LEISURE LETTER (02/02/2015)




  • Feb 3:  GLPI 4Q CC
  • Feb 3: WYNN 4Q CC
    • ; pw: 57961245
  • Feb 12: MPEL 4Q CC
    • (1866) ; pw: MPEL
  • Feb 17: MGM 4Q CC
    • ; pw: 8870181


GGR - Macau GGR for January came in at  28.74 billion MOP (27.90 HKD, 3.60 USD), down 17.4% YoY. 

Takeaway: Slightly worse than consensus in-line with Hedgeye


Cruise 2015 Wave color – 

  • Jean Paugh, manager at All About You Travel Unlimited in Rockledge, Fla. “It’s been a good first month of the year; we sort of picked up where we left off in December.”  Paugh said a number of cruise lines jumped the gun by introducing promotional specials for Wave season in December or even November, which has helped drive early Wave business.  A variety of destinations are in demand, Paugh said, ranging from Florida cruises for clients who don’t mind repeating itineraries, to Alaska and beyond.
    • The soft spot for Paugh is Europe. While river cruises are still doing well, as are luxury cruises, the higher airfares to Europe have put a damper on midmarket demand. “It’s the Mediterraneans and Baltics, that’s what’s really soft with us so far,” she said.
  • Other sellers report a different experience. “We’re selling a lot of Europe,” said Karen Kimmey, owner of OK Travel Agency, in Chicago.
  • Cruise lines were advertising more, especially Viking River Cruises, which was a sponsor of the U.S. Figure Skating Championship on TV in mid-January.
  • Shari Marsh, owner of a Cruise Holidays franchise in Raleigh, N.C., said her sales for January were up 50% from last year. “Europe is selling really, really well,” she said. But there’s a catch. “I’m scared to death because a lot of people will go ahead and book, but they don’t do air right away,” Marsh said. “I’m worried what people will say when I circle back around and tell them what the air prices are.”
  • “I’m seeing we’re having a tough time with Europe,” said Ross Spalding, president of Crown Cruise Vacations, an Ensemble agency in Princeton, N.J.
    • Spalding said the Jan. 7 terrorist attack in Paris and subsequent events “are causing people to hold off just a little...We are about half of where we were last year for the first few weeks.”   
    • Spalding said he has to sell considerably more Caribbean cruises to make up for lost European sales, “although the offers these suppliers have out there are pretty darn aggressive in Europe.”
  • Ken Muskat, executive vice president of sales at MSC Cruises said the company’s Wave season promotion of reduced deposits, onboard spending credits and a complimentary beverage package in some cases is driving an increase in call volume compared with last January.
    • “The large majority of the bookings are associated with the Wave offer,” he said. “Europe is doing well. We’ve been very focused on Europe for a while,” he said, using a package that combines a cruise, airfare and a two-night stay in a hotel pre-cruise.
    • Muskat said MSC recently reduced its peak season rate on the package for departures out of Barcelona. “You really can’t get on your own the air, a two-night hotel stay and a seven-night cruise for the price we’ve got out there,” he said.
    • Muskat said he sees that happening, as well: “We’re probably this year focused on sending more North Americans to more of our ships that are deployed in Europe than ever before.”

Article HERE

 Takeaway:  While there are some mixed reactions, Europe continues to be a concern with many agents.  MSC's comments signal more promotions ahead for the European sailing season which will drive bookings at the expense of lower pricing. 


Macau Legend/1680.HK  said it has received all the necessary permits from the Macau government to open its 444-room Harbourview Hotel. The hotel is having a soft opening on Monday and an official opening on February 11.  The hotel will not have any gaming. But it is connected by bridge to the firm’s Babylon Casino.


Macau Legend added in their Monday filing:  “As the redevelopment of the Macau Fisherman’s Wharf progresses, the board expects that more gaming tables would be granted by the DICJ to the company on an incremental basis to support the redevelopment of the Macau Fisherman’s Wharf.”

Takeaway: The number of additional tables Macau Legend receives is absolutely critical to its long-term growth targets.


Landing Mainland China real estate developer Landing International Development Ltd said there would be a groundbreaking ceremony on February 12 for its new US$2.2 billion casino project to be located on Jeju Island in South Korea. It will be called ‘Myth-History Park’.  


