• run with the bulls

    get your first month

    of hedgeye free


A Perfect Day!

“When you realize how perfect everything is you will tilt your head back and laugh at the sky.”
After veteran Fed Head, Donald Kohn, pandered to the most politicized policy making stance in US economic history last night, what is there not to like about anything priced in Burning Bucks? This is perfect! Isn’t it?
The Credibility of the US Currency has been blown right out of the water, and now the Buck is Burning to lower-lows. This morning’s early trading sees the lowest price we’ve seen in 14 months for the US Dollar Index, trading down another -0.63% at $75.50. Importantly, the only prices that were lower than this for the US Dollar (since 1971 when the USD became the world’s “Reserve Currency”) was that which we saw right before the 2008 US stock market crash.
This is perfect!  Right? Go, Go, Jaime D-iego Earnings, GO!
In the immediate term, of course, it is! Never mind about the intermediate term or long term implications. Let’s jack this Dow Jones party up to 10,000 feet and start paying out them Wall Street bonuses again baby! If your neighbor says anything about it, just “tilt your head back, and laugh at the sky!”
The #1 headline on Bloomberg this morning is: “Stocks, Oil Climb on China Exports; Dollar Drops, Gold Gains.” Doesn’t this sound like a perfect environment for the Fed Heads to fear-monger you into thinking about Bernanke’s Great Depression text books? The Vice Chairman of the Fed (Kohn), who has never seen an asset price bubble that he understood, has a view that the chance of accelerating prices isn’t something we need to worry about “for awhile.”

What Almighty Incompetent One is “awhile”? Oh, right - the Fed doesn’t do specific durations. That’s perfect too! Now we can really jack this party’s volume up. Let’s ignore the accelerating prices that are marked-to-market though, and take Geithner’s Aides word for it. They are paid to be willfully blind. They’ll never know how loud we actually have this bullish Dollar debasement volume dialed up to anyway!
Perfect is as perfect does. Sounds like October of 2007… unfortunately…
For now, look at these bullish country level stock market prices accelerating which, ostensibly, the compromised and conflicted get paid to ignore.  Just “tilt your head back and laugh” some more:
1.      SP500 futures 1082 = that’s only +60% higher than said Great Depression Part Deux in March

2.      China closed up another +1.2% to +63% YTD, after reporting a sequential ramp in exports of 700 basis months month-over month!

3.      Hong Kong and Australia tacked on +1-2% moves overnight, taking both markets to higher-highs at +52% and +32% YTD, respectively

4.      Germany is leading Western European stock markets to new YTD highs, trading +1.8% so far this morning to +21% YTD

5.      Russia adds another +3.4% to its YTD deflation of +129%! Oops, I mean reflation – or Mr. Kohn is that an acceleration?

6.      Brazil’s Bovespa closed up at a fresh YTD high yesterday of +72%; accelerating prices anyone?

With that Buck Burning, don’t be bringing up the Commodity side of year-over-year price accelerations now either. That’s not going to be perfect for our newfound narrative of PERFECT! Shhhh… talk about rents or housing or something would ya…
Instead of seeing that oil moving from $35/barrel in Q4 of 2008 to $75/barrel this morning, or that the price of Gold or, God forbid, TIPS (Treasury Inflation Protected Securities), let’s let this Buck Burn at the stake. This is perfect for Debtors, Bankers, and Politicians. Never mind the citizenry… they don’t really watch this American Financial Wizard of Oz show on YouTube do they?
Yes, fortunately, they do. In face of the US stock market making higher-highs and the US Dollar making lower-lows, this week’s reading on American Consumer Confidence (ABC/Washington Post weekly data) dropped a full 3 points to minus -48 (down from -45). Maybe not so perfect for everyone after all…
Of course this isn’t perfect for everyone. In the long run, our long standing position as the world’s financial reserve fiduciary will be dead. In the meantime, them Intel and JP Morgan earnings really look perfect though don’t they! Give me a big CNBC Booooyah!
I have a higher-high of immediate term TRADE resistance now for the SP500 at 1090. Immediate term support remains at 1053. Our Macro Team will be holding our Q4 Research Edge Macro Themes conference call this afternoon. If you’d like information about the call, please email .
Best of luck out there on this perfect day for America!

