The math suggests that January and February could actually accelerate from a strong November, and that’s without a macro recovery.



The early 2012 set up looks favorable for hotel stocks.  We are very encouraged by November’s strong growth and while December won’t quite look as good, January and February are likely to accelerate.  When the hotel companies report in late January/early February, not only should Q4 earnings look solid, but the outlooks could be favorable with about a month of 2012 already in the bank.


November US REVPAR for Upper Upscale properties came in at 8.2% growth, in-line with our sequential model projection of 8.0%.  November generated the highest YoY growth rate since May 2011, overcoming the relatively weak 4.8% rise in October.  We track REVPAR on a sequential dollar basis, seasonally adjusted.  Our model successfully predicted the summer swoon and the fall resurgence, both coinciding with the performance of hotel stocks.


With two more weeks left, December Upper Upscale REVPAR is tracking +6%, also above our projection, which means Q4 REVPAR may expand 6-7% YoY.  That’s pretty solid growth in the face of a difficult macro environment.  In addition, there are surveys of a strong holiday season to close out 2011 which could increase hotel bookings.


And the YoY trend may get even better.  According to our seasonality model, REVPAR may reach double-digit growth in January and February.  If that happens, the bears will be severely disappointed.  There are expectations out there for flat REVPAR growth for 2012.  We’re only predicting 2-3% growth in REVPAR for CY 2012 and we are bullish on the sector.


Healthy US REVPAR performance would restore investor confidence in the lodging sector.  We think lodging outperforms consumer discretionary in any environment.  Counter intuitively, MAR could be the biggest winner.  Obviously, MAR doesn’t have the same leverage to increasing RevPAR as the hotel owners but the sentiment is much worse surrounding the name.  With the completion of its timeshare spin-off, MAR is almost a hotel pure play with a business model that generates 95% of its revenues through fees.  This business model should command a huge premium valuation multiple in our opinion and an environment of improving investor sentiment could get us there.  At only 9x EV/EBITDA, we’re left with plenty of upside.




TODAY’S S&P 500 SET-UP – December 22, 2011


Storytelling may very well make the US stock market world go round, but the globally interconnected facts embedded in last price remain.  As we look at today’s set up for the S&P 500, the range is 31 points or -1.26% downside to 1228 and 1.23% upside to 1259. 








THE HEDGEYE DAILY OUTLOOK - daily sector view


THE HEDGEYE DAILY OUTLOOK - global performance




  • ADVANCE/DECLINE LINE:  695 (-1620) 
  • VOLUME: NYSE 824.30 (-12.96%)
  • VIX:  21.43 -7.71% YTD PERFORMANCE: +20.73%
  • SPX PUT/CALL RATIO: 2.53 from 1.25 (+102.78%)




TREASURIES – not getting the memo from Ed Hyman on GDP being 4%? in Q4 either; we all know that the Keynesian sell-side GDP models failed Old Wall St in both 2008 and 2011, so I don’t get why someone would use them right here when the long-end of the Treasury market has front-run every Growth Slowdown from Dupont to Oracle this year. 10yr trading 1.96%, only up 11bps on the wk and well below all lines of resistance.

  • TED SPREAD: 57.12
  • 3-MONTH T-BILL YIELD: 0.01%
  • 10-Year: 1.98 from 1.94   
  • YIELD CURVE: 1.70 from 1.68


GLOBAL MACRO DATA POINTS (Bloomberg Estimates):

  • Japan Gov forecasts FY11-12 real GDP (0.1%), FY12-13 real GDP +2.2%.
  • UK final Q3 GDP +0.5% y/y vs consensus +0.5% and prior +0.5%
  • UK final Q3 GDP +0.6% q/q vs consensus +0.5% and prior revised to +0.00% from +0.5%
  • 8:30am: Chicago Fed, Nov., est. -0.17 (prior -0.13)
  • 8:30am: GDP QoQ (Annualized)    3Q, est. 2.0% (prior 2.0%)
  • 8:30am: Initial Jobless Claims, Dec. 17, est. 380k (prior 366k)
  • 9:45am: Bloomberg Consumer Comfort, Dec. 18, (prior -49.9)
  • 9:55am: UMich Confidence, Dec. F, est. 68.0, (prior 67.7)
  • 10am: Leading Indicators, Nov., 0.3% (prior 0.9%)
  • 10am: House Price Index, Oct. est. 0.2% (prior 0.9%)
  • 10am: Freddie Mac mortgage rates
  • 10:30am: EIA natural gas storage 