According to building permits granted by the Jeju government, Landing Jeju is permitted to develop and construct “a gaming and integrated resort with a total gross floor area (GFA) of approximately 306,763 square metres [3.30 million sq. feet]” added the filing.


It would include “premium hotels and villa hotel and other conferencing and exhibition facilities, a gaming facility, a theme park and shopping and other entertainment and tourism facilities” plus condominiums, villas, bungalows and other accommodation facilities with a GFA of approximately 132,265 square metres.


NCLH - customers who book a cruise of three nights or longer can choose from one of four value-added perks that include a free Ultimate Dining Package, a free Ultimate Beverage Package or up to $300 in on-board credits. The fourth option is to bring along extra passengers in a cabin for free when there already are two paying passengers (up to the limit allowed in the cabin). The option only is available on select sailings.

Article HERE

Takeaway: New Norwegian Wave deal


CCL -  According to Carnival UK’s executive vice president of operations, David Noya, "There is a lot of interest and bookings for the new ship, and since we launched the new ads, we are on track for our biggest ever wave for P&O. We’re seeing a lot of newcomers – people who are totally new to cruise, as well as people that have cruised before.”

Article HERE

Takeaway: Bookings are doing well for P&O Cruises UK possibly due to an earlier Wave. There hasn't been any commentary on pricing, which we think is slowing in the UK.


RCL - According to RCL Senior Vice President, Sales, Trade Support and Service Vicki Freed, there will be a new rotational dining program for RCL. Under the new program, guests will dine at different complimentary restaurants each night of their cruise based on their rotational schedule.  At each restaurant, guests will have the same wait staff and table mates each evening.


The new rotational dining program will begin with Anthem of the Seas, but there is no indication yet if it will spread to Quantum of the Seas, Oasis of the Seas and/or Allure of the Seas.

Article HERE

 Takeaway:  We think this modification is due to the negative feedback regarding the implementation of the Dynamic Dining on Quantum.

RCL latest Weekend WoW deal

Article HERE


CCL – Carnival aired its first-ever Super Bowl TV commercial entitled "Come Back to the Sea" – a 60-second spot combining stunning cinematic images of the ocean and stirring words from President John F. Kennedy to create an emotional storyline about people's universal connection with the sea.

Article HERE


Montage Laguna Beach - Strategic Hotels & Resorts Inc. bought the 250-room Montage Laguna Beach from an affiliate of Ohana Real Estate Investors, a Redwood City investment firm funded by Pierre Omidyar, the founder and chairman of eBay. Ohana still owns the Travelodge Laguna Beach and the Montage Beverly Hills, among other properties. The sale was for $360 million.

Article HERE

Takeaway: This luxury property was sold at a California record of $1.44m average price per key.


WYN - Wyndham Hotel Group, announced it has acquired Dolce Hotels and Resorts, a provider and manager of group accommodations with a portfolio of 24 properties and over 5,500 guestrooms across seven countries in Europe and North America, for $57M in cash.

Article HERE



Las Vegas - According to, 2015 LV hotel prices are down 5% YoY over the Spring Break period. 

Article HERE


Macau – The average daily wage of construction workers increased by 6.1% QoQ in 4Q 2014, and the average daily wage of local construction workers was up by 8.2%.

Article HERE

 Takeaway:  Higher construction worker wages is another headwind 


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.

European Banking Monitor: No Follow Through on Euro-QE; Swaps Widen

Takeaway: Last week's enthusiasm over ECB asset purchases was short-lived as investors remain concerned about EM collapse risk.

Below are key European banking risk monitors, which are included as part of Josh Steiner and the Financial team's "Monday Morning Risk Monitor".  If you'd like to receive the work of the Financials team or request a trial please email 




Key Takeaway:


The ECB’s asset purchase high was short-lived as global markets resumed their decline shortly after the news. The collapse in energy prices continues to destabilize select economies raising the specter of a financial crisis. We watch closely both TED Spread and Euribor-OIS for indications of rising global systemic risk in the banking system both at home and in Europe. TED Spread has quietly crept up to 25 bps from 21 bps a month ago, but that magnitude of change is not especially noteworthy. Meanwhile, Euribor-OIS is essentially unchanged.


Belgium cut rates, Russia cut rates, and the ECB is buying bonds.  Global central banks are trying to stimulate growth, but markets are falling.  Perhaps investors have built up a tolerance to central bank drugs.  As that seemed to be the case last week, short-term risk measures in our heat map below came out mostly in the red.