XLU – SPDR Utilities
We bought low beta Utilities with a reasonable dividend yield on 10/13.

EWT – iShares Taiwan
With the introduction of “Panda Diplomacy” Taiwan has found itself growing closer to mainland China. Although the politics remain awkward, the business opportunities are massive and the private sector, now almost fully emerged from state dominance, has rushed to both service “the client” and to make capital investments there.  With an export industry base heavily weighted towards technology and communications equipment, Taiwanese companies are in the right place at the right time to catch the wave of increased consumer spending spurred by Beijing’s massive stimulus package.

EWG – iShares Germany
Chancellor Angela Merkel won reelection with her pro-business coalition partners the Free Democrats. We expect to see continued leadership from her team with a focus on economic growth, including tax cuts. We believe that Germany’s powerful manufacturing capacity remains a primary structural advantage; with fundamentals improving in a low CPI/interest rate environment, we expect slow but steady economic improvement from Europe’s largest economy.

CAF – Morgan Stanley China Fund
A closed-end fund providing exposure to the Shanghai A share market, we use CAF tactically to ride the more volatile domestic equity market instead of the shares listed in Hong Kong. To date the Chinese have shown leadership and a proactive response to the global recession, and now their number one priority is to offset contracting external demand with domestic growth. Although this process will inevitably come at a steep cost, we still see this as the best catalyst for economic growth globally and are long going into the celebration of the 60th Anniversary of the People’s Republic.

GLD – SPDR Gold We bought back our long standing bullish position on gold on a down day on 9/14 with the threat of US centric stagflation heightening.   

XLV – SPDR Healthcare
We’re finally getting the correction we’ve been calling for in Healthcare. We like defensible growth with an M&A tailwind. Our Healthcare sector head Tom Tobin remains bullish on fading the “public plan” at a price.

CYB – WisdomTree Dreyfus Chinese Yuan
The Yuan is a managed floating currency that trades inside a 0.5% band around the official PBOC mark versus a FX basket. Not quite pegged, not truly floating; the speculative interest in the Yuan/USD forward market has increased dramatically in recent years. We trade the ETN CYB to take exposure to this managed currency in a managed economy hoping to manage our risk as the stimulus led recovery in China dominates global trade.

TIP – iShares TIPS
The iShares etf, TIP, which is 90% invested in the inflation protected sector of the US Treasury Market currently offers a compelling yield. We believe that future inflation expectations are currently mispriced and that TIPS are a efficient way to own yield on an inflation protected basis, especially in the context of our re-flation thesis.

XHB – SPDR Homebuilders
We were the bulls on a Q2 housing turn but, as the facts change so do we: now we are getting cautious on 1H 2010 US Housing. Rates up as access to capital tightens is not good for new home builders as we enter into a new year and series of potential catalysts for renewed pressure in the secondary market, including the expiration of the $8,000 tax credit.

USO – US OIL Fund WTIC Oil traded just north of our overbought line on 10/12. With the US Dollar hitting another higher-low, we shorted more of oil’s curve.

EWJ – iShares Japan While a sweeping victory for the Democratic Party of Japan has ended over 50 years of rule by the LDP bringing some hope to voters; the new leadership  appears, if anything, to have a less developed recovery plan than their predecessors. We view Japan as something of a Ponzi Economy -with a population maintaining very high savings rate whose nest eggs allow the government to borrow at ultra low interest levels in order to execute stimulus programs designed to encourage people to save less. This cycle of internal public debt accumulation (now hovering at close to 200% of GDP) is anchored to a vicious demographic curve that leaves the Japanese economy in the long-term position of a man treading water with a bowling ball in his hands.

