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LEISURE LETTER (01/22/2015)



  • Jan 22:  Carnival Vista event
  • Jan 28:  LVS 4Q CC
  • Jan 29:  PENN 4Q CC
  • Feb 2: Cod Manila Grand Opening
  • Feb 3:  GLPI 4Q CC

headline story

Macau Visitation fell in December – Macau received a record-breaking number of visitors in 2014 – more than 31.5 million visitor arrivals, +7.5% YoY according to director of Macau Government Tourist Office (MGTO) Maria Helena de Senna Fernandes. Mainland China visitation grew 14.1% in 2014. She also expects 5% visitation growth for CNY 2015 and FY 2015.


The average length of stay for visitors was 1.9 days, with 46.2% of them in 2014 choosing to stay overnight. The average occupancy rate of hotels in Macau is 86.5%, up by 3.4%, with total overnight guests in 2014 reaching 10,710,000. The average room rate of 3 to 5 star hotels in Macau was $199.9, up 8.6% YoY.

Article HERE

Takeaway:  This suggests overall December visitation fell 2% and would represent the 1st monthly decline since January 2013. As for Mainland visitation in December, growth was 1% - the slowest pace since March 2013. Official results will be released tonight by DSEC. 




MPEL  has said it will press on with extending the shopping arcade in its City of Dreams despite the death of a worker on the construction site. The Labour Affairs Bureau halted the use of all hoists on the site after a worker operating a hoist there fell to his death on Tuesday. Melco Crown said, "The temporary suspension of construction will not affect progress.” The company hopes to open the extension next year.

Article HERE

Takeaway:  No delays for MPEL


GTECH/Italy Lottery tax  The additional gaming tax on video lottery and AWP licensees in Italy has now come into force and has been also allocated among licensees with surprises among operators.   The peculiarity of such tax is that will be shared among video lottery licensees depending on their number of video lottery and AWPs regardless of the revenues generated by each machine.  This circumstance led licensees to disinstall a large number of underperforming machines before the end of the year in order to maximize the revenues generated by their network and have a lower portion of the € 500 million additional tax allocated to them.


And apparently some licensees were very aggressive in disinstalling machines since, according to Italian gambling regulator, AAMS, some of them are now running a number of machines much lower than the video lotteries and AWP in place before the coming into force of the budget law.


GTECH is leading the table of tax payers with over € 96 million of allocated taxes.

Takeaway:  This is the compromise for not having a gaming duty tax increase in Italy but still a higher cost, nonetheless, for the video lottery licensees. We're still waiting to see who gets the Lotto license. 


CLDT  guided Q4 REVPAR to $112. $3.5m secondary offering at $30.

Takeaway:  This is at the low end of their Q4 guidance of $112-114.

PEB –  guided 2015 Same-Property RevPAR growth rate to 6.5-7.5%

Takeaway:  Not surprisingly, this is lower than 2014's expected growth of 8.25-8.75%.  However, it's a strong number.


RCL – The Celebrity Century will become the SkySea Golden Era this May, as she transfers to the new SkySea brand, a joint venture between Royal Caribbean Cruises, Ctrip and Stone Capital.  Among the changes on the vessel will be a complete rethink of the restaurants, aiming them at the Chinese market. Also being added will be an ice bar, trampoline at sea, and mini-golf.


CTRP has a 35% stake in SkySea, while Royal Caribbean has an equal 35% share. Stone Capital has a 30% share and is a Shanghai-based private equity firm that invests for China’s wealthiest families and entrepreneurs. The ship’s inaugural season will see it homeport in Shanghai from May to October.

Article HERE 


CCL Cunard has launched an all-inclusive package for Grills Suites passengers to mark the line's 175th anniversary this year. The Grills Suites Inclusive Package includes onboard credit of $60 per day, four bottles of wine, dining credit, included gratuities, a photo, coffee card and internet minutes, all depending on the length of the cruise.

