The Week Ahead

The Economic Data calendar for the week of the 1st of December through the 5th of November is full of critical releases and events.  Attached below is a snapshot of some of the headline numbers that we will be focused on.




The Week Ahead - 11.28.14 Week Ahead

Cartoon of the Day: It's Getting Smokey

Cartoon of the Day: It's Getting Smokey - Bearish cartoon 11.26.2014

Central bankers are torching their countries' currencies around the globe.

LEISURE LETTER (11/28/2014)

Tickers:  BYD, MGM, H, HLT


  • Dec 1:  8:30 am  IKGH Q3 earnings
  • Dec 2: 11 am ISLE Q2 2015 earnings
  • Dec 8: 10:30 MTN Q1 2015 earnings
  • Dec 12: Trump Taj Mahal Closing
  • Dec 17:  Upstate NY casino decision


BYD, MGM – will redesign Borgata buffet, renovate its spa and more as part of $13 million in renovations. Additional renovations will be made to the casino floor, front desk, suites and its back-of-the-house talent areas, said casino President and Chief Operating Officer Tom Balance.

Article HERE

Takeaway: The $13m is likely part of the $25m capex guidance for Borgata’s FY 2014.


Crown Racing and Gaming Minister Terry Waldron told State Parliament that the tax Crown pays on VIP gaming profits will be cut from 11% to 8%.  In return, Crown will guarantee it will pay at least $45.25 million to the State Government over the next five years - well above the $37.4 million it paid over the past five years. Crown believes the lower rate of 8%, which, with the Burswood Park Board levy of 1%, brings the rate to 9%, will allow it to match the incentives offered by casinos in Macau, Singapore and Las Vegas.

Article HERE

Takeaway: Crown will give out more incentives to attract China mainland VIPs in the coming days.


H – filed a mixed securities shelf of indeterminate size

Article HERE


MSC Cruises - is offering agents full commission on cruise and flight packages as part of its turn of year sales campaign. The line is also offering savings of £600 per cabin as part of the promotion, which runs from December 1 until March 5 next year. The campaign entitled “The Sale” is focused on promoting MSC’s fly-cruise programme and is valid on selected Mediterranean summer sailings in 2015 and winter 2015-16 destinations.

Article HERE

Takeaway: MSC has been aggressive with agent promotions lately, even in Europe.  


HLT Insider Transactions:

Executive Vice President and Chief Financial Officer, Kevin Jacobs sold 26,000 shares (non-options related) over two days, November 24 and 25 in two 13,000 tranches at an average price of $27.80 and $25.95, via scheduled 10b5-1 plan and now owns 681,123 shares.


Executive Vice President and President, Development, Architecture and Construction, Carter Ian Russell sold 200,000 shares (non-options related) at $26/share on November 25 via scheduled 10b5-1 plan and now owns 1,632,224 shares.


Executive Vice President, Hilton Worldwide and President, Hilton Grand Vacations, Mark Wang sold 25,000 shares (non-options related) at $26/share on November 25 via scheduled 10b5-1 plan and now owns 700,433 shares.

Takeaway: Regular scheduled insider selling at Hilton begins.  


Macau package tourists– The number of package tourists visiting Macau rose to 1.12 million last month in October, +56% YoY. The Statistics and Census Service says the number of package tourists from the mainland rose by 75% to 919,000. More came from Taiwan and South Korea but fewer from Hong Kong. Some 863,000 people stayed in the city’s hotels and guesthouses last month, 4% more than a year earlier. Each stayed, on average, 1.4 nights.

Article HERE

Takeaway:  These are usually lower-income tourists who do not make a dent in GGR - partially explains the growing disconnect between visitation (strong) and Mass revenue growth (weak to negative).


China Lottery Sales Increase 20% in October – Lottery sales in mainland China increased 20.3% YoY to RMB32.7 billion (US$5.3 billion) in October.  Welfare lottery sales in October reached RMB17.7 billion, up by 14.5% YoY. Sports lottery sales increased by 27.9% YoY to RMB15 billion

Article HERE

Takeaway: Chinese lottery sales growth have been strong.


Ho Tram to Offer VIP Phone Proxy Betting – The Grand Ho Tram casino resort in Vietnam is to start offering – to high-roller gamblers – live telephone betting on some of its tables from next month. 

Article HERE

Takeaway: Vietnam and the Philippines both offering viable alternatives for the shutting of phone proxy betting by Sands China and Wynn Macau.


China Corruption Crackdown – A top official at iconic Chinese state-owned liquor maker Moutai has been snared in the country’s ongoing anti-corruption campaign. Kweichow Moutai Group deputy general manager Fang Guoxing is under investigation for serious violations of discipline, the ruling Communist Party’s Central Committee for Discipline Inspection said.