SHY – iShares 1-3 Year Treasury Bonds
 If you pull up a three year chart of 2-Year Treasuries you'll see the massive macro Trend of interest rates starting to move in the opposite direction. We call this chart the "Queen Mary" and its new-found positive slope means that America's cost of capital will start to go up, implying that access to capital will tighten. Yields are going to continue to make higher-highs and higher lows until consensus gets realistic.



Las Vegas Sands will launch the initial public offering of its Macau business late next month.   The company is seeking to raise up to US$2.5 billion in the offering.  The SCMP cites “sources familiar with Sands’ plan” as saying that the operator expects to complete the offering in about four weeks after receiving regulatory approval for a share offering and listing on the Hong Kong stock exchange.


Once regulatory approval is obtained, LVS’ bankers can begin to market the share sale to potential investors.  The bankers believe that Wynn’s recent IPO success in Hong Kong has presented “a good platform for the listing”, according to sources cited by the SCMP.  The IPO comes after the restructuring of US$3.3 billion in Macau-specific debt in exchange for higher interest payments and the raising of US$600 million in pre-flotation bond sales that could convert into shares in the Macau unit following a stock market listing in Hong Kong.           





Edmund Ho Hau-wah seems to be making a final push to act on previous pledges to control development in Macau’s gaming market.  Secretary for Economy and Finance Francis Tam Pak-yuen said on Monday that the administration of the outgoing chief executive is planning to review the number of table games in operation. In addition, it plans to raise the age limit for players and dealers to 21 from 18 and relocate machine parlors away from residential areas. 


All of these measures have been previously announced by the current administration but none has been carried out.  It seems that much of the renewed interest is due to “prodding from Beijing” to do something to rein in growth before the new government comes in.  Given that the current administration only has two months left in office, there is little time to bring measures before the new legislature which will be sitting its first session on Friday. 





Information from the Statistics and Census Service indicated that visitor arrivals in package tours increased in August by 3.7% y-o-y, putting an end to continuous y-o-y decline for the past three months.  The average hotel occupancy rate in Macau rose to 80.4%, or by 3.7% compared to the same period in 2008.  August saw a total of 631,454 guests check into hotels and guest houses in Macau, up by 15% y-o-y, with the majority coming from Mainland China (47.6% of total) and Hong Kong (27.9%). 

Game of Chicken: SP500 Levels, Refreshed...

When I was a kid, I used to play this game of chicken. Today, with the Dollar testing its YTD lows, it feels like the SP500 is playing the same…


The USD Index is down -0.29% at $75.90. The 2009 YTD low is 13 cents away from that print. Can the Burning Buck mark a lower-low as the SP500 tries its best to climb above its YTD closing high? That’s the game of chicken that the REFLATON trade wants to play.


In October of 2007 I wasn’t brave enough to stay in it on the long side until the bitter end. Thank God for that. Today, the risk management setup is far from similar, but it is October, and them chilly mornings can wake you up like they did with selloffs like we saw today.


I have only bought and covered positions today (bought Utilities (XLU); covered Darden (DRI). Since my 1054 line held, however low beta my buys may be, I’m definitely a better buyer on today’s weakness. Until this Buck stops Burning, the math will force us to play this US government sponsored game of chicken…


Today’s intraday US stock market recovery puts my refreshed TRADE lines of immediate term support/resistance at 1054 (dotted green) and 1089 (dotted red). In the Virtual Portfolio I now have 20 longs and 9 shorts.



Keith R. McCullough
Chief Executive Officer


Game of Chicken: SP500 Levels, Refreshed...  - chart1013


investing ideas

Risk Managed Long Term Investing for Pros

Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.


In light of recent RevPAR trends and MAR's 3Q09 results, 2009 guidance looks too conservative. We still think Street estimates for 2010 need to come down.



We expect HST to beat the Street numbers and raise 2009 guidance when they report this Wednesday.  Our Q3 Adjusted EBITDA estimate of $140MM is approximately 6% above the Street.  For Q4, we are 8% above the Street's estimate of $233MM.  We think 2009 RevPAR will come in closer to 19.5% than the down 20-23% guidance from the 2Q09 earnings call.  If RevPAR comes in better than company guidance, operating margin compression should also be less severe than the guidance of down 600-650bps. 


