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LV: WEAK MARCH TAXI TRIPS

Takeaway: A difficult comp, but the March decline in taxi traffic suggests another disappointing GGR month that could depress Q1 EPS for MGM/WYNN

  • As seen in the chart below, monthly Strip non-Baccarat drop and NV taxi traffic closely track each other – correlation coefficient of 0.57 and a t-stat of 9.0
  • March taxi traffic declined 5.2% and while the comp was difficult at +10.9%, so was the non-bacc drop comparison, +6.2%
  • Following a strong January when GGR grew 15%, February was weak at –4% and now March is looking potentially lower as well
  • These are not exactly the figures of a ‘strong Las Vegas recovery’

LV: WEAK MARCH TAXI TRIPS - TS


Buy Germany On A Pullback

With the German equity market (DAX) pulling back just under -1% today, we reiterate that we remain bullish on German equities and recommend buying the market on down days.

 

We are well aware that the DAX is already up 20.5% YTD (vs SPX ~ 2%), yet we think it will pay to obey the commands of the central planners, in particular Mario Draghi’s “whatever it takes” ECB policy position.

 

To reiterate our thesis:

  • QE is only just beginning; the euro should continue to weaken; Germany is likely to disproportionately benefit due to exports; and asset classes like equities are likely to inflate due to money creation
  • The German economy sits in the sweet spot to benefit from a weaker euro as its exports account for a monster 47% of German GDP
  • Since the ECB announced QE on 1/22/15 the correlation between the DAX and EUR/USD is -0.84, a strong negative correlation that we expect to persist as the ECB keeps its foot on the QE pedal for longer than its intended target (late 2016)
  • Recommending long the DAX (HEWG or EWG) and short EUR/USD (FXE)

 

If you missed our call “Germany: Still Bullish” on 4/14, CLICK HERE for a 30 minute video replay that walks through 40 slides of supporting material.

 

Already this week there have been a number of “fundamental” data points that we think will grind the EUR/USD lower and the German equity market higher:

  • There appears to be no resolve on Greece’s debt issues, with Friday’s Eurogroup meeting expected to pass without formal loan/concession agreements. The next catalyst is an IMF loan repayment due May 12th.
  • Everyone from Draghi, Junker, and the German leadership was out this week confirming that a “Grexit” is off the table. Ultimately we think debt restructuring is the likely outcome, and we expect a long timetable and political consternation to get the Greeks to better meet Eurozone demands & conditions.
  • German ZEW economic survey for APR showed an improvement for the 6th straight month in Current Expectations (70.2 vs 55.1), however the forward looking Expectations survey dipped slightly to 53.3 vs 54.8, the first tick down after 5 straight months of improvement.
  • The German Economy Ministry revised up its outlook on German growth, with 2015 GDP forecast at 1.8% vs prior 1.5% and 2016 GDP at 1.8% vs prior 1.6%.
  • From a quantitative perspective the DAX remains in a bullish formation, trading above its TRADE, TREND, and TAIL levels of support, whereas the EUR/USD remains in a bearish formation, trading below its TRADE, TREND, and TAIL levels of resistance. (see charts below)

Buy Germany On A Pullback - vv. dax

Buy Germany On A Pullback - vv. eur


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 80.65%
  • SHORT SIGNALS 78.64%

Keith's Macro Notebook 4/22: China | USD | Housing

Hedgeye Macro Analyst Darius Dale shares the top three things in CEO Keith McCullough's macro notebook this morning.


The Global Central Planning Circus (China Edition)

The Shanghai Composite? It is up another +2.4% this morning to +36% year-to-date (a new high). My, oh my… And, get this, China is up +92% since growth and inflation really started to slow in October of 2014!

 

Meanwhile, observe the *Record* weekly gain in Chinese stock brokerage accounts opened this week. 3,250,000 accounts were opened (per Sina.com.)

 

No issues here. This will all end really well. Move along.

 

The Global Central Planning Circus (China Edition) - y77

 

Editor's Note: This is an excerpt from Hedgeye morning research today. Click here for more information and how you can become a subscriber.


China, USD and Housing

Client Talking Points

CHINA

The Shanghai Composite is up another +2.4% this morning to +36% year-to-date (new high) and, get this, +92% since growth and inflation really started to slow in Oct of 2014! A *Record* weekly gain in Chinese stock brokerage accounts opened this week (3.25M) per Sina.com.

USD

The U.S. Dollar backs off again this morning as macro markets continue to price in a Lower-For-Longer Fed (FOMC meeting is next week) - both our Foreign Currency and 10YR UST Yield risk ranges are tightening now – that implies less short-term volatility in both big macro markets if the Fed delivers on dovish (for now).

#HOUSING

We’ll see where the bears live today/tomorrow as we get both Existing and New Home Sales reports; ITB (our favorite Housing ETF) +1.4% in a down tape yesterday – that sub-sector is +8.6% year-to-date and we think for good fundamental reasons.

 

Asset Allocation

CASH 32% US EQUITIES 14%
INTL EQUITIES 16% COMMODITIES 2%
FIXED INCOME 30% INTL CURRENCIES 6%

Top Long Ideas

Company Ticker Sector Duration
MTW

MTW revised down its 2015 guidance for the Foodservice Equipment segment and preannounced a weaker than expected 1Q 2015. Sales in the quarter are a noteworthy miss, but we do not believe that the release has relevance for our sum-of-the-parts valuation thesis, and see many reasons to anticipate stronger operating results in 2H 2015.  Basically, we think investors stand to be paid for suffering through this volatility, with potential share price upside on separation ranging from the high 20s to low 40s. Near-term profit weakness is partly why the shares are ‘cheap’, and we think holders may be compensated well for the volatility. The shares are currently trading lower on a weaker than expected 1Q15, but 2Q15 should show improved Crane segment results and 2H should show better Foodservice Equipment results.

ITB

iShares U.S. Home Construction ETF (ITB) is a great way to play our long housing call. The housing data was mixed in the latest week with the April homebuilder confidence survey (NAHB HMI) putting in a strong sequential improvement, while March Housing Starts were a bit soft. The National Association of Home Builders (NAHB) released its April Housing Market Index survey (HMI) – essentially a survey of builder confidence. The print was strong as it showed a nice bounce across all three survey categories: traffic of prospective buyers, current conditions, and expectations 6 months out.  Housing Starts were up sequentially in March, but by less than the market expected. Total Starts rose by 2% to 926,000 (seasonally-adjusted annualized rate) from 908,000 in February.

TLT

On the domestic fixed income front we’re looking at lower yields for longer. Lower yields benefit those slow-growth fixed income cash flows tied to the treasury curve (yields down, bonds up). TLT sets-up nicely in a slow-growth, deflationary setting because inflation missing=expectation for even easier policy=more central-planning cowbell=lower yields for longer.

Three for the Road

TWEET OF THE DAY

On the domestic fixed income front we’re looking at lower yields for longer. Lower yields benefit those slow-growth fixed income cash flows tied to the treasury curve (yields down, bonds up). TLT sets-up nicely in a slow-growth, deflationary setting because inflation missing=expectation for even easier policy=more central-planning cowbell=lower yields for longer.

QUOTE OF THE DAY

Seize the day, and put the least possible trust in tomorrow.

Horace

STAT OF THE DAY

Purchase Applications are up +5% week-over-week and accelerating to +15.4% year-over-year.


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