Article HERE


Officials in north China's Shanxi Province have been expelled from the Communist Party of China and dismissed from public office, Zhang Xiuping, former deputy secretary of the CPC Jinzhong City Committee, because she took advantage of her post to seek profits for others in exchange for a large amount of money and property, and committed adultery, said a statement. Another official Wang Min, former head of the discipline authority in Yangquan City, took advantage of his post to seek profits for others, and accepted a huge amount of money and property. Another two officials expelled from CPC and dismissed from public posts were Yang Xiaobo, former mayor of Gaoping, a county-level city, and Qin Jianxiao, former secretary of the CPC Zezhou County Committee of Jincheng City, according to the statement.

Article HERE

Takeaway: Given the "hide out" story we featured on Wednesday, there appears to be no slowdown in the corruption crackdown by Mainland Chinese officials.


China SAR System & Taiwan Implications – Taiwanese vote this weekend in local elections that are being watched by China for signs the ruling party it prefers to deal with is losing its political grip.

Article HERE


Resell Your Nonrefundable Hotel Reservation on Roomer – Canceling your vacation at the last minute can be painful — mostly because of the money you lose on your nonrefundable accommodations. But Roomer, a three-year old startup, has created a marketplace where travelers can buy and sell these hotel reservations, and today it announced that it has raised $5 million in new funding. As described on Roomer’s website, booking a room through the service is just the same as booking through any other travel service, and it usually costs less. To sell your non-refundable reservation, simply submit a listing to the site and wait for someone to purchase it. When a buyer does so, Roomer contacts the hotel to transfer the booking to their name and then sends you the money through PayPal, Western Union, or wire transfer. Roomer takes a 15% cut of each transaction.

Article HERE

Takeaway: We wonder how hotels will crackdown on the reselling of rooms, especially since identification is required at time of check-in.  It sounds interesting but we are skeptical of Roomer's business plan.


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.

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Keith's Macro Notebook 11/28: Oil | Russia | UST 10YR

Hedgeye CEO Keith McCullough discusses the top three things in his macro notebook this morning.



Takeaway: Today we highlight one of our processes that sets us apart from our competition (HINT: we don't do surveys; we actually crunch the numbers).


Long Ideas/Overweight Recommendations

  1. iShares National AMT-Free Muni Bond ETF (MUB)
  2. iShares 20+ Year Treasury Bond ETF (TLT)
  3. Vanguard Extended Duration Treasury ETF (EDV)
  4. Health Care Select Sector SPDR Fund (XLV)
  5. Consumer Staples Select Sector SPDR Fund (XLP)

Short Ideas/Underweight Recommendations

  1. iShares Russell 2000 ETF (IWM)
  2. SPDR S&P Regional Banking ETF (KRE)
  3. iShares MSCI European Monetary Union ETF (EZU)
  4. iShares MSCI France ETF (EWQ)
  5. SPDR S&P Oil & Gas Exploration & Production ETF (XOP)



In Monday’s edition of the Hedgeye Macro Playbook, we highlighted how recent trends across the preponderance of high-frequency economic indicators were supportive of our view that both growth and inflation are slowing domestically. Along those lines, the preponderance of this week’s economic data was more of the same in that regard – i.e. slowing at the margins. Here are those key releases (in order of release date/time):


  • Chicago Fed National Activity Index: 0.14 in OCT, down from 0.29 in SEP, which was revised down from an initial reading of 0.47
  • Markit Services PMI: 56.3 in NOV, down from 57.1 in OCT
  • Markit Composite PMI: 56.1 in NOV, down from 57.2 in OCT
  • Real GDP: revised up +10bps to +2.4% YoY in 3Q , which was still down from +2.6% YoY in 2Q
  • Case-Shiller Home Price Index: +4.9% YoY in SEP, down from +5.6% YoY in AUG
  • FHFA House Price Index: +4.2% YoY in SEP, down from +4.8% YoY in AUG
  • Conference Board Consumer Confidence Index: 88.7 in NOV, down from a downwardly-revised 94.1 in OCT
  • MBA Mortgage Purchase Applications: -4.3% WoW, down from +4.9% WoW in the prior week
  • Initial Jobless Claims: +313k WoW, up from an upwardly revised +292k WoW in the prior week; on a 4-week rolling NSA basis, the YoY rate of improvement (which implies the 1st derivative is negative) decelerated for the 5th consecutive week to -12.7%
  • Core Durable Goods (ex-Defense & ex-Aircraft): +5.8% YoY in OCT, down from 6.8% YoY in SEP
  • Core Capital Goods (ex-Defense & ex-Aircraft): +8.2% YoY in OCT, up slightly from +8.1% YoY in SEP
  • Real Personal Consumption Expenditures: +2.2% YoY in OCT, down slightly from +2.3% YoY in SEP
  • University of Michigan Consumer Confidence Index: 88.8 in NOV, down from a preliminary NOV reading of 89.4
  • Pending Home Sales: +2.2% YoY in OCT, down from an upwardly revised +3.4% YoY in SEP
  • New Home Sales: +1.8% YoY in OCT, down from +14% YoY in SEP


Got #GrowthSlowing?


