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[PODCAST] KEITH PULLS NO PUNCHES

Hedgeye CEO Keith McCullough weighs in this morning with his latest no-holds-barred thoughts and advice on the markets and economy.

 

 

(For more information on how you can access Hedgeye's morning conference calls please click here.)


Q2 2013 GLOBAL HOTEL TRANSACTIONS (UUP/LUXURY)

Similar trend to Q1 

 

 

Upper upscale (UUP) & Luxury Transaction Trends for Q2 2013

  • Q2 2013 worldwide hotel transactions (UUP & Luxury brands) was $2.0 billion, similar to Q1 2013's $2.0 billion but lower than Q2 2012's $2.7 billion. 
  • The number of US luxury/UUP hotel transactions (where price was disclosed) was 12 in Q2 2013 compared with 7 in Q1 2013 and 6 in Q1 2012. 
  • The number of non-US luxury/UUP hotel transactions (where price was disclosed) was 8 in Q2 2013 compared with 7 in Q1 2013 and 10 in Q2 2012.
  • As usual, REITs were very active. 
  • HST bought Hyatt Place Waikiki for $325k APPK (average price per key) and HOT sold W New Orleans for $158k APPK
  • Several multi-asset deals with one large M&A deal in the Upscale segment:  Apple REIT Six merged with BRE Select Hotels (an affiliate of Blackstone); 
  • Relative to a two-year trailing average, US average price per key (APPK) in the UUP segment slipped 11% at $237k.  Non-US APPK in the UUP segment rose 39% to $465k 

Delinquency rate

  • According to Fitch, the hotel delinquency rate in June was 8.4%, higher than that seen in March 2013.  However, the delinquency rate remains well below the relative high of 14% seen in Q3 2011.

Q2 2013 GLOBAL HOTEL TRANSACTIONS (UUP/LUXURY)  - hotel1

 

Q2 2013 GLOBAL HOTEL TRANSACTIONS (UUP/LUXURY)  - hotel2

 

Q2 2013 GLOBAL HOTEL TRANSACTIONS (UUP/LUXURY)  - hotel3

 

Q2 2013 GLOBAL HOTEL TRANSACTIONS (UUP/LUXURY)  - 7 1 2013 4 47 37 PM


July 24, 2013

July 24, 2013 - 724dtr


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PNK YOUTUBE

In preparation for PNK's F2Q 2013 earnings release tomorrow, we’ve put together the recent pertinent forward looking company commentary.

 

 

YOUTUBE FROM Q1 CONFERENCE CALL

  • "In Lake Charles, we've been performing an extensive room renovation program with approximately 16% of year-over-year room nights out of service. This is particularly impactful on our weekends. The good news is our newly refurbished guestrooms are terrific, and our guests love what we are doing." 
  • "In St. Louis, we are on the homestretch of our $82 million expansion. Our event center, which is the second component of the expansion, will open in June, and our 200-guestroom hotel opens in the fall."
  • "We have a new management team in place at Boomtown New Orleans. We are seeing immediate improvements with multiple metrics at this property.
  • "In Belterra, we believe we have the right strategy in place to maximize our position in a market that continues to experience increasing gaming options. We remain focused on differentiating Belterra with its resort destination positioning and have recently completed an extensive buffet remodel, are in the process of building a new Stadium Sports Bar and we'll undertake a hotel renovation project this year."
  • "Marketing reinvestment, as a percentage of revenue, was flat versus prior year. We continue to be very focused on driving profitable revenue and applying a measured and rational approach to our marketing spend in all markets."
  • "In terms of guest behavior, in January and February, we saw that trips declined at a greater rate than spend per trip. Meaning people came less often, but their spend was pretty much in line with historical play levels. In March and then into April, both trips and spend patterns came back close to prior-year levels."
  • [L'Auberge Baton Rouge] "Guest acquisition continues to be very strong with over 27,000 people visiting the property for the first time during the quarter. Repeat visitation is also very strong, with over 50% of those who have visited returning for a second trip. The hotel continues to be a good story, with occupancy now over 90% and RevPAR increasing over 30% since opening.  We're very pleased in the progress made by L'Auberge, Baton Rouge over the quarter and are confident of the ramp-up of that facility as we continue to go through the rest of the year."
  • "We continue to look for ways to grow the market by leveraging our existing assets, such as the Four Seasons, where we increased casino guestroom utilization by 43% over prior year. And we await the completion of new assets with the Event Center at River City opening in June and the hotel coming online in late September."
  • "We continue to see the impact of new competition in Columbus, affecting visitation. In terms of the Horseshoe Cincinnati opening in March, it's still too early to quantify but thus far the impact has been muted."
  • "On River Downs, demolition of our grandstand and the other older facilities is complete and we have begun construction of the new facilities with a scheduled opening in the second quarter of 2014."
  • "Our team responded well to lower business levels with a focus on cost containment and operating efficiencies."
  • [L'Auberge Baton Rouge] "You should continue to see improved operating margins there as time goes on. As long as we continue to build the revenue we'll have corresponding margins with that revenue."
  • [River Downs] "The heavy spending will start going into the third quarter in reality. And really the fourth and first quarter will be the bulk of it, the fourth quarter of this year and the first quarter of next year with the property opening in the second quarter of 2014."
  • [AC land sale] "It relates to the NOL being created, yes, that will happen as soon as the transaction gets consummated. And our expectations are that that will happen in the third quarter of this year."
  • [Texas] "We don't anticipate there will be any legislation that will move forward this session."
  • "We think that we will be able to de-lever pretty quickly. Not only will we, following capital expenditures both in Lake Charles and River Downs, will we have cash flow to actually pay down debt. But obviously those -- our cash flow base is growing, both by virtue of Baton Rouge maturing as well as River Downs and Lake Charles adding to that base. So we have talked publicly about our targets between 3.5 and 5 times of leverage. We think that we will get there relatively quickly at a faster pace than would be normal because of the dynamics that I just talked about. And really our goal is to get to 4 times or lower within a few years."

