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Yes, We're Sticking With Our Long-Bond Call | $TLT

Editor's note: This is an excerpt from Hedgeye morning research. For more information on how you can become a subscriber click here.


The 10-Year U.S Treasury note looked at last week’s trifecta of Japan/Europe/China stimulating and saw exactly what it was ... global #GrowthSlowing.


For the record, the U.S. ten-year treasury yield (which has been our team's top, non-consensus call this year) remains in crash mode at 2.33%. It's down -23% YTD.


We still like the Long Bond vs RUT short. The Russell 2000 was flat for the 3rd consecutive week last week. Pretty much everything else equities has been going straight up.


Yes, We're Sticking With Our Long-Bond Call | $TLT - 56


Macro Notebook 11/24: Draghi | UST 10YR | Russell 2000

Hedgeye Macro Analyst Ben Ryan shares the top three things in Keith's macro notebook this morning.

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LEISURE LETTER (11/24/2014)



  • Aristocrat Leisure FQ4 earnings 9pm: ; pw: 8115282


WYNN – Gov.-elect Charlie Baker is calling on the state Gaming Commission to take a close look at Wynn Resorts if a reported federal investigation into whether the gaming giant violated money-laundering laws finds any improprieties.  Elaine Driscoll, a spokeswoman for the Gaming Commission, said it is monitoring the situation.  “Our Investigations and Enforcement Bureau will conduct a comprehensive and careful review of this matter,” she said. “The commission has very broad authority under the statute to take any actions deemed appropriate.”

Article HERE

 Takeaway: There could be delays/complications with the Everett project.


Sinogreen – Sinogreen Energy International Group Ltd, a Hong Kong-listed firm controlled since September by Macau junket investor Jack Lam Yin, said in a new filing it plans to use money raised in a corporate funding exercise to develop a junket business in Macau. Friday’s filing said Sinogreen would use Mr Lam’s “expertise and experience” in order to “explore the opportunity of developing the gaming promotion business in Macau”. Mr Lam is chairman of Jimei Group Ltd, on of Macau’s largest consolidators of gaming promoters.

Currently Jimei runs Jimei Casino next door to the Grand Lapa hotel on Macau peninsula under an SJM Holdings Ltd gaming licence. 


200.HK – MelcoLot, a subsidiary of Melco International Development Ltd, set up a wholly owned special purpose vehicle subsidiary called Express Wealth Enterprise Ltd, a joint venture with Firich Enterprises Co Ltd, a Taiwan-listed maker of electronic gaming machine, to hold the license for a proposed casino project in Tbilisi, Georgia’s capital. MelcoLot, listed on the Growth Enterprise Market in Hong Kong, sold 5,530 new shares of Express Wealth to Firich, which in turn will allocate them to two other Taiwanese firms – Taiwan-listed Rich Development Co Ltd and Taiwan-incorporated Syncmold Enterprise Corp. MelcoLot will also sell 200 new shares to Oz Gaming Georgia LLC, a food and beverage and entertainment firm in Georgia that has been working with the government to develop gaming regulation. Upon completion of the deal, Express Wealth will be 42.7 percent held by MelcoLot, 31.62 percent by Firich, 15.35 percent by Rich Development, 8.33 percent by Syncmold and 2 percent by Oz Gaming. MelcoLot is also being used as a vehicle to bid for a casino licence in a real estate development called BCN World in Barcelona, Spain

Article HERE

Takeaway: Melco International Development quickly becoming the emerging, frontier market vehicle for Mr. Ho's development while also shielding the strong cash flows of MPEL from potential frontier market regulatory concerns.


BLOOM.PM – Bloomberry Resorts Corp has added 66 VIP gaming tables and 223 slot machines to its Solaire Resort and Casino in Manila. The extra capacity is included in a new hotel tower that opened this past weekend. The facility, known as the Sky Tower, has 312 suites, a Chinese restaurant and a whiskey and cigar bar for VIP customers.

Article HERE

Takeaway: Lower tax rate potentially benefiting Manila - building out additional VIP capacity as an viable destination for Mainland Chinese looking for a Macau alternative


MGM – China's Diaoyutai State Guesthouse and American hospitality giant MGM Resorts International officially opened The Diaoyutai Boutique Chengdu in the capital of Sichuan province in Southwest China. The partners collaborate in China together through Diaoyutai MGM Hospitality, Ltd. and have previously opened the MGM Grand Sanya in Hainan Province.