  • Yahoo! said to consider cutting its 40% stake in Alibaba to ~15%
  • Greece creditors said to resist IMF pressure to accept bigger losses on Greek govt bond holdings
  • U.K. GDP climbed 0.6% in 3Q, more than estimated
  • 10:25am: NRC meets to discuss Toshiba design, permits for what would be first nuclear reactors built in U.S. in 30 years




  • Herpes Virus Makes Oysters Rare Treat in French Holiday Season
  • ‘Medieval’ Economy Is Kim Jong Il’s Legacy as Minerals Untapped
  • Hong Kong Solstice Banquets Threatened by Bird Cull, Sales Ban
  • Hamburg Loses to Trieste as Southern Ports Exploit Rail: Freight
  • Nothing Predicted Happened as Men Conspired With Nature in 2011
  • Oil to Set Record in 2012 as U.S. Dodges Slump: Energy Markets
  • More Bankers Predict Policy Easing as Economy Cools, PBOC Says
  • Gold May Decline in London as ETF Holdings Drop to 1-Month Low
  • Oil Rises for Fourth Day as U.S. Supplies Drop Most in a Decade
  • Komatsu Sees Record Year for Mining Equipment Sales on China
  • Corn Crop Heading for Record to Feed 1 Billion Cows: Commodities
  • U.S. Stocks Rise for 2nd Day as Oil Climbs, Treasuries Retreat
  • Gloucester Coal Suspends Share Trading Pending Merger Proposal
  • Copper Gains for Third Day on Stockpiles, U.S. Data Speculation
  • Uralkali Cuts Output Target for Next Year to Buoy Prices
  • Ex-Dow Scientist Who Stole Secrets Gets 7 Years, 3 Months Prison
  • India Should Allow Banks, Funds Trade in Commodities, Panel Says
  • Palm Oil Climbs to Two-Week High as Rains Threaten Production


THE HEDGEYE DAILY OUTLOOK - daily commodity view





THE HEDGEYE DAILY OUTLOOK - daily currency view





ITALY – you’d think the Italian stock and bond markets could at least recover my 1st lines of support (immediate-term TRADE lines) and hold them for more than 48 hours – after 24hrs, and 489B euros of life support, nope – MIB’s first TRADE line of resistance = 15,391; watching that like a hawk alongside Euro 1.31 as I have no European short exposure and need to put it back on once resistance is confirmed.



THE HEDGEYE DAILY OUTLOOK - euro performance





ASIA – still not getting the memo that the LTRO gets the world free and clear of the #1 factor that’s pummeling Global Equity valuations in 2011 – Growth Slowing. Yesterday’s export print in Japan (down -4.5%) knocked the Nikkei down another -0.8% overnight (down -18% YTD) and Chinese stocks have been down every day this week. Emerging Markets MSCI Index down -23% YTD – EM outflows $41.2B YTD are = 2nd worst ever.



THE HEDGEYE DAILY OUTLOOK - asia performance




  • Baghdad Bombings Kill 57 as Political Tensions Escalate
  • Oil to Set Record in 2012 as U.S. Dodges Slump: Energy Markets
  • Putin Must Beat Own Economic Record as ‘Golden Decade’ Ends
  • EU Banks’ Retreat Creates Gap for Gulf Borrowers: Arab Credit
  • Malaysia, Emirates Consider Sukuk for Aircraft: Islamic Finance
  • Dana Gas Slumps to Lowest on Record on Egypt Delay Report
  • Egypt May Delay $148 Million Payment to Dana Gas, Al Bayan Says
  • U.S. Joins EU Push to Embargo Iran Oil Over Nuclear Effort
  • Rosneft Overtakes Exxon Mobil in Crude Output, Vedomosti Reports
  • BankMuscat Plans Stock Sale at 20% Discount; Shares Advance
  • MIDEAST DAYBOOK: Egypt Bond Rating Cut at Moody’s; Barwa Sale
  • Dubai’s Nakheel Says It Made 10% Profit Payment on Sukuk
  • Qatar’s Barwa Sells Financial District for $3 Billion
  • Aldar Won’t Delist Shares From Abu Dhabi, Deputy CEO Says
  • Iran to Hold Navy Exercises East of Strait of Hormuz, Fars Says
  • U.A.E. Shares Retreat on Aldar Delisting Concern, Margin Calls
  • Iraq Halts Oil Exports Via Turkey on ‘Operational Requirements’
  • Goldman Sachs Sukuk Row May Dent Industry Lure: Islamic Finance





The Hedgeye Macro Team

Howard Penney

Managing Director

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What's True?