European Financial CDS- Swaps widened across the board in Europe last week.  Greek spreads blew out following Syriza’s election victory.  Syriza’s win again raises concerns around austerity/Grexit. Concerns that Spain could follow a similar electoral path pushed out spreads for most Spanish banks.  Russia's Sberbank saw its spreads widen by a further 67 bps after the Bank of Russia unexpectedly cut interest rates on fears of an impending recession. This conflicts with six rate increases over the past year as the central bank is stuck between a rock and a hard place. This past week, Russia’s rate policy shifted from fighting inflation and supporting the Ruble to stimulating economic activity.


European Banking Monitor: No Follow Through on Euro-QE; Swaps Widen - chart1 financials CDS


Sovereign CDS – Sovereign swaps were mostly wider last week as global markets fell amid waning enthusiasm over ECB asset purchases. French sovereign swaps tightened by -6.9% (-4 bps to 47 ) while Spanish sovereign swaps widened by 13.1% (10 bps to 87).


European Banking Monitor: No Follow Through on Euro-QE; Swaps Widen - chart2 sovereign CDS


European Banking Monitor: No Follow Through on Euro-QE; Swaps Widen - chart3 sovereign CDS


European Banking Monitor: No Follow Through on Euro-QE; Swaps Widen - chart4 sovereign CDS


Euribor-OIS Spread– The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. The Euribor-OIS spread was unchanged at 9 bps.


European Banking Monitor: No Follow Through on Euro-QE; Swaps Widen - chart5 euribor OIS



Matthew Hedrick



Ben Ryan




China, Oil and the UST 10YR

Client Talking Points


China: slowing? Yes. But that was a good thing for stocks in DEC inasmuch as buying the dip has been bad for the last 5 days of trading (Shanghai Comp down for 5 straight days = 8% correction, breaking @Hedgeye 3223 TRADE support). 


Oil had a big ramp into the bell on Friday as most thing sensitive to USD not going straight up (U.S. GDP miss stopped its climb) were up, but failed @Hedgeye immediate-term resistance of $48.34 and is -2.2% (WTI) this morning, with next support $43.61. 


UST 10YR Yield has already crashed -24% year-to-date (started the year at 2.17% and is 1.66% last), so we’ll take the #deflation win as everyone in this league is using the same balls! Next big data point for the bond market is jobs day Friday.

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


Yield Spread (leading indicator for US growth) remains at 12 months lows



Whenever Tom Brady is asked to name his favorite Super Bowl win, his reply is “the next one.”


The home ownership rate is now at its lowest level since 1994, down to 63.9 percent in the final quarter of 2014.

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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 SUGAR, SILVER, and GOLD markets experienced the most BULLISH relative positioning changes week-over-week
  • The SOYBEANS, WHEAT, and COCOA markets experienced the most BEARISH relative positioning changes week-over-week

Commodities Weekly Sentiment Tracker - chart1 sentiment

Commodities Weekly Sentiment Tracker - chartx


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

  • The RBOB GASOLINE, LEAN HOGS, CORN markets are positioned for HIGHER PRICES near-term
  • The LIVE CATTLE, HEATING OIL, and ORANGE JUICE markets are positioned for LOWER PRICES near-term

Commodities Weekly Sentiment Tracker - chart2 spot 2nd month spread


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

  • The NATURAL GAS, WTI CRUDE OIL, and BRENT CRUDE OIL  markets are positioned for HIGHER PRICES in 1-year  
  • The LIVE CATTLE, COCOA, and SOYBEANS markets are positioned for LOWER PRICES in 1-year  

Commodities Weekly Sentiment Tracker - chart3 spot 1yr spread


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 open interest


Ben Ryan


CHART OF THE DAY: The YTD Market Scoreboard (Got $TLT?)

CHART OF THE DAY: The YTD Market Scoreboard (Got $TLT?) - 02.02.15 chart


Editor's note: This is a brief excerpt from today's Morning Newsletter written by Hedgeye CEO Keith McCullough.


I play for the team that likes the Long Bond more than the Dow in 2015 – here’s the breakdown of the YTD score:


1. Dow Jones Industrial Index down -2.9% last week to finish JAN -3.7%

2. SP500 down -2.8% last week to close JAN down -3.1%

3. S&P Financials (XLF) down another -3.2% last wk to finish JAN -7.1% (worst S&P Sector)

4. S&P Utilities (XLU) -1.7% wk-over-wk to close JAN up +2.3% (best S&P Sector)

5. Long-term Treasuries (TLT) +10% YTD (pre interest payment) #timestamped


GDP #Patriots

“The truth was incredible enough.”