Article HERE


SGMS– following the merger with Bally, SGMS announced a corporate reorganization including CEO Gavin Isaacs and CFO Scott Schweinfurth who will oversee three operating segments: Gaming, Lottery and Interactive.

1) Gaming - covering the Bally, WMS and SHFL brands and led by Derik Mooberry

2) Lottery - including SGMS’ traditional lottery business and led by James Kennedy
3) Interactive - previously Williams Interactive as well as social gaming operations and led by Jordan Levin.


GTK.IM – GTECH received a seven-year contract extension with the Missouri Lottery. GTECH has been the major lottery technology and services provider to the Missouri Lottery since 1991. Under the terms of the new contract, GTECH will provide the Missouri Lottery with a full set of integrated services, including a new central gaming system and replacement of Lottery Scratcher Validation and back-office systems, based on GTECH’s Enterprise Series platform. It will also replace draw-based lottery terminals with approximately 3,500 full-service Altura GT1200 terminals and 1,500 Altura GT1200 Compact terminals. 


RCL – announced a new promotion WOW sale including 50% Off 2nd Guest + $300 Spending Money + 50% Off Deposit Offer for all sailings, excluding Quantum of the Seas, Anthem of the Seas, and all China departures. Buy One, Get One 50% applies to all stateroom categories and excludes third and higher occupancy guests. Cruise must be booked Nov 17-Dec 31, 2014.

Takeaway:  Caribbean struggles continue for the Royal Caribbean brand. Our cruise pricing survey for mid-Nov will be published shortly.


RCL – RCL and Ctrip.com announced a strategic partnership through SkySea Cruises, a joint venture which is designed to serve the Chinese cruise market. Royal Caribbean and Ctrip will each own 35% of the new company, with the balance being owned by SkySea management and a private equity fund. The transaction is expected to close before the end of November. The new cruise line will begin service in the middle of 2015 and will operate with one ship. The venture anticipates the potential for additional vessels to be added over time.

Takeaway:  A potential small boost to the JV/mgmt contract line item for 2015.  RCL and CCL believe China is the future.


SNOW – announced the resignation of CEO Bill Jensen for personal reason as well as the hiring of Thomas F. Marano as the Company’s new CEO.  Previously, Mr. Marano was Chairman and Chief Executive Officer at ResCap from 2008 to 2013, Managing Director at Cerberus Capital Management from April 2008 to April 2009 and prior roles as Chief Capital Markets Officer at GMAC/ResCap and 25 years with Bear Stearns including the Head of Global Mortgage and Asset Backed Trading and Originations from 2006 to 2008.

Article HERE

Takeaway: With Fortress still the 60% majority shareholder, the Board hires a CEO with a fixed income and asset backed trading background versus mountain operations or some other consumer, travel-related business.


Macau Visitation –  Macau visitor arrivals 2.65 million in October arrivals +11% YoY including Mainland China arrivals of 1.82 million +20% YoY


LEISURE LETTER (11/24/2014) - M1


Takeaway:  Highest overall visitation growth since Feb 2013. Mainland visitation highest since March 2014


Communist Party of China Calls for Stricter Rules –  Liu Yunshan, a member of the Standing Committee of the Political Bureau of the CPC Central Committee and a senior official, presided over two seminars held in Beijing in recent days. Experts and officials from various departments and regions said a series of strict rules for Party's discipline after the 18th National Congress of CPC have created a new situation in the Party's work style. They vowed to implement the central authority's decisions, governing the Party with both ideologies and systems, and making strict rules for the Party a new normal for Party construction.

Article HERE

Takeaway: The crackdown on corruption and abuse continues unabated.  


New Jersey Sports Betting Injunction – A U.S. District Judge Michael Shipp ruled that New Jersey's latest sports betting effort, the 2014 Sports Wagering Law, violates the Professional and Amateur Sports Protection Act of 1992.  As such, Judge Shipp ruled in favor of the NCAA and four major professional sports leagues Friday and issued a permanent injunction to prevent New Jersey casinos and racetracks from offering sports betting. According to State Senator Raymond Lesniak, New Jersey will file an appeal. The state believes it has a much better chance in the Third Circuit Court of Appeals, which ruled against New Jersey by a 2-1 majority decision in September 2013. During that appeal, as New Jersey attorneys argued that the federal prohibition on sports betting unconstitutionally commandeered states, Third Circuit Court judges said states are free to repeal sports betting laws and decide "the contours of the prohibition."