Takeaway:  Another operator following the trend of offering all-inclusive deals


CCL - Carnival COO Alan Buckelew said, "We are looking at double-digit growth in China—20%, 30% annually—over the next few years while overall growth [in the industry] is around 3% and 4%.”  “In China, the 25- to 45-year-olds are buying the cruises,” he said. “That is where the wealth is in China. They often bring along their parents. Extended-family cruises are common.”


Vacations are also shorter in China, with the average cruise lasting for four days compared with seven days in the West.  Carnival says it already enjoys a 55% to 60% share of the tiny but fast-growing Chinese market, and executives expect it to grow to about half the size of the U.S. market—the industry’s largest—by 2020.  


The Chinese also don’t stand in line for buffets, and spa treatments that are popular on Western routes have yet to catch on. Chinese cruisers require plenty of space for morning tai chi classes, and prefer private gambling parlors to the sort of elaborate evening shows that are popular in North America. 

Takeaway:  These demographics are well-known. China is a certainly a big opportunity but could also be a costly one, up front.


Las Vegas  According to the Las Vegas Review, January has been a big convention month for Las Vegas, starting with the International Consumer Electronics Show, which drew a record 170,000 attendees.  The largest show this week will be the Shooting, Hunting & Outdoor Tradeshow, which is expected draw 67,000 visitors.

Article HERE

Takeaway:  Convention business for Q1 2015 could be shaping up better than anticipated.


Maryland  – wants to remove 300 slots each to make more room for table games and amenities. CZR wants to add 30 table games and Cordish intends to add 13. The Maryland Lottery must approve the reductions. Earlier, it allowed Gaming and Leisure Property’s Hollywood Casino to remove 308 machines..


Malyasia offers free visa for tourists from China. 

Article HERE

Takeaway: Another reason for tourists not to go to Macau. Korea/Philippines are also benefiting from Macau's slump.


US Treasury  The U.S. Treasury is telling casinos to do more to stop criminals from using their sports books to launder money in its latest warning to the industry to bolster compliance programs.

Article HERE


China Q4 GDP - 7.4% growth vs consensus of 7.2%


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.


Takeaway: The ECB is a "tree". Today we thought we’d focus on the “forest” by quickly framing up the global macro landscape through the lens of TACRM.


Long Ideas/Overweight Recommendations

  1. iShares U.S. Home Construction ETF (ITB)
  2. Health Care Select Sector SPDR Fund (XLV)
  3. Consumer Staples Select Sector SPDR Fund (XLP)
  4. PowerShares DB U.S. Dollar Index Bullish Fund (UUP)
  5. iShares 20+ Year Treasury Bond ETF (TLT)
  1. LONG BENCH: Vanguard REIT ETF (VNQ), Utilities Select Sector SPDR Fund (XLU), Vanguard Extended Duration Treasury ETF (EDV)

Short Ideas/Underweight Recommendations

  1. iShares TIPS Bond ETF (TIP)
  2. iShares MSCI Emerging Markets ETF (EEM)
  3. CurrencyShares Japanese Yen Trust (FXY)
  4. Industrial Select Sector SPDR Fund (XLI)
  5. SPDR Barclays High Yield Bond ETF (JNK)
  1. SHORT BENCH: SPDR Oil & Gas Exploration & Production ETF (XOP), CurrencyShares Euro Trust (FXE), WisdomTree Emerging Currency Fund (CEW)



Framing Up Global Macro Amid ECB-Related Consternation: Instead of focusing on the “tree” (i.e. Draghi’s ongoing press conference) in today’s Macro Playbook, we thought we’d focus on the “forest” by quickly framing up the global macro landscape through the lens of our Tactical Asset Class Rotation Model (TACRM). The saying, “to know where you’re headed, you need to know where you’re coming from” has rarely been truer than it may wind up being today.


One of the most important pieces of market color TACRM provides investors is through the lens of its Extreme Momentum Monitor, which flags the 20 highest and 20 lowest Volatility-Adjusted Multi-Duration Momentum Indicator (VAMDMI) readings throughout the accessible global macro investment universe of roughly 200 ETFs.