-Glenn Beck


“It was so incredible, in fact, that a strange thing happened after it was reprinted in newspapers from coast to coast… The public didn’t believe it.” (Dreamers and Deceivers, pg 19)


In a riveting account of how former US President Grover Cleveland kept both his sickness and surgery a secret, in the aforementioned quote Beck describes America’s reception to investigative journalist, E.J. Edwards, discovering the #truth.


What was the #truth about US economic growth in both December and Q4 of 2014? It slowed. As growth slowed and #deflation expectations took hold, the #truth is that investing in the Long Bond (TLT) instead of late-cycle stocks got you paid.


GDP #Patriots - TLT cartoon 01.26.2015 normal


Back to the Global Macro Grind


In stark contrast to this historical metaphor of groupthink in trusting officialdom in the late 19th century, I’m thinking that if you told most Americans that year-over-year growth in US GDP is closer to 2% than it is 5% - they’d believe you.


Most upstanding humans believe in those who fight for the #truth every day too. While there used to be a lot more of them in the US financial media, they call them #Patriots – “a person who vigorously supports their country and is prepared to defend it.”


My congratulations to the New England Patriots for winning another Super Bowl. Whether you like the man or not, I think you have to respect Tom Brady’s team leadership. The man is all about the team and the system he plays for; not about himself.


I play for the team that likes the Long Bond more than the Dow in 2015 – here’s the breakdown of the YTD score:


1. Dow Jones Industrial Index down -2.9% last week to finish JAN -3.7%

2. SP500 down -2.8% last week to close JAN down -3.1%

3. S&P Financials (XLF) down another -3.2% last wk to finish JAN -7.1% (worst S&P Sector)

4. S&P Utilities (XLU) -1.7% wk-over-wk to close JAN up +2.3% (best S&P Sector)

5. Long-term Treasuries (TLT) +10% YTD (pre interest payment) #timestamped


Academics like to talk about what was “causal” in driving performance numbers. I like to write about what is. There is very little to no evidence to refute that a slowing in the rate of change in both growth and inflation isn’t bad for certain macro investing styles and exposures – and very good for others.


Since Long-term Bond Yields had been front-running this Q4 GDP #slowing news since December, last week was more of an exclamation point than it was a new sentence about what actually happened in the US economy:


1. US 2yr Yield was down -3 basis points on the week, but are already down -21bps (-31%) YTD

2. US 10yr Yield was down -15 basis points wk-over-wk, but are already down -52bps (-24%) YTD

3. Yield Spread (10yr minus 2yr) compressed another -12bps last wk to -31bps (-21%) YTD


This is why it should surprise no one who is bearish on bond yields that:


A) US Regional Bank Stocks (KRE) are even worse than XLF at -9.5% YTD

B) US REIT Stocks (VNQ) are crushing it at +6.8% YTD (pre dividends)


Yep. It’s all the same macro trade. If you got the direction of both growth and inflation right, you got bond yields right (and everything that correlates positively/negatively in either equity style factors and/or asset allocations right).


What’s next?


First, have a #process that allows you to embrace the uncertainty of each and every centrally planned market day. Second, be prepared for a short-term correction in what’s been nothing short of a parabolic move in the USD vs. other devalued currencies.


Yep, that’s the other thing that happened as the US Dollar stopped going up at an accelerating rate last week. Some of the extreme correlation trades (CRB Index and Oil vs USD) went the other way:


1. CRB Commodities Index +1% last wk to -4.8% YTD

2. WTI Oil +4.5% last wk to -11.3% YTD


So just take the time to observe Mr. Macro Market’s message (i.e. don’t try to force a pass at the goal line when you have time to run the ball). As #Patient GDP Patriots, I’m confident we can intercept hurriedness, and capitalize on the other team’s mistakes.


Our intermediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 1.65-1.79%


Dow 17,032-17,410

USD 94.51-95.98

Oil (WTI) 43.61-48.34

Gold 1


Best of luck out there this week,



Keith R. McCullough

Chief Executive Officer


GDP #Patriots - 02.02.15 chart


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.