Despite our belief that HST will beat and raise for 2009, we are still cautious on the stock and the lodging space.  HST is trading at almost 15x 2009E EBITDA and about 18x 2010E EBITDA - hardly attractive in our opinion.  The implied price per key of 189k is also not particularly "cheap", in our opinion.  Lastly, we are still below the Street on 2010 for both revenues and EBITDA. We believe 2010 will bring positive occupancy but will still have negative ADR as the industry seeks to recover the roughly 10 points of occupancy lost from peak to trough.  Until occupancy recovers meaningfully, we do not believe that hotels will have much pricing power.  In the meantime, costs should modestly rise, resulting in operating margin declines.


2010 Guidance?

Last year HST did not provide 2009 guidance on the third quarter release, so we do not expect them to address 2010 in the release since visibility hasn't markedly improved. However we do expect HST to give preliminary guidance related to 2010 on the call which we suspect will be highly predicted on GDP recovery.



3Q09 Preview Details:

RevPAR of -19.5% on NA hotels

  • Using a weighted average of HST's US city exposure for 6/20-9/5, we came up with a RevPAR estimate of -16.4%, which we adjusted downward given HST's exposure to Upper Upscale and corporate travel
    • This compares to Marriott branded NA operated RevPAR being down 19.8%
    • Estimate -7.5% occupancy and -13% ADR
  • F&B down 18% and other down 4%

Cost per Occupied room down 2% ; total property level expenses down 10%


FFO of $0.09



"Youtube" from 2Q09:

  • "The weakness in rate is not likely to abate until demand recovers, which will likely require the economy to stop shrinking and start expanding.  However, we have seen some progress in slowing the negative trends we experienced since the beginning of the year.  While the group cancellation rate for the quarter was still above our normal average, it represented less than half the rate we experienced in Q4 of 2008 and the first quarter of 2009."
  • "cancellation rate improved meaningfully through the quarter, suggesting this issue may present less of a problem going forward"
  • "We think the margins will decline more than we experienced in the first half of the year, as the RevPAR decline will be more weighted to declines in average rate and changes in the business mix, as well as lower food and beverage margins due to further declines in high profit banquet and audio-visual business"
  • "We expect an increase in hourly wage rates and in property insurance costs, as insurance rates have started to increase.
  • "if you look at the RevPAR range that we've suggested for the full year it tends suggests that the second half of the year somewhere between 17% and 20% decline in RevPAR. 

First Look: ARO Setup Looking Sweet

ARO: Setup Looking Sweet

October 13, 2009





I love when Keith throws me 90 mph fastballs like what he sent me last night… “ARO breaking down on what couldn't have been better news, TRADE line = 42.84.” As most of our subscribers know, our process here is one where our analysts focus on owning the debate on key issues with companies, industries and sectors, while Keith is focused on managing risk and timing/sizing across multiple durations (TRADE, TREND, and TAIL).  When we identify a critical uncertainty – as measured by price, sentiment, or financial performance, we collectively drill down on the answer. In that respect, ARO is an interesting budding idea. Consider the following…


Revenue growth has been solid – we can’t take that away. Kudos. But 900+ core stores, growth is reaching maturity.  ARO’s new concept, P.S. from Aeropostale, is moving from a test concept with 7 stores to a full fledged growth vehicle.  The P.S concept is aimed a 7 -12 year old consumer vs. Aero at 14- 17. The excitement around the success of this concept BETTER be justifiable. Also, remember that one of the key drivers to comp has been due to ARO making fashion a higher percent of the mix (ie skinny jeans and bling) and less of a fashion follower. This has pushed operating margins past peak levels. We’re all for upping the fashion component of a business. But the company needs to spend accordingly to sustain such growth, and mitigate the likelihood of a miss. We’re not convinced that’s the case here. Also, with the succession plan for a co-CEO structure (one person from Ops and the other from merchandising) it does not exactly scream ‘stability.’