Specifically, observing what’s leading or lagging global macro markets, at the margins, tends to provide investors with a material signal in the dynamic process allocating to and from asset class beta. For example, we noticed that commodities and Euro-denominated assets had begun to consistently dominate the bottom-20 VAMDMI readings by mid-summer (see: slide 14 HERE) and that color that was very instrumental in helping us make the #StrongDollar commodity price #Deflation call that we continue to stick with today.




Among the top-20 readings:


  • Fixed-Income and Yield Chasing accounts for 12 of the exposures: LQD, BNDX, XLU, EDV, ZROZ, TLT, MUB, AGG, VNQ, IYR, FLAT and BND
  • DM Equities account for 0 of the exposures
  • EM Equities account for 4 of the exposures: EPHE, SMIN, EPI and FXI
  • Foreign Exchange accounts for 1 of the exposures: FXF
  • Commodities account for 2 of the exposures: GLD and SLV
  • Cash accounts for 1 of the exposures: UUP


*Things that do NOT rhyme with our active macro themes (refer to the hyperlinks below):


  • The breakout in precious metals – which may be alluding to a meaningful pullback in the USD vis-à-vis peer currencies from here – is relatively new and is among the key discussion topics we’ve had with our institutional subscriber base of late.
  • Amid our expectation of a continuation of broad-based EM asset price deflation, we have been bullish on both the Philippines and China, but India did not make the cut from a fundamental perspective. Should we chase India or is India signaling a bottoming process across EM asset prices? If the latter is true, we’ll be forced to close out many of our short ideas in the EM space in the red.
  • Not many investors saw this move in the Swiss franc coming – including us.


Among the bottom-20 readings:


  • Fixed-Income and Yield Chasing accounts for 3 of the exposures: BWZ, IBND and EU
  • DM Equities account for 3 of the exposures: EWC, EWCS and KRE
  • EM Equities account for 3 of the exposures: EPOL, VNM and EPU
  • Foreign Exchange accounts for 4 of the exposures: UDN, FXE, FXS and FXC
  • Commodities account for 7 of the exposures: DBB, JO, SOYB, JJC, BAL, COW and DBA
  • Cash accounts for 0 of the exposures:


*Every exposure in the bottom-20 VAMDMI readings is well within the scope of our active macro themes and hopefully we helped you get appropriately positioned for these draw-downs.


One more quick thing to note: currently there are 32 ETFs with a VAMDMI reading greater than +1x, which indicates a trend of positive VWAP momentum across multiple durations. That number compares to 49 ETFs with a VAMDMI reading less than -1x, which indicates the opposite. That ratio was 30/85 at the end of last week.


What this tells us is that investors are clearly bottom-fishing in bombed-out assets (think: EM, junk debt, energy, foreign currencies, etc.), effectively attempting to take advantage of any relief rally that Mario Draghi may provide.


They better hope markets are broadly satisfied with whatever he announces today, or another leg down in everything allergic to #Quad4 could be just around the corner.


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



Global #Deflation: Amidst a backdrop of secular stagnation across developed economies, we continue to think cyclical forces (namely #StrongDollar driven commodity price deflation) will drag down reported inflation readings globally over the intermediate term. That is likely to weigh heavily upon long-term interest rates in the developed world, underpinning our bullish outlook for U.S. Treasury bonds.


EARLY LOOK: History's People (1/21)


#Quad414: After DEC and Q4 (2014) data slows, in Q1 of 2015 we think growth in the US is likely to accelerate from 4Q, aided by base effects and a broad-based pickup in real discretionary income. We do not, however, think such a pickup is sustainable, as we foresee another #Quad4 setup for the 2nd quarter. Risk managing these turns at the sector and style factor level will be the key to generating alpha in the U.S. equity market in 1H15.


The Hedgeye Macro Playbook (1/16)


Long #Housing?: The collective impact of rising rates, severe weather, waning investor interest, decelerating HPI, and tighter credit capsized housing in 2014.  2015 is setting up as the obverse with demand improving, the credit box opening and 2nd derivative price and volume trends beginning to inflect positively against progressively easier comps. We'll review the current dynamics and discuss whether the stage is set for a transition from under to outperformance for the complex.