This note was originally published at 8am on December 19, 2011. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.

“Do you like learning? Do you like finding out what’s true?”

-Ray Dalio


Unless you’re long Venezuela or Pakistan (the only 2 markets in the world up double digits YTD), this was not a good year to be long stocks. Most of you know that by now. The final few weeks of 2011 might change the storytelling. Then again, they may not.


What’s True?


During what I thought was the best Global Macro Risk Management interview of the year, that’s what Bridgewater’s Ray Dalio leaned across the table and asked of Charlie Rose.


Can we, as a profession, look into the mirror and answer that question? Or are we failing to learn? Are we accepting mediocrity?


Re-think, Re-work, Re-build.


Rather than give you some completely random wire-to-wire December 31st“Outlook for 2012”, my risk management goals for the coming months, quarters, and years are:

  1. Don’t lose money
  2. Embrace Uncertainty
  3. Be Right

In order to achieve these goals, I have a lot of learning to do. We have an opportunity to learn something from markets every day.


Back to the Global Macro Grind


What’s True about Global Equity markets in November and December of 2011 is that they are down. This morning, after seeing Asia make fresh new lows (China and India down -21.0% and -25.2% YTD, respectively), we’re seeing another dead cat bounce from oversold levels in European Equities. Don’t forget that France, Italy, and the UK were down -5.9%-6.3% last week.


Last week’s macro moves were largely explained by our Top 3 Global Macro Themes for Q411:

  1. King Dollar – up another +2.1% week-over-week
  2. Correlation Crash – USD up = most things highly correlated (inversely) to the USD down
  3. Eurocrat Bazooka – no dice

What’s True about the Correlation Crash as it pertains to Commodities is that they went straight down last week:

  1. CRB Commodities Index = -3.6%
  2. Oil prices (Brent) = -4.9%
  3. Gold = -6.9%
  4. Copper = -6.2%
  5. Palladium = -8.9%

What’s True about Palladium is that if you dropped it on your head, it would hurt.


But, aside from consensus being paid to call precious metals “currencies” over the course of the last 4 years, What’s True about the causality embedded in that consensus assumption?


In order to attempt to answer to that question, we need to taking a step back, and Embrace The Uncertainty associated with the Ben Bernanke policy to inflate:


“Let us experiment with boldness… even though some of the schemes may turn out to be failures, which is very likely.”

-John Maynard Keynes in the 1920s (Keynes Hayek, page 33)


What’s True about the Keynes model away from what he called it himself? Well, the man did blow up his entire net worth by being long The Inflation Trade (Commodities) in 1928…


P&L doesn’t lie; Keynesian politicians talking about “price stability” do.


Ray Dalio’s thoughts on this generational debate that’s occurring on Old Wall Streets, in our offices, and on the Twitter-sphere is quite simple: “there is not a quality conversation about what is true.”


So either President Obama or the next President of the United States figures this out or there is going to continue to be a social tension amongst The People. Americans may not know the specific how or why, but they do know they are being lied to.


My first solution to this mess is simply to stop what we are doing (stop lying). Dalio’s is to have a conversation about What’s True. Somewhere in between those ideas is a beautiful American bridge that can Re-build what we broke – America’s trust.


Otherwise, as Dalio solemnly reminded Rose in October of 2011, “… the cost of being wrong is a terrible thing.”


My immediate-term support and resistance ranges for Gold, Oil (Brent), and the SP500 are now $1568-1608, $101.98-107.18, and 1207-1226, respectively.


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


What's True? - Chart of the Day


What's True? - Virtual Portfolio


The Macau Metro Monitor, December 22, 2011




Singpoare Changi Airport passenger traffic increased 7.4% YoY to 3,890,535 in November.  This is the slowest YoY growth since March 2011.  Traffic was helped by strong visitation from Middle East and Northeast China.



Singapore hotels are enjoying an increase of between 5-30% in occupancy this holiday season.  Those in Marina Bay and Sentosa said occupancy rates have increased by as much as 30%.  A few are running on full capacity from Christmas Day to the middle of January, due to an increase in the number of tourists, as well as locals who prefer to take "staycations".





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