LEISURE LETTER (04/02/2015)



OPAP - is extending an open invitation for the Expression of Interest (EoI) by interested parties regarding the concession of the right to install and operate 18.500 VLTs in Greece. The EoI process will run until 30 April 2015. The full EoI document plus other relevant information can be found at


The EoI process will be followed with the issuance of an RFP in an open, international tender for the submittal of binding financial proposals by prospective concessionaires.  Participation in the EoI process will not be a prerequisite for participating in the tender process which will follow.

Takeaway: The 2nd round of Greece is an important growth opportunity for SGMS and GTECH and will be closely watched.


Genting Singapore - As stated in the March 9th and 11th Announcements, the share buy-backs referred to in the Announcements do not constitute the purchase, redemption or acquisition by the Company of its own shares under the Isle of Man Companies Act 2006 until the name of the Company has been registered in its Isle of Man register of members in respect of those shares. The Company wishes to inform that the name of the Company has been registered in its Isle of Man register of members in respect of 11,989,400 shares which are the subject of the share buy-backs referred to in the Announcements, and such shares have been cancelled on 1 April 2015.

Takeaway:  Those shares represented only 1% of outstanding shares.


Genting HK-  Genting Hong Kong is seeking shareholder approval for a new mandate to dispose of NCLH shares at the company's discretion. This gives it the flexibility to sell shares at appropriate occasions, without having to get approval for each transaction.


Genting HK's 2014 mandate for selling up to just under 56.82m NCLH shares is expiring on April 25 and, as expected, a new 12-month mandate has been proposed.  Under the 2014 mandate, Genting HK has sold 6.25m NCLH shares to date.


In a filing Tuesday, Genting HK said the future disposal may constitute a major transaction or a 'very substantial disposal.' 



LVS - Sands Bethlehem wants to expand its gaming floor with the addition of a multimillion dollar live dealer electronic table game stadium. Sands officials made an informational presentation for the Pennsylvania Gaming Control Board on Tuesday. Sands has yet to apply to the board to add the gaming stadium.

If approved, the 150 betting terminal, live dealer electronic gaming stadium would be the first in a Pennsylvania casino. It would feature four to eight live dealers.



AirBnB - starting today Airbnb will allow Americans to book accommodations in Cuba.  More than 1,000 properties are currently available across the island with 40% in Havana. Airbnb believes Cuba could become one of its largest markets in Latin America. 



RCL - Bernard Aronson, a director of Royal Caribbean Cruises Ltd. since 1993, has decided not to stand for re-election at the company's upcoming Annual Shareholders Meeting in May, citing the time commitments required of his new responsibilities.  In February 2015, Aronson was named by President Obama as U.S. Special Envoy to the Colombian Peace Process.


CCL - Following its inaugural Europe season in 2016, Holland America Line’s new Koningsdam will homeport at Port Everglades in Fort Lauderdale, Fla.

The ship will sail a series of Caribbean voyages and one cruise to the Bahamas from November 2016 through March 2017. Itineraries range from one four-day cruise to seven days and 10 and 11 days.


NCLH - is testing an enhanced room service menu on Breakaway-class ships that incurs a convenience charge of up to $7.95 per order. Room service orders by Haven and suite passengers will not be charged the convenience fee.  


No comment yet on whether this charge will roll out to the rest of the fleet.

The new room service fee comes shortly after the cruise line instated an automatic 18% gratuity on all specialty and entertainment dining.


Takeaway: Sure these changes would benefit onboard yields but why would potential cruisers want the higher costs by sailing NCL?


BYD - The Borgata casino has confirmed it will file an appeal of its property tax assessment for this year by Wednesday’s deadline, the Philadelphia Inquirer reported. Last year, the Borgata won $88.25 million in a settlement with AC over its appeal of 2014 property taxes.





March GGR shares - March GGR shares: SJM (23.2%), Sands China (21.4%), Galaxy (20.0%), MPEL (14%), Wynn Macau (11.2%), MGM China (10.2%).



Takeaway: Wynn had the most improvement month-over-month while LVS took the biggest hit. New junkets at Wynn finally making an impact.


Online bust - Mainland China police have apprehended 1,071 people allegedly involved in a large online gambling network, said Xinhua. The agency described it as the largest ever enforcement action against an illegal operation trading in bets on the results of China’s legal state lotteries – the welfare lottery and the sports lottery.



Gaming taxes - The government has reduced its estimate of revenue from gaming tax this year by 27.3% to MOP84 billion (about US$10.5 billion) in view of the downturn in the casino market, Secretary of the Economy and Finance Lionel Leong Vai Tac has said.


Leong told the Legislative Assembly that this means he now expects revenue from all sources of MOP119.9 billion, 22.4% less than before. The government now forecasts that gross gaming revenue will average MOP20 billion per month this year, having previously forecast an average of MOP 27.5 billion.