Some other key factors we like to consider…

  1. Our SIGMA analysis for ARO is definitely not headed in the right direction. Yes, it is currently in the sweet spot where sales are growing faster than inventories and margins are up yy, but the sales/inventory spread is eroding, and margin compares get very tough in 1.5 quarters.
  2. Taking a longer term view, margins are beyond peak. Try finding another retailer where you can say that.
  3. Sentiment is generally positive. 55% buys, and only 7% sells. Price is deviating big time from $47 price targets (charts below). Analysts will pound the table or catch a falling sword. 15% of float is short – while that is higher than we like to see, it is less than half of where it topped out a year ago.
  4. Management does nothing but sell. Seriously…they were not even buyers a year ago at $13. 


Maybe it’s too early to short this one. I’ll leave it to Keith to drill down timing/sizing (and will be back to our subs accordingly). But the setup certainly looks good.


First Look: ARO Setup Looking Sweet - ARO SIGMA


First Look: ARO Setup Looking Sweet - 2


First Look: ARO Setup Looking Sweet - arosellside


First Look: ARO Setup Looking Sweet - aroinsider




Some Notable Call Outs


  • Unless you are an avid Columbia Sportswear watcher you may have missed the company’s last two hires to come across the wires. First, on October 6th the company announced the addition of Kathleen McNally as creative director apparel. Kathy joins the company with experience at Nike, Lucy Activewear, and J Crew. Second, the company announced the addition of Adrienne Moser as general manager of apparel merchandising for the Columbia brand. Moser joins with experience from Lacrosse, Nau, and Patagonia. While we don’t personally know these two hires, we suspect there is a subtle message here as Columbia invests in upgrading its apparel offerings.


  • We have highlighted the success and intrigue with a number of U.S based members-only ecommerce sites selling fashion closeouts. One company we have not focused on is Vente-Privee, the French based predecessor to many of these stateside start-ups. Vente-Privee is said to be producing revenue of 650 million Euros annually and has now entered the rumor mill of potential acquisitions. While none of this can be confirmed, the valuation being thrown around suggests Vente-Privee is worth $1.5 to $2 billion! If true, it will not be long before a wave of IPO’s emerge across the membership-only space.


  • As talk of Black Friday begins to heat up, add Blu-ray DVD players to the list of items that are sure to be used as key traffic drivers in the consumer electronics department. Although there are several models currently priced under $200, it is now widely expected that the product will be promoted at the $100 price point aggressively throughout the holiday period.





-China protests extension of EU footwear tariff - The European Union has to decide whether to extent a 15-month tariff against Chinese and Vietnamese footwear for unfair competition. Chinese manufacturers and European buyers complain this will push prices up at the expense of consumers.

Beijing – A European Union plan to extend tariffs on Chinese and Vietnamese footwear by 16.5 and 10 per cent respectively for at least 15 months has sparked an outcry from China’s shoemakers. Led by the EU’s main shoe-producing members (Italy, Spain, France and Poland), the European Union has accused the governments of the two Asian nations of unfairly subsidizing their low-cost shoemakers. The EU first imposed duties in 2006 for two years claiming unfair competition. This was renewed in October of last year but, pending a review by the European Commission, tariffs should end on 3 January.



-U.K. Retail like-for-likes rise 2.8% in September - Clothing and footwear sales grew in September, led by a strong performance from kidswear and back-to-school ranges. Autumn ranges were impacted by the mild weather at the start of the month, with winter footwear and clothing sales picking up towards the end of the month, according to the BRC-KPMG Retail Sales Monitor. UK retail sales values rose 2.8% on a like-for-like basis in September, compared with a 1.5% fall in September last year. However, the September 2008 reporting period was weak due to turmoil in the financial markets. The September 2009 period covered by the report also included the August Bank Holiday weekend. Total sales were up 4.9% on a year ago, versus a 1% gain in September 2008. <drapersonline.com>