We know why most investors like surveys such as the [regional] Philly Fed Business Outlook or, worse, an “independent” research provider’s proprietary (READ: fabricated) assessment – they’re almost always bullish and they don’t require any work to interpret (i.e. no rate-of-change calculus, trend amalgamation, etc.)!


If, however, we opted to publish a survey like our [perceived] competitors, ours would probably tell you to remain long of our slow-growth yield-chasing trade – the outperformance of which has Consensus Macro attempting to play catch-up.


***CLICK HERE to download the full TACRM presentation.***



#Quad4 (introduced 10/2/14): Our models are forecasting a continued slowing in the pace of domestic economic growth, as well as a further deceleration in inflation here in Q4. The confluence of these two events is likely to perpetuate a rise in volatility across asset classes as broad-based expectations for a robust economic recovery and tighter monetary policy are met with bearish data that is counter to the consensus narrative.


Early Look: Macro Tryptophan (11/28)


#EuropeSlowing (introduced 10/2/14): Is ECB President Mario Draghi Europe's savior? Despite his ability to wield a QE fire hose, our view is that inflation via currency debasement does not produce sustainable economic growth. We believe select member states will struggle to implement appropriate structural reforms and fiscal management to induce real growth.


QE Conundrums – Draghi’s Misguided Intervention? (11/26)


#Bubbles (introduced 10/2/14): The current economic cycle is cresting and the confluence of policy-induced yield-chasing and late-cycle speculation is inflating spread risk across asset classes. The clock is ticking on the value proposition of the latest policy to inflate as the prices many investors are paying for financial assets is significantly higher than the value they are receiving in return.


#Bubbles: S&P500 Levels, Refreshed (11/18)


Best of luck out there,




Darius Dale

Associate: Macro Team


About the Hedgeye Macro Playbook

The Hedgeye Macro Playbook aspires to present investors with the robust quantitative signals, well-researched investment themes and actionable ETF recommendations required to dynamically allocate assets and front-run regime changes across global financial markets. The securities highlighted above represent our top ten investment recommendations based on our active macro themes, which themselves stem from our proprietary four-quadrant Growth/Inflation/Policy (GIP) framework. The securities are ranked according to our calculus of the immediate-term risk/reward of going long or short at the prior closing price, which itself is based on our proprietary analysis of price, volume and volatility trends. Effectively, it is a dynamic ranking of the order in which we’d buy or sell the securities today.

#Deflation Risk

Client Talking Points


What this #crash tells you is how the perpetual inflation expectation of all major asset prices ends – at first slowly, then all at once. WTIC $69 is -36% since June; the low-end of our intermediate-term TREND range = $64.45; do not underestimate the correlation impact this has to both levered equities and high yield energy debt.


Breathtaking move for the oligarchs here as the Russian Trading System loses another -3.1% this morning (-30% year-to-date) and the flow through to stock markets like Norway’s (-3.4% this morning), Canada, etc. is obvious.


UST 10YR continues to #crash (-27% year-to-date) to 2.20% this morning. The world is now buying certain stock markets on the explicit #GrowthSlowing signal that the bond market is issuing (i.e. the new catalyst is an easier BOJ, ECB, PBOC, and… yes Fed!); U.S. CPI can easily break down through 1% in Q1 now – long the Long Bond still our best macro idea #2014

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

The Vanguard Extended Duration Treasury (EDV) is an extended duration ETF (20-30yr). U.S. real GDP growth is unlikely to come in anywhere in the area code of consensus projections of 3-plus percent. And it is becoming clear to us that market participants are interpreting the Fed’s dovish shift as signaling cause for concern with respect to the growth outlook. We remain on other side of Consensus Macro positions (bearish on Oil, bullish on Treasuries, bearish on SPX) and still have high conviction in our biggest macro call of 2014 - that U.S. growth would slow and bond yields fall in kind.


We continue to think long-term interest rates are headed in the direction of both reported growth and growth expectations – i.e. lower. In light of that, we encourage you to remain long of the long bond. The performance divergence between Treasuries, stocks and commodities should continue to widen over the next two to three months. As it’s done for multiple generations, the 10Y Treasury Yield continues to track the slope of domestic economic growth like a glove. We certainly hope you had the Long Bond (TLT) on versus the Russell 2000 (short side) as the performance divergence in being long #GrowthSlowing hit its widest for 2014 YTD (ex-reinvesting interest).


The U.S. is in Quad #4 on our GIP (Growth/Inflation/Policy) model, which suggests that both economic growth and reported inflation are slowing domestically. As far as the eye can see in a falling interest rate environment, we think you should increase your exposure to slow-growth, yield-chasing trade and remain long of defensive assets like long-term treasuries and Consumer Staples (XLP) – which work decidedly better than Utilities in Quad #4. Consumer Staples is as good as any place to hide as the world clamors for low-beta-big-cap-liquidity.

Three for the Road


Italy's unemployment rate rockets to +13.2% #NoWorries Draghi is on it



No one can whistle a symphony. It takes a whole orchestra to play it.

-H.E. Luccock


Energy Stocks (XLE) were -1.3% Wednesday, down -3.6% year-to-date.

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