Takeaway: Leong's forecast would imply a 31% YoY decline, below our estimate of 25%.


Package tours hotel stats (Feb 2015) - Attributable to the Lunar New Year holidays, visitors on package tours increased by 13.2% YoY to 983,000. Package tour visitors from Mainland China increased by 21.5% YoY.


A total of 756,000 guests checked into hotels and guesthouses, down by 9.9% YoY. Guests from Mainland China (512,000) and Hong Kong (87,000) decreased by 6.4% and 16.2%. In the first two months, hotel guests totaled 1,559,000, down by 8.9% YoY; the average occupancy rate stood at 79.8%, a decrease of 6.1% points.




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.

[Unlocked] Keith's Daily Trading Ranges

This is a complimentary look at Daily Trading Ranges - our proprietary buy and sell levels on major markets, commodities and currencies sent to subscribers weekday mornings by CEO Keith McCullough. It was originally published April 02, 2015 at 07:13. Click here to subscribe.

[Unlocked] Keith's Daily Trading Ranges - Slide1


[Unlocked] Keith's Daily Trading Ranges - Slide2

[Unlocked] Keith's Daily Trading Ranges - Slide3

[Unlocked] Keith's Daily Trading Ranges - Slide4

[Unlocked] Keith's Daily Trading Ranges - Slide5

[Unlocked] Keith's Daily Trading Ranges - Slide6



[Unlocked] Keith's Daily Trading Ranges - Slide7

[Unlocked] Keith's Daily Trading Ranges - Slide8

[Unlocked] Keith's Daily Trading Ranges - Slide9

[Unlocked] Keith's Daily Trading Ranges - Slide10

[Unlocked] Keith's Daily Trading Ranges - Slide11
[Unlocked] Keith's Daily Trading Ranges - Slide12

[Unlocked] Keith's Daily Trading Ranges - Slide13

UST 10YR Yield, OIL, Russia

Client Talking Points

UST 10YR Yield

UST 10YR Yield: 1.85% this morning, it is testing the low-end of our immediate-term 1.82-1.93% risk range as lower-for-longer starts to get priced in – both the March ADP and ISM reports slowed, sequentially, yesterday –“data dependent” rates.


The USD was overbought and was the right immediate-term signal, alongside the inventory numbers yesterday, that helped Oil bounce big to lower-highs – WTI risk range has tightened to $45.81-50.99, so we would re-short Oil and its related stocks/bonds closer to the top-end of the range.


+1.5% this morning for the Russian Trading System Index, finally tapping the top-end of its 837-929 risk range – We have been waiting for a re-entry point on the short side there, it looks like we’re going to get that.

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

Manitowoc  (MTW) is splitting the business into two companies. Given the valuation differential between the sum-of-the-parts and the current enterprise value of the company, the break-up should be a substantial positive. Recent nonresidential and nonbuilding construction data remains firm for 2015, which suggests that MTW’s crane sales should see a pickup in the first half of the year. The Architecture Billings Index (a survey of architects) typically leads nonresidential and residential construction spending by approximately 9-12 months. More importantly, the ABI Index leads MTW Crane Orders by 2 quarters.


iShares U.S. Home Construction ETF (ITB) is a great way to play our long housing call, U.S. #HousingAccelerating remains 1 of the Top 3 Global Macro Themes in the Hedgeye Institutional Themes deck right now. Builder Confidence retreated for a 3rd consecutive month in March and New Home Starts in February saw their biggest month-over-month decline since January 2007.  We think the underlying reality is more sanguine with the preponderance of the weakness in the reported February data largely attributable to weather.  

While labor supply constraints may serve as a drag to builder confidence, presumably it is rising demand trends that are driving tighter conditions in the resi employment market.  All else equal, we’d view improving demand as a net positive.  On the New Construction side, while the sharp drop in Housing Starts captured most of the headlines, we believe the real story was in the 3% gain in permits. We'd expect to see a big rebound in the next two months in housing starts as the data plays catch-up to the thaw.


Low-volatility Long Bonds (TLT) have plenty of room to run. Late-Cycle Economic Indicators are still deteriorating on a TRENDING Basis (Manufacturing, CapEX, inflation) while consumption driven numbers have improved. Most of the #Deflation trades bounced to something less-than-terrible (both absolute and relative) for 2015, whereas the real alpha trending in macro markets continues to play to the lower-rates-for-longer camp’s advantage.

Three for the Road


WE'LL DO IT LIVE!!! Join The Macro Show at 8:30AM ET (for free) w @KeithMcCullough @Hedgeye 



"Yesterday's homeruns don't win today's games."

-Babe Ruth


Walmart truck driver base salary: $82,000

get free cartoon of the day!