HOUSING: Starts/Permits & Apps All Strong | 2015 Tail Winds & Top-Down Turns (1/21)


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 – keeping in mind that we have equal conviction in each security from an intermediate-term absolute return perspective.  

Short HAIN Call Today @1PM

Takeaway: We’re holding a conference call today at 1pm EST to update our short thesis on HAIN.


Toll Free Number:

Direct Dial Number:

Conference Code: 727318#

Materials: CLICK HERE


Short HAIN Call Today @1PM - 1


The call will focus on updated financial performance — which includes slowing trends, compressing margins, and deteriorating returns – since our initial short call. 


We’ll also take a detailed look at the UK business, which we believe is merely a conventional food business rather than an organic one – and should be valued as such.  We’ll hit on several other key points throughout the presentation, all of which indicate the company is severely misunderstood and mispriced.


Our sum-of-the-parts analysis suggests substantial downside.


Attention Students...

Get The Macro Show and the Early Look now for only $29.95/month – a savings of 57% – with the Hedgeye Student Discount! In addition to those daily macro insights, you'll receive exclusive content tailor-made to augment what you learn in the classroom. Must be a current college or university student to qualify.

Short HAIN Call Today @1PM

Takeaway: We’re holding a conference call today at 1pm EST to update our short thesis on HAIN.

Call Details

Toll Free Number:

Direct Dial Number:

Conference Code: 727318#

Materials: CLICK HERE


Short HAIN Call Today @1PM - 1


The call will focus on updated financial performance — which includes slowing trends, compressing margins, and deteriorating returns – since our initial short call. 


We’ll also take a detailed look at the UK business, which we believe is merely a conventional food business rather than an organic one – and should be valued as such.  We’ll hit on several other key points throughout the presentation, all of which indicate the company is severely misunderstood and mispriced.


Our sum-of-the-parts analysis suggests substantial downside.

Counter-TREND Moves In Macro

Client Talking Points


Euro held the low-end of my $1.15-1.19 risk range, bounced, and his holding those gains at $1.16 this morning – anything Up Euro, Down Dollar gets you counter-TREND moves in commodities – how long they hold, we do not know.


The context of a counter-TREND bounce is critical – don’t forget that the CRB Index closed at multi-year lows on Tuesday at 219, then bounced +1% to 221 yesterday. Where #deflation gets priced next is highly dependent to the reaction to whatever Mario Draghi does – why doesn’t he just buy Oil futures?


In other global #GrowthSlowing news, Dr. KOSPI (and Copper) continue to signal ongoing slowing – next support for KOSPI is 1880. With Tech earnings weak (XLNX, FFIV, SNDK, etc.) overnight, it’ll be interesting to see how Tech (XLK -1.4% year-to-date) trades relative to the year-to-date laggard Financials (XLF, -5.2% year-to-date), post the AXP miss.




WATCH and INTERACT with CEO Keith McCullough and Hedgeye's analysts as they discuss the stock market, economy and more all in real-time. They will answer your questions live via email, phone, Twitter and chat throughout the entire trading day. 


Special appearances by market experts, including best-selling "Currency Wars" author James Rickards, money manager Michael Holland, Jones Trading chief market strategist Michael O'Rourke and many more. CLICK HERE to sign up.


Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

The Vanguard Extended Duration Treasury (EDV) is an extended duration ETF (20-30yr). As our declining rates thesis proved out and picked up steam over the course of the year, we see this trend continuing into Q1.  Short of a Fed rate hike, there’s no force out there with the oomph to reverse this trend, particularly with global growth decelerating and disinflationary trends pushing capital flows into the one remaining unbreakable piggy bank, which is the U.S. Treasury debt market.