-U.K. Inflation falls to five-year low - The level of inflation has dropped to its lowest rate in five years as falling energy prices continued to cut the cost of living, according to reports. The Office for National Statistics reported that the consumer prices index fell to 1.1% in September on a year-on-year basis, down from 1.6% in August. In the year to September, the retail prices index annual inflation fell by 1.4%, compared with a fall of 1.3% in August. The main cause of the fall was cheaper electricity and gas bills. Prices of clothing and footwear put upward pressure on inflation as prices rose by more than a year ago across a range of items. <drapersonline.com>


-IPO Climate Warming for Some Retailers - In the last 10 weeks, three retailers in North America have filed statements regarding their intent to go public — two in the U.S. and one in Canada. The two Form S-1 filings with the Securities and Exchange Commission in the U.S. were Dollar General Corp. on Aug. 10 and Rue21 on Sept. 18. Dollarama is the Canadian firm that filed Sept. 10. A fourth retailer, VS Holdings, which operates The Vitamin Shoppe stores, filed its Form S-1 on July 23, and is set to price this month. VS Holdings will be the first retail IPO in two years. And it isn’t only the U.S. IPO market starting to simmer. Last month, two retailers outside North America unveiled plans to go public. Italy’s online discount retailer, Yoox, said it plans to list on the Italian Bourse in the first half of next year. Australia’s largest department store group, Myer, said it will return to the Australian stock market before Christmas. <wwd.com>


-Wealthy Americans to Spend 5% Less This Holiday - Wealthy Americans will spend an average of 5 percent less on gifts this holiday season because of uncertainty about the economic recovery, a survey from the American Affluence Research Center found. Respondents with average incomes of $300,000 said they will spend $2,380 on average this year, compared with $2,505 last year, according to the survey. Nine percent said they won’t buy any gifts, 38 percent said they will spend less, 59 percent said their expenditures will remain the same and 3 percent said they will spend more. <bloomberg.com>


-Manufacturers Face Pressure on Sustainable Practices - Manufacturers will continue to face pressures to implement responsible business practices, as they balance cost controls and profitability with environmental and consumer awareness. Speakers at the first Sustainable Fashion Forum held here last week, which coincided with other events highlighting the issue, stressed its importance and complexity. Organized by APLF to coincide with the Fashion Access trade show, the event drew speakers and attendees from across the supply chain spectrum. <wwd.com>


-Puma Sports India looks to become a complete lifestyle brand - Shoes and sportswear maker Puma Sports India Pvt Ltd, a subsidiary of Puma AG Rudolf Dassler Sport, is moving from being just a sports and accessories brand to a complete lifestyle brand. The company has entered into an exclusive retail collaboration with Gini & Jony to enter the kidswear market. In India, Puma markets a range of lifestyle products, including shoes, apparels, accessories, watches and even sunglasses. While Puma will keep production and imports under its control, the distribution will be through Gini & Jony. <indiaretailing.com>


-New CEO at Converse - Nike Inc. announced Monday that Michael Spillane will move up to CEO at Converse, taking over from Jack Boys after his retirement at the end of the year. Boys had been CEO of Converse, a wholly owned subsidiary of Beaverton, Ore.-based Nike, since 2001. In 2007, Spillane joined Nike as Converse’s president of North American footwear shortly before becoming president of North America and global product. His prior experience includes CEO roles at Polartec and Malden Mills, in addition to senior positions at Tommy Hilfiger and Jockey. Under his new title, Spillane will report to Eunan McLaughlin, president of Nike Inc. Affiliates. <wwd.com>


-CEO Golden Leads Turnaround at Hampshire - The company named Heath Golden its new president and chief executive officer in August, following a turbulent period that saw a failed merger bid in April with NAF Holdings II LLC, an investment vehicle controlled by Efrem Gerszberg, brother of Ecko Unlimited co-founder Seth Gerszberg. Golden — an attorney by training, who was elevated from the chief operating officer position — has reorganized management and is overseeing the final stages of a restructuring plan, which began in 2008. The plan has reduced head count at the New York-based company by 50 percent and is on course to save Hampshire $12.4 million in annual selling, general and administrative costs. Hampshire, whose business is comprised of 60% sweaters and 40% sportswear, has seen top-line sales decline 25% since 2005, from $322.4 million to $240.9 million in 2008. <wwd.com>