Article HERE


Free Play Case Heard before South Dakota Supreme Court – Should Deadwood casinos have to pay taxes on free play on slot machines? The First Gold, Mineral Palace and Four Aces are the plaintiffs and argued that casinos pay taxes on adjusted gross proceeds and there has to be some revenue to meet that definition as well as the lower circuit court was wrong when it ruled that the value of free play should be included in adjusted gross proceeds. The state countered by saying that state regulations say promotional items cannot be deducted from revenue and says the legislature hasn't created an exemption for coupons. The Supreme Court will issue a ruling at a later date. 

Article HERE


Chinese families a prime target for cruising: Hong Kong Tourism Board (HKTB) study

“Our findings indicated out of the three consumer segments (family, young and achievers), the achiever, or those between ages 47 to 60, showed the least intention to take cruise (11%) compared to families with children (44%)…because they view cruising as a hassle-free, ideal occasion to spend quality time with the family,” HKTB executive director Anthony Lau said, adding that Chinese travelers perceived cruises as a luxury product.


Respondents also indicated a preference for French and Italian fine dining on cruises, deemed free Wi-Fi a necessity, and said the ideal length for a cruise is six to seven days. Over 80% wanted to cruise to Hong Kong.

Takeaway: This demographic study shows the differences between Chinese and North American cruisers. Chinese cruisers are more family-oriented, younger, a preference for longer voyages (6-7 days) and view cruising as a luxury entertainment option.



Singapore inflation slowed to 0.1% in October, down from 0.6% in September.


Hedgeye Macro Team remains negative Europe, their bottom-up, qualitative analysis (Growth/Inflation/Policy framework) indicates that the Eurozone is setting up to enter the ugly Quad4 in Q4 (equating to growth decelerates and inflation decelerates) = Europe Slowing.

Takeaway:  European pricing has been a tailwind for CCL and RCL but a negative pivot here looks increasingly likely in 2015. Following CCL's F3Q 2014 earnings release, we recently turned negative on those stocks based on the negative European thesis. 


Hedgeye Macro Team remains negative on consumer spending and believes in muted inflation, a Quad4 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.


Commodities Weekly Sentiment Tracker

Note: Using the z-score in the tables below as a coefficient of variation for standard error helps us flag the relative market positioning of the commodities in the CRB Index. It is not intended as a predictive signal for the reversion to trailing twelve month historical averages. For week-end price data, please refer to “Commodities: Weekly Quant” published at the end of the previous week. Feel free to ping us for additional color.    



1.       CFTC Net Futures and Options Positioning CRB Index: The Commodities Futures Trading Commission (CFTC) releases “Commitments of Traders Reports” at 3:30 p.m. Eastern Time on Friday. The release usually includes data from the previous Tuesday (Net Positions as of Tuesday Close), and includes the net positions of “non-commercial” futures and options participants. A “Non-Commercial” market participant is defined as a “speculator.” We observe the weekly marginal changes in the overall positioning of “non-commercial” futures and options positions to assess the directionally-biased capitulation risk among those with large, speculative positions.


The WHEAT, GOLD, and SUGAR markets experienced the most BULLISH relative positioning change in the CRB week-over-week

The COTTON, SOYBEANS, and COCOA markets experienced the most BEARISH relative positioning change in the CRB week-over-week


Commodities Weekly Sentiment Tracker - chart 1 CFTC sentiment


2.       Spot – Second Month Basis Differential: Measures the market expectation for forward looking prices in the near-term.

  • The NATURAL GAS, CORN, and SUGAR markets are positioned for HIGHER PRICES near-term
  • The HEATING OIL, COTTON, and RBOB GASOLINE markets are positioned for LOWER PRICES near-term

Commodities Weekly Sentiment Tracker - chart2 spot 2nd month basis


3.       Spot – 1 Year Basis Differential: Measures the market expectation for forward-looking prices between spot and the respective contract expiring 1-year later.

  • The CORN, SUGAR, and WHEAT markets are positioned for HIGHER PRICES in 1-year  
  • The LEAN HOGS, LIVE CATTLE, and NATURAL GAS markets are positioned for LOWER PRICES in 1-year  

Commodities Weekly Sentiment Tracker - chart3 spot 1yr basis


4.       Open Interest: Aggregate open interest measures the amount of opened positions in all actively traded futures contract months. Open interest can be thought of as “naked” or “directionally-biased” contracts as opposed to hedgers scalping and providing liquidity. Most of the open interest is created from large speculators or participants who are either: 1) Producers/sellers of the physical commodity hedging their cash market exposure or 2) Large speculators who are directionally-biased on price.


Commodities Weekly Sentiment Tracker - chart4 agg. open interest         


Ben Ryan



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%