The Macau Metro Monitor, March 15, 2011




A district judge rejected pleas by LVS to dismiss Jacobs' suit against his former employer.  Judge Elizabeth Gonzalez of Las Vegas said that there was sufficient evidence of influence from Las Vegas on Macau operations to justify Nevada court jurisdiction. Sands China attorneys will decide shortly on whether to appeal the ruling.  Meanwhile, the judge said that the case will proceeds towards settlement talks.



Macau’s Infrastructure Development Office (GDI) will launch three public tenders today and run through May 3rd, two for the construction of public housing in Seac Pai Van and another one for the land reclamation project in the peninsula’s northeast. The PRC State Council approved Macau’s 3.5 square kilometre land reclamation plan in 2009 which included five areas of claimed land situated in the Macau peninsula’s northeast (A), south of Avenida Sun Yat Sen (NAPE - B) and North of Taipa island (C, D and E). 


"Area A” is set to be ready before 2016 and will be the link between the territory and the artificial island of the Zhuhai-Macau-Hong Kong Bridge. Zones A and B are planned mainly for road infrastructure, tourism and recreation facilities, parks and green areas, public buildings and commercial and residential neighbourhoods.  Meanwhile, in zones C, D and E, located in northern Taipa, land will be used for public and community facilities, transport infrastructure, commercial and residential districts and for diverse industries’ projects. Local officials have guaranteed that no gaming developments will take place in the new areas.  The public tender for the second and third phases of the Seac Pai Van housing complex, in Coloane, will have a total of 932 apartments



SJM Holdings chief executive Ambrose So Shu Fai was quoted saying that while the company is interested in investing in Hengqin Island that they do not have any concrete development plans.



Several major hotels, including the 2 IR's, have and continue to receive reservation cancellations in the aftermath of the disaster in Japan.  All the hotels that responded to The Business Times said that they would be waiving cancellation  fees.  So far the impact on the two IR's seems immaterial.  RWS saw hotel room cancellations from at least 31 affected guests since Sunday, said Lee Sin Yee, spokesman for the resort, but no cancellations of conventions or meetings organised by Japanese corporations so far. Marina Bay Sands declined to disclose how many disaster-related hotel room cancellations it has received so far.


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Old School Wall Street

“A good player plays where the puck is. A great hockey player plays where the puck is going to be.”

-Wayne Gretzky


Just over three years ago, we started Hedgeye with the philosophy that the research business should be transparent, accountable and trustworthy.   At the time, many of our Old School Wall Street critics derided us for naively entering the investment research business with a simple philosophy.  Needless to say, three years, forty five employees, and hundreds of clients later, Hedgeye isn’t such a novelty.  Neither are our core values.  


We’ve made a few enemies amongst the Old School Wall Street crowd over the course of the past few years, but we’ve made many more new friends, some of whom we are now honored to count as subscribers to our research.  Yesterday, it seems, we made a new enemy in Peter Boockvar, the Sales Trader /Equity Strategist from Miller Tabak.  Boockvar, it seems, is not so crazy about transparency.


At Hedgeye, we are fond of an expression called “YouTubing”. This expression means to analyze and, sometimes, critique, the public comments of politicians, executives, and market commentators.  “YouTubing” is not meant to be a personal attack, but rather a critique related to the substance of those views articulated.  In the Web 2.0 world, if you make public comments, you should expect to be “YouTubed”.  As a firm, we make many public comments, and fully expect to be held accountable to them.


Intraday yesterday Keith tweeted the following via @KeithMcCullough:


“If Boockvar is long Nikkei and short Yen here, now he knows why no one will ever give him money to manage”


This was in response to an appearance by Boockvar on CNBC yesterday, where he discussed his case for Japan. That video is here:  (if the link doesn’t open, copy and paste it into your browser)


A paraphrase from his appearance was:


“Japan is going to want to print their way out of this. Therefore you want to be long their equities, and short their currencies and short their bonds.”