-JJB Sports Plans to Raise 100 Million Pounds in Equity Sale - JJB Sports Plc plans to raise £100 million ($161 million) in a share sale. The U.K. sporting goods chain said it reviewed a range of options to provide additional capital and confirmed it is completing arrangements for an equity issue. <sportsonesource.com>


-M&M's Rock with Kiss at Walmart - Mars Direct, a division of Mars Snackfood U.S., has stocked My M&M's Kiss Blend on Walmart shelves. For a limited time, the iconic faces of the band are appearing on M&M's chocolate candies. The range includes four customized packages with band members Gene Simmons, Paul Stanley, Tommy Thayer and Eric Singer featured. The candy rollout coincides with the release of Kiss' latest album Sonic Boom, only available at Walmart. <licensemag.com>


-Amazon UK to offer free delivery on all products for Christmas - Amazon UK will offer free delivery on all of its products in the run up to Christmas. The retail giant has scrapped the £5 threshold customers used to have to cross to qualify for free deliveries. It will be available for all items shipped by Amazon until January 1 2010. Amazon UK managing director Brian McBride said: “Christmas is coming and so it’s the perfect time to offer customers free shipping on every item available from Amazon.co.uk.




RESEARCH EDGE PORTFOLIO: (Comments by Keith McCullough): AZO


10/12/2009 02:58 PM


The Auto-Repurchase-Zone continues to underperform, but its making a higher low here. I'll cover red and re-short it on an up day. McGough and Levine remain bearish. KM





JCG: Tracy Gardner, President: Retail & Direct, sold 19,000 shares ($760k) after exercising the right to buy 19,000 shares, nearly 13% of total common holdings.





The six licensed casino operators in Macao voiced their support for local government’s intention to further regulate the development of the local gaming industry.  The operators agree with the government’s aim to prevent over-expansion without restriction.  Executive representatives from all of the concessionaires attended a meeting with officials from the Macao Special Administrative Region government, discussing issues concerning the gaming industry.


The long-term aim of the local government is to have a diversified economy in Macau.  This year the government has already moved to regulate the VIP gaming market by bringing in a junket commission cap.  The SAR government is also said to be drafting new laws and rules concerning the age limit of persons entering local casinos and the location of slot machine halls.  The proposed bill will preclude persons under the age of twenty-one from entering, or working at, local casinos, and gaming operators will also be forbidden from setting up new slot machine halls in local neighborhoods.  Plans to limit the number of tables in the market, subject to an ongoing government review of the number of tables in Macau, are also in place.  Steve Wynn views the policy as “a good idea”. 





Quemoy is considering building Taiwan’s first casinos.  A petition was collected by the head of Quemoy’s Democratic Progressive Party, calling for a referendum on the issue.   The opportunity being pitched by pro-gambling lobbyists is to transform the island from an undeveloped island controlled by the military and into a tourist destination for millions of mainlanders just 20 nautical miles away.


There is certainly not consensus on the issue in Quemoy.  The debate will be as heatedly contested as it was in Penghu, where voters unexpectedly rejected a proposal to allow gambling.  Even if a referendum is called and the people vote in favor of gambling, the decision would then go to the Taipei government, which is also divided over the issue.





During the China National Day Golden Week, from October 1 to October 7, the average occupancy rate of three-to-five star hotels in Macau reached 87.3%, 5.6% higher than the same period of 2008.  The average room rate of three-to-five star hotels was 1,226 patacas, up 15.5% y-o-y.  The number of mainland visitors coming to Macau during the National Day Golden week was 420,000, a 2.12% increase y-o-y.

real-time alerts

real edge in real-time

This indispensable trading tool is based on a risk management signaling process Hedgeye CEO Keith McCullough developed during his years as a hedge fund manager and continues to refine. Nearly every trading day, you’ll receive Keith’s latest signals - buy, sell, short or cover.