Start receiving Hedgeye's Cartoon of the Day, an exclusive and humourous take on the market and the economy, delivered every morning to your inbox

By joining our email marketing list you agree to receive marketing emails from Hedgeye. You may unsubscribe at any time by clicking the unsubscribe link in one of the emails.

Buy Everything?

This note was originally published at 8am on March 19, 2015 for Hedgeye subscribers.

“A smile is a curve that sets everything straight.”

-Phyllis Diller


Oh, you’re not smiling this morning? Then you didn’t buy and cover everything within 3-6 minutes of the Fed statement yesterday. Consensus Long Bond Bears were not positioned for that!


Rather than rehash the who said what and when in yesterday’s epic Global Macro move (Dollar Down, Rates Down à Everything Reflation and Yield Chasing Up), here’s the replay of the LIVE coverage I did:


In the spirit of trying to “ESPN Finance” (i.e. provide live coverage and analysis from pros instead of journos), I figured I’d put myself and my analyst, Ben Ryan, to the real-time test. I’m glad we did. Evolving this profession is a big growth opportunity.


Buy Everything? - espnfinance


Back to the Global Macro Grind


The thing about ESPN is that they became the world’s curator of what mattered in sports (replays!). After yesterday’s macro market game was played, you know the score – and I highly doubt you want to watch 25 minutes of me analyzing, post game…


So go to minute 13 of that video, and I get to the highlight that mattered most. Apologies in advance for my tone and choice of words – when it’s game time, I care less about style, and more about results.


From an immediate-term perspective, “the call” yesterday was simple – buy everything.


Ok, maybe not everything – in immediately acknowledging the statement as dovish, you obviously wouldn’t have bought the US Dollar or TBT (Ultra Short 20yr Treasury ETF)… but you could have bought damn near anything else!


To review:


  1. Not only did Janet Yellen NOT make a Policy Mistake (signaling explicit rate hikes)…
  2. She masterfully pushed out the “dots” on both the timing and pace of hikes (if there will be any at all)


In doing so, she basically crushed whoever was betting on “rate liftoff” and may very well have put the guys who trade on inside information out of business too!


Can you imagine you had what you thought was the river card in hand (that she was going to remove the word “patient”) and put on a massive Long USD, Long Rates position with Utilities and REITS on the short side?


She removed the word alright – and then said “but that doesn’t mean we’ll be impatient.” Ha! Inasmuch as I am no fan of central planning, that was one of the best one-liners of the year. Bravo Janet – and shame on you insider-trading-bro!


In order to get these big macro moves right, you have to know where consensus is positioned in levered terms (in order to monitor that, we look at CFTC Non-Commercial futures and options positioning):


  1. US Dollar Bulls hit YTD highs at +81,210 NET long contracts at the beginning of the week
  2. Euro Bears hit all-time highs with a net SHORT position of -185,661 contracts
  3. SP500 (Index + Emini) net SHORT position was at YTD high of -39,891 contracts
  4. Russell 2000 net SHORT position hit a YTD high of -40,793 contracts
  5. Long-bond Bears ramped the net SHORT position in the 10yr Treasury to -173,194 contracts


Therefore, the call to “buy everything”, in the moment was more like a call to do the opposite of how the crowd was positioned. This job is not easy, but that’s why it was an easy call to make.


Context is the most important thing when making a high conviction “call.” I don’t make them frequently.


Ok ESPN guy - now what?


I’m just going to go back to doing what we always do – executing on our process. While the Fed could have changed everything yesterday, it did not. The USA has another month left in #Quad1, then moves back into #Quad4.


Yellen’s decision keeps our non-consensus view of lower-rates-for-longer on the table (US Treasury 10yr Yield smoked back down to 1.94%, German 10yr Bund Yield at all-time lows of 0.19%, etc.) and she reiterated our #deflation call.


With commodities having crashed again in March (and Oil’s Down Dollar Viagra bounce from yesterday fading, fast), reality is that Janet’s Fed is going to get more, not less, #deflation data when the March data gets reported in April.


As a Long Bond Investor (total Return of TLT up approximately +5% YTD vs SP500 +2%), you can smile this morning. If you’re still long the Russell 2000 (IWM), Healthcare (XLV), Consumer Discretionary (XLV), and Housing (ITB) stocks, you can smile too.


Thanks Janet, for keeping everything less-straight!


Our immediate-term Global Macro Risk Ranges are now (intermediate-term TREND views in brackets):


UST 10yr Yield 1.88-2.05% (bearish)
SPX 2076-2105 (bullish)
RUT 1230-1257 (bullish)
DAX 11811-12239 (bullish)
VIX 13.51-16.12 (bullish)
USD 97.39-100.93 (bullish)
EUR/USD 1.04-1.09 (bearish)

Oil (WTI) 41.32-46.34 (bearish)


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Buy Everything? - 03.19.15 chart

CHART OF THE DAY: Who Gets Paid to Battle #Deflation?