It seems Boockvar’s thesis is that printing money will lead to increasing interest rates in Japan, which will lead to an increase in Japanese equities.  In fact, he also made a bullish call on Japanese equities on December 31st, 2010 on CNBC, which he articulated in this clip: (if the link doesn’t open, copy and paste it into your browser)


Thesis drift, anyone?


Needless to say, Boockvar’s response to Keith’s public critique was less than hospitable and was topped off by calling Keith some not so nice names in a private communication.  Boockvar’s use of schoolyard epithets does nothing to enhance his professional standing in our eyes.  Now, we don’t mean to pick on Boockvar, he just typifies a gang we call Old School Wall Street, and this is just the latest example of how rattled they get by real-time accountability.  Twitter on!


Since articulating a coherent view in 140 letters on Twitter can be challenging, we want to restate our position on Japan. Our bearish view on Japan is something we began articulating in Q4 of 2010, in a thesis called Japan’s Jugular.   A key highlight of this thesis is, in contrast to Boockvar’s view, that printing money will have just the opposite impact.  It will lead to increased debt, slowing growth, and declining equity prices.  In fact, in 18 years of Keynesian experimentation, from 1992 to 2010, Japan had on average +0.85% year-over-year GDP growth.  Over the same period, the Nikkei 225 returned -55%  No, Mr. Boockvar, this time is not different . . .


Naturally any good contrarian is looking for a buying opportunity given the dramatic sell off in Japan over the past few days.  We would caution against this, despite the relief rally this morning, for two reasons:

  1. Unknown unknowns – The derivative impact of the earthquake has been damage to the nuclear power infrastructure in Japan.  At this point, there is limited information from which to evaluate the real impact of this damage, in particular at the Fukushima Dai-Ichi plant, where this morning it was reported that a second reactor may have ruptured.  The point is, we have no idea how this will end and be resolved.
  2. Known knowns: The Japanese economy reached a negative inflection point last year when its pension plan began selling assets to fund pension obligations.  This highlights two key components of our negative thesis on Japan: demographics and debt.  Japan has both the oldest population in the world, with ~22.7% of the population 65 years of age or older, and is the most indebted developed nation, with a debt-to-GDP ratio of 205%+.  The risk is that this tragedy only accelerates negative growth in Japan due to an inflexibility created from almost two decades of Keynesian policies.

Of course, there will be an opportunity to get long the Japanese recovery trade eventually. As always, duration matters; however, after the January 17, 1995 Kobe earthquake, Japanese equities lost (-24.7%) before bottoming out nearly six months later on July 3. The Nikkei 225 did not break even until nearly 11 months later on December 7 of that year.


Now a public service message to Peter Boockvar and Friends:


This is the new Wall Street where accountability and transparency matters.  While your long term track record is cool, let’s just start with the last three years.  For the record, every single position we’ve take in the Hedgeye Portfolio since inception is on our website for the world to see.  We encourage you to do the same.


Next time you want to challenge someone to head down to the schoolyard for disagreeing with your thesis, add me to that list.  My email is .  My friends call me Big Alberta, and I’ll be waiting at the puck for you.


Keep your head up and stick on the ice,


Daryl G. Jones


Old School Wall Street - Chart of the Day


Old School Wall Street - Virtual Portfolio


CNBC VIDEO: Investing Post Japan Earthquake


Notable news items and price action over the past twenty-four hours.

  • MRT said this morning that it may sell the company as part of an effort to enhance shareholder value.  The two largest shareholders of the company, affiliates of Castle Harlan, Inc., and Laurel Crown Partners LLC, authorized the move.
  • PEET shares gained post-market on a story from DealReporter stating that the company has seen takeover interest including from SBUX.  As we wrote in our 2/15 note, “PEET – WHY SBUX SHOULD BUY PEET”, we believe such a transaction would make sense for Starbucks.
  • SBUX said 100 stores in Japan were closed
  • CPKI was raised to Buy from Neutral at Buckingham Research.
  • CPKI gained 4.5% on accelerating volume.
  • CBRL was raised to Buy from Hold at Standpoint Research.
  • CBRL gained 1.2% yesterday, also on accelerating volume.
  • JACK, THI, and KKD all declined on accelerating volume.




Howard Penney

Managing Director

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