Fed Conversations

This note was originally published at 8am on July 10, 2013 for Hedgeye subscribers.

“The one who engages in conversation should not debar others from participating in it.”

-Cicero

 

That’s one of the many quotes from Stephen Greenblatt’s The Swerve (page 70) that gets the juices flowing. Whether you’re tapping into the minds of the early Greeks (Epicurus = 341-270 BCE) or the arena of debate in the Roman Republic (Cicero = 106-43 BCE), it’s all there.

 

If you work within an investment culture that demands both constant questioning and collaboration, it’s all there too. Is there any other way to find the truth? Those who put their political pride over the market’s truths have never made good Portfolio Managers, fyi.

 

Sadly, politicians have provided the Fed, ECB, and BOJ closed forums where un-elected bureaucrats call the shots. While that may have been normal in Stalin’s Russia, it’s not in the area code of what America’s Founding Fathers envisioned. Who really cares about today’s Fed “minutes”? Until the Fed opens itself up to the Dalios and Druckenmillers of the world, they’re not even having a conversation.

 

Back to the Global Macro Grind

 

China’s economic data was horrendous overnight. So let’s not talk about the implications of Asian #GrowthSlowing, copper demand collapsing, mining capex bubbles, etc. Let’s start begging for a Bernanke-style bailout for the Chinese economy!

 

Yeah baby, that’ll do it – look at how well things turned out for every other Asian government that levered itself up since the Ming dynasty. I am hearing the Chinese are really into the whole Krugmanomics idea of turning China’s balance sheet into Japan’s too. Shhh.

 

To be crystal clear on this, we do not think China will “stimulate” you. Here are Darius Dale’s Top 3 reasons why:

 

1.   Property Bubble – they are trying to pop it before they get popped like we did (imagine that, learning from US history); property price growth continues to accelerate (+7.4% YoY in JUN; 13 consecutive months of sequential gains)

 

2.   Rebalancing, Not Levered Growth - Politburo's economic rebalancing agenda (quality of growth now more important than quantity of growth), which they've supported with recent rhetoric and (in)action during the recent credit crunch

 

3.   Psychology – despite the intermediate-term TREND slowing Chinese growth is still trending in-line to above long-term targets; if growth doesn’t fall off a cliff, new leaders will be reluctant to appear weak in the context of their long-term plan

 

Unlike team Obama, Geithner, and Bernanke (or Abe, Aso, and Kuroda in Japan), Xi and Li will be in charge for another 10 years. Why on earth would they implement short-term Western-style “stimulation”, when their ultimate goal is for history to respect them long-time?

 

I know, I know – whatever you do, do not engage in rational discussions about this when you can always defer to trading on the latest Chinese, Eurocrat, of Fed horse whispering rumor. That’s where the vig is at, bros.

 

The vig?

 

Yeah, you know – “also known as the juice, the cut or the take…” (Wikipedia definition). Or the amount a Washington “consultant” gets paid for his super secret inside info on what the Fed Minutes are actually going to say today (or what Bernanke is going to whisper next).

 

Just like Jefferson envisioned, for sure.

 

In other #StrongDollar, Strong America news, US stocks closed up for the 4th day in a row yesterday, taking the Russell 2000 to yet another all-time closing high of 1,018. For those of you who are still into keeping score for the 2013 bears, that’s +20% YTD.

 

All-time is also a very long-time, so why not sell some up here? You know, lather yourself up with some booked gains. As our Financials guru (and birthday boy), Josh Steiner, always reminds me, ‘no one ever went broke booking a profit.’

 

From our process’ perspective, making some sales up here in US Equities is your short-term, high probability, bet because:

  1. PRICE – SP500 is immediate-term TRADE overbought in the 1650-1658 range
  2. VOLATILITY – front-month VIX is immediate-term TRADE oversold around 14.02
  3. VOLUME – has been nowhere to be found on this no-volume meltup (down -13-27% versus our TREND avg)

What goes up on no-volume can come down on no-volume. So, as consensus is forced to chase price again, and again, and again in 2013, just take a deep breath and focus on proactively managing the risk of a very trade-able range (SPY range = 1592-1658, for now).

 

Despite the “rumors” of being “stimulated” by some Chinese dudes, both the Shanghai Composite and the Hang Seng closed well below their bearish TREND lines of 2,190 and 21,991, respectively overnight.

 

Oh, and Oil is testing a breakout above our long-term TAIL risk line of $108.36/barrel this morning too. So, Bernanke, before you think about devaluing the Dollar again with a closed network “communication tool”, think about the rest of us who are engaged in open discussions about you while we’re taking your Policy To Inflate in the pump.  

 

Our immediate-term Risk Ranges are now (we have 12 Macro Ranges in our new Daily Trading Range product too, fyi):

 

UST 10yr 2.56-2.73%

SPX 1621-1658

Hang Seng 20,124-20,991

VIX 14.02-16.21

USD 83.89-85.09

Oil 105.06-109.39

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Fed Conversations - Chart of the Day

 

Fed Conversations - Virtual Portfolio



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