CHART OF THE DAY: Who Gets Paid to Battle #Deflation? - 04.02.15 chart


Editor's Note: This is a brief excerpt from today's Morning Newsletter written by Hedgeye CEO Keith McCullough. Click here for info on how you can subscribe.


What if US bond yields break to all-time lows, and I just stop? This is not the 1990s. As you can see in our Chart of The Day, the world is getting older at its fastest rate. As Global #GrowthSlowing gets priced into bond yields, your market life gets easier accepting that.


Lower For Longer

“I find my life is a lot easier the lower I keep everyone’s expectations.”

-Bill Watterson


For those of you who aren’t into Hedgeye-style Fed and Global #Deflation cartoons, may I suggest some ole school Calvin & Hobbes? Bill Watterson syndicated that uniquely American comic strip during some of the best of US economic times, then stopped.


Lower For Longer - 11


“Watterson stopped drawing Calvin and Hobbes at the end of 1995 with a short statement to newspaper editors and his readers that he felt he had achieved all he could in the medium.” (Wikipedia)


What if US bond yields break to all-time lows, and I just stop? This is not the 1990s. As you can see in our Chart of The Day, the world is getting older at its fastest rate. As Global #GrowthSlowing gets priced into bond yields, your market life gets easier accepting that.


Back to the Global Macro Grind


As we roll into our Q2 Global Macro Themes call (April 7th) and I look back on the most thought provoking slides of our Q1 deck, this chart we are showing you again today is a critical one to consider from a long-term global demographic perspective.


What we are showing you here is the world’s 65+ year-olds as a percentage of 25-54 year-olds, in rate of change terms. And the investment implications associated with this demographic reality are quite simple:


The number of aging baby boomers who are inclined to allocate retirement assets to Fixed Income instead of Alibaba (BABA) or Go Daddy (GDDY) stock is accelerating! So I’ll reiterate our uber bullish call on the Long Bond (TLT) again this morning.


Lower-rates-for-longer? Yep. Here’s what drove the outperformance of bonds vs. US stocks (again) yesterday:


  1. In rate of change terms, the ADP employment report slowed (again), sequentially in March
  2. USA’s ISM slowed to 51.5 in March vs. 52.9 in February
  3. The “employment” component of the ISM slowed to 50.0 MAR vs. 51.4 FEB


In other words, anything that walks or quacks like a slowing US jobs picture is not a duck. To the bond market, it’s a dove. And, my newest bff Janet, is the Mother of All Doves!


In terms of risk management levels for the US 10yr Bond Yield:


  1. The immediate-term TRADE range is now 1.82-1.93%
  2. Long-term TAIL risk resistance remains up at 2.39%
  3. And there’s no intermediate-term TREND support to the all-time closing lows


Since all-time remains a very long time, we’re thinking that Americans who are predisposed to get themselves levered up with cheap credit are going to absolutely love the idea of a 3% 30yr mortgage rate.


Put another way, the more right we are on Global #Deflation and slower-for-longer Global GDP growth rates, the more bullish we’ll probably get on Housing (ITB) as all of the “folks” who are paying peak US rents, will see the affordability equation on buying improve.

Lower For Longer - Deflation cartoon 02.24.2015

Getting back to why the Tizzle (TLT) shot up to +5.1% YTD yesterday (+1.3% on the day vs. SP500 -0.4% to 0.0% for 2015), what could Mr. Macro Market possibly be front-running now? How about the 1st slowing NFP (non-farm payroll) number in the last 7 months?


My man Hatzius @Goldman wrote a nice piece of rate of change research on this NFP matter last week that our most recent Employment Cycle conference call pointed to in the week prior to that – the probability of payroll gains slowing, is rising.


And, at the end of the day, with:


A)     #StrongDollar +

B)      Global #Deflation


Already messing with Janet’s former June rate hike expectations… what do you think she is going to do next if C) is a deteriorating series of US employment data?


Ah, lower-for-longer, eh! I find my life easier still thinking this way.


Our immediate-term Global Macro Risk Ranges are now (with intermediate-term TREND views in brackets):


UST 10yr Yield 1.82-1.93% (bearish)
SPX 2037-2076 (neutral)

RUT 1 (bullish)
Nikkei 19002-19484 (bullish)

VIX 13.13-16.67 (bullish)

USD 96.93-99.11 (bullish)
EUR/USD 1.06-1.10 (bearish)
YEN 118.71-120.95 (bearish)
Oil (WTI) 45.81-50.99 (bearish)
Gold 1166-1208 (bearish)


Best of luck out there today and enjoy your long weekend,



Keith R. McCullough
Chief Executive Officer


Lower For Longer - 04.02.15 chart

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.