTES - lvs2


Mr. Adelson:

  • Solid results despite VIP challenges
  • Return excess capital to shareholders
  • As confident today as ever been in long-term future of company
  • Strategic position - creators of large scale, convention based Integrated Resort
  • Over 80% of profits from Mass, less than 20% from VIP in Macau
  • Size of cash flows >$5 billion affords developments in new jurisdictions as well as return capital to shareholders


  • Adjusted property EBITDA increased 3.2% to $809.0 million, reflecting mass gaming and non‐gaming growth but a challenging VIP environment 
  • Growth in China continues
  • Mass still growing 15% in Macao, expect mass to grow for foreseeable future, remains supply constrained and supply driven market
  • Current gaming softness is cyclical and will reverse
  • Strategy has not changed
  • 18.2 million people visited in Q3, up 8.2% YoY
  • Hotel room optimization yielding results
  • Largest employer in Macau across any industry
  • Rising labor costs - more than happy to increase salaries, revenues will outpace labor costs


  • Normalized hold adjusted ebitda +$15 million to $367 million 
  • Bringing in more foreign Premium Mass customers
  • Japan and Korea envy MBS as model for IR development, most iconic IR in the world.
  • Mall at MBS remains a go to, must visit shopping mall across SE Asia

New Markets

Development opportunity parameters:
— Minimum of 20% return on total invested capital
— 25% ‐ 35% of total project costs to be funded with equity

— project financing to fund 65% ‐ 75% of total project costs



  • Progress being made, process continues.
  • Potential for IR, remain enthusiastic


  • Extensive time on the ground
  • Focused on Seoul
  • Willing to commit substantial capital in both Japan and Korea


  • Exploring a scaled IR opportunity

Return of Capital

  • Confidence in business, reliability of cash flow affords significant return to shareholders via share repurchase and dividends
  • Have sufficient capital for planning and developing new projects
  • Announce dividend increase of 30% to US$0.65/quarter beginning in Q1 2015.  Every intention to increase dividend in years ahead.
  • $300 million returned in Q3 via share repurchase activity, completed initial $2 billion repurchase authorization
  • Authorized additional $2 billion repurchase



Q: Profit margin assumptions for mass, premium mass (slide 21), what's behind the lowered assumptions?

  • Competitive mass pressures on premium mass, structural advantage in base mass, steadfast in 45%+ margin in base mass. Higher flow through, blended near 45%, expect flow through to rise. 
    • Hedgeye: premium mass issues should've been acknowledged on the Q2 conference call

Q: Smoking ban impact?

  • Not impacting any segment. Smoking areas utilized. Obedient society, go to smoking rooms and return to tables.

Q: Buyback target vs. opportunistic due to lower share price?

  • Programmatic in nature, no guideline. Board meetings over the coming weeks, likely similar to past, but any opportunity should revisit.

Q: CapEx pushed out at Parisian?

  • Parisian targeted opening date:  Partial vs. Complete? Full opening in March 2016, partial opening in November or December if government approves partial opening. 
    • Hedgeye: we'd put the over/under in Q2

Q: Premium Mass competition - continued to shift tables to premium mass, slow shift or move back to base mass?

  • Move tables based on market demand. Excess supply on VIP.

Q: Visitation strong but GGR decelerating, shift in rated customers?

  • Believe as new properties open with new infrastructure, GGR will grow. Confident base mass, mass mass will grow. 

Q: VIP side in Macau, difference in incremental margin, direct hold impact?

  • Margins on VIP are healthy and commission rates not going up.

Q: New share repurchase authorization, how fund - FCF, leverage?

  • Have not addressed yet, plenty of money, historically all cash for development & construction, now go out and get construction facility which will recover capital.

Q: Singapore - sacrificing role for profitability, how frame trade off?

  • Cognizant of atmosphere, remaining conservative, bearish on VIP in Singapore - highly concentrated, very thin market, very competitive with RWS and Philippines. Competitor (RWS) that has had monopoly in Malaysia, but still buying business - paying 1.7% to 1.8% but also paying for Premium Direct, VIP Direct.  MBS maintaining Macau commission levels. Moving player money is a challenge for MBS.

Q: Interest in Japan if locals excluded, change scope of project/investment?

  • Not interested in Japan or any other market if foreigners only.  In Korea, 16 foreigners only casinos cumulatively don't make what Kangwon makes as locals casino.  Foreigners only casinos don't receive sufficient visitation to support Integrated Resort, need locals.

Q: Golden Week, helped liquidity?

  • Can't talk about Golden Week due to Q4 event.

Q: Malls: interest in selling, use cash proceeds to buy back stock?

  • Too soon to sell, given 19%+ CAGR over past five quarters.
  • Still reprogramming the malls to increase sales and sales/sq. ft. 
  • Four Seasons Mall US$7k/sq. ft. 
  • Never sell when growing ~20% CAGR YoY.
  • Too much opportunity over the next few years.
  • Original plan to monetize at 4% cap rate 

Q: Margins

  • Premium mass mid 30%, base mass mid 40s%

Q: VIP improvement - what causes confidence/improvement?