As growth and inflation expectations continue to slow, stay with low-volatility Long Bonds (TLT). We believe the TLT has plenty of room to run. We strongly believe the dynamics in the currency market are likely contribute to a “reflexive deflationary spiral” whereby continued global macro asset price deflation and reported disinflation both contribute to rising investor demand for long-term Treasuries, at the margins.


Hologic (HOLX) is a name our Healthcare Sector Head Tom Tobin has been closing monitoring for awhile. In what Tom calls his 3D TOMO Tracker Update (Institutional Research product) of U.S. facilities currently offering 3D Tomosynthesis, month-to-date December placements signaled a break-out quarter after a sharp acceleration in October and slight correction to a still very high rate in November. We believe we are seeing a sustained acceleration in placements that will likely drive upside to Breast Health throughout FY2015. Tom’s estimates are materially ahead of the Street, but importantly this upward trend in Breast Health should lead not only to earnings upside, but also multiple expansion and a significant move in the stock price.

Three for the Road


Best S&P Sector YTD? Utilities $XLU +4.2% YTD with growth slowing and bond yields falling



Following the light of the sun, we left the Old World.

-Christopher Columbus


Toyota Motor Corp. retained its crown as the world’s largest car company by sales in 2014, selling 10.23 million vehicles in 2014 up 3%. 

Hedging the Storm in Energy

Hedgeye’s Macro and Energy teams hosted a call with Wayne Penello and Andy Furman of Risked Revenue Energy Associates (“R^2”) yesterday (Wednesday, January 21st) on the risks and outlook for hedging practices in the energy space. A replay link along with a summary of the key topics of discussion is included below:


Hedging the Storm in Energy

  • An extended period of time with contract settlements in the $90s and $100s per barrel, along with backwardation in the forward curve created an environment where producers resisted hedging production and many were under-hedged at the mid-2014 highs in oil
  • R^2 expects continued strength in the USD and oil prices that will remain low for an extended period of time with a bottom in 2016
  • The most solid and well-liked companies do not have exotic hedge books and do not attempt to “time” their implementation of a hedge program. Rather they consistently hedge with straight-forward, vanilla swaps. Enhanced swaps and 3-way collars leave downside exposure and carry floating risk vs. a swap which carries fixed risk
  • Example with Pioneer (weak strategy) vs. Concho (well-managed):
    • Pioneer entered into enhanced swaps allowing them to swap for a higher price in the future, partially financed by selling a put below the market. They were forced to pay big premiums to buy-back this put sold when prices moved right through it
    • Concho entered into plain vanilla swaps (hedged 87% in 2015 and 69% in 2016) and has significantly outperformed the XOP 
  • Oil collars are economically attractive to producers for the first time in ~3 years from a cap/floor price ratio. The put/call price is normally negatively skewed (put options cost more than an upside call options), but this pricing scenario has now reversed
  • Volatility and credit deterioration are making it more expensive to hedge with counterparties (added premiums for worse credits and increased difficulty for counterparties to delta hedge their exposure)
  • Contango in the curve right now is not generated from lack of liquidity. These back-month contracts are still active, and price discovery is real
  • Small and mid-cap oil companies are hedged for 40% of production in 2015 and 20% of production for 2016 which is a real risk moving forward
  • Well-hedged producers are cutting cap-ex and scaling back growth plans
  • Un-hedged or under-hedged producers with too much debt will have to cut cap-ex, scale back growth plans, and will be forced into asset sales (this will accelerate when borrowing-bases are reassessed)
  • Borrowing-base determinations will reset in April, and this will result in restructurings: asset sales need banks approval because assets are collateral for counterparties
  • With regards to all of the paper leverage in commodity markets i.e. ETFs or leveraged futures commodity funds, some of the support for oil prices over the last week is based on the fact that many passive commodity investors had to re-weight there commodity exposure which caused another +60K long futures contracts last week (60 Million barrels of oil which is significant). The liquidation of these positions is a big risk and could be much worse than 08’. 

Please feel free to reach out to us with additional questions or comments with regards to the content discussed on the call.



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 80.48%
  • SHORT SIGNALS 78.35%