  • Investigation of corruption is narrowed but not complete, so need to rethink but based on new information need greater clarification of narrow scope of on going crackdowns. So, unsure of VIP rebound at present time, could be 3 to 4 months, maybe by Q2 2015.  VIP for sure not going away.

Q: Parisian tables - formula?

  • Macau government will favor if have more non-gaming vs. gaming - especially if gaming exceeds 10% of total floor space. 

Q: Hold adjusted basis in Macau, EBITDA margin flat YoY - how hold margins flat, what add'l efforts to keep margin?

  • Mass margins will keep/sustain margins due to mass driven model.
  • But competitive set - unclear what competitors will do in Premium Mass
  • Margins up 110 bps on hold adjusted basis.

Macro Medley: 0 for (Quad#) 4

Takeaway: The global shift into quad #4 continues. There are pockets of fundamental strength domestically but we were 0 for 4 today.

QUAD #4:  We’ve been highlighting the emergent entry into Quad #4 (characterized by disinflation and decelerating growth) in our GIP model with regular frequency for over two months now.  We walked through the model in extended detail and our preferred positioning most recently here >> THE MARKET THINKS WE'RE IN QUAD#4...DO YOU? 


In short, you want to be long/OW the stuff that is working today (Bonds, Cash, large cap defensive yield) and short/UW its converse (high beta, small cap illiquidity and early cycle leverage)


Macro Medley: 0 for (Quad#) 4 - UNITED STATES


QUAD #4...GLOBALLY:  While we typically apply the model on a country by country basis, it generalizes to any regional or global aggregate.  In fact, the price consequences of a global shift into quad #4 are that much more acute. 


Looking across our global macro monitor – which tracks global growth & inflation trends -  growth and inflation estimate revision trends over the last quarter across both developed and EM markets have been almost universally negative.


Note: the table size/font is probably hard to read but simply observing the overwhelming prevalence of red (ie. negative growth/inflation estimate revisions trends) across countries/regions is sufficient for internalizing the prevailing global trend.   


Macro Medley: 0 for (Quad#) 4 - GMM 101514



DOMESTICALLY:  In discussing the September jobs report we summarized the shifting variables under the Fed's policy calculus in this way:   


ROW Growth Slowing + Global Disinflation Predominating + Domestic Wage Growth Decelerating + LFPR declining + Housing Slowing  vs. Strong Initial Claims + Solid NFP Gains + Declining Unemployment Rate + Accelerating Aggregate Income Growth


In brief, the domestic labor market (& mfg) and aggregate income growth continue to crest while wage growth and housing continue to flag, EU/Japan remain in discrete deceleration, EM economies suffer under strong dollar pressure and disinflation predominates. 


The left hand side of the equation has already pushed the Fed towards rhetorical dovishness. To the extent global quad #4 trends worsen, we import incremental disinflation and/or that ROW weakness spills over into the domestic macroeconomy, we can expect more of the same in terms of reactionary policy response.    


Unless this-time-is-different, relative exceptionalism (ie. sustained de-coupling) wins the day, it’s unlikely the US goes escape velocity in isolation. 


Indeed, inflation expectations continue to collapse, rate hike expectations are getting pushed out and, from a rate of change perspective, the domestic macro data has, on balance, been slowing.  


Macro Medley: 0 for (Quad#) 4 - 5Y BE


Macro Medley: 0 for (Quad#) 4 - Eco Summary Table 101514



0 for 4 TODAY:   We had a quadfecta of disappointing data this morning with Retail Sales, PPI, Empire Manufacturing & Mortgage Purchase Applications all deteriorating sequentially. 


  • Retail Sales:  The (expected) decline in auto sales and lower gas prices drove the bulk of the decline in Headline Retail sales with weakness in furniture and building materials sales exacerbating the drop.  Across the control group, declines in Food, Clothing and e-sales led the first M/M drop since January with the 1Y and 2Y ave growth rates decelerating as well.  Growth has been noteably choppy YTD (2nd chart below) and household income growth remains strong but the broad deceleration (11 of 13 industries reported decelerating growth) is noteworthy.
  • Mortgage Purchase Demand declined a modest -0.7% W/W after last week’s bounce above the 170-level on the index.  4Q is currently tracking +2.5% Q/Q with the YoY improving to -4.1% in the latest week.  Comps continue to ease significantly against 4Q13 and into 1Q next year as we lap the collective shock of rising rates, QM implementation, and FHA loan limit reductions. 
    • Refinance activity rose +10.6% W/W, on the back last week’s 5% rise, as rates retreated a full -10bps to 4.20%.  After dropping -13bps in the last two weeks, rates are now back at their lowest level YTD and the lowest level since June of last year. 
  • PPI:  Food and Energy/Gas led the -0.1% M/M decline in PPI-FD in September with both core and headline decelerating -20bps sequentially to +1.6% YoY.  The deceleration was not particularly surprising given the broad and expedited commodity price declines, but it does offer further. confirmatory evidence of our entre into quad 4.

 Macro Medley: 0 for (Quad#) 4 - Compendium 101514


Macro Medley: 0 for (Quad#) 4 - Retail Sales Control Group MoM  YoY  2Y


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Christian B. Drake


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