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Listen to the Levels (Raising Cash)

Listen to the Levels (Raising Cash) - 88

 

If you can’t make money in stocks or bonds, what do you do?

 

This is one of the main reasons we have been steadily raising cash to the highest level in our Hedgeye Asset Allocation Model of the year.

 

62% to be precise.

 

Over in Europe, stocks continue to break our immediate-term TRADE lines of support with the German DAX leading losers this morning down -2.3%. If ECB Mario Draghi lets Euro rates do this, he’ll let stocks drop faster. 

 

Listen to the Levels (Raising Cash) - 56


LEISURE LETTER (05/12/2015)

Tickers:  WYNN

 

EVENTS  

  • May 13 - IGT 1Q CC 8am, ; PW: 2660253

  • May 14 - Genting Singapore 1Q CC  6am

  • May 14 - Macau Legend Development 1Q CC 8:30pm

COMPANY NEWS  

WYNN - The largest individual shareholder, T.Rowe Price, in Wynn Resorts Ltd has cut its stake by almost 40%, according to a filing to Nasdaq on Monday. TRowe now holds 10.4 million shares of WYNN, down from ~17.1 million it held .

ARTICLE HERE 

 Takeaway: Long only's finally capitulating in Macau stocks?

 

GC.CN - Great Canadian Gaming to acquire Casino New Brunswick for ~$95M. The purchase price represents an acquisition multiple of approximately 8.0x – 8.5x the casino's 2014 normalized EBITDA. Closing is expected to occur in fall of 2015.

 

Universal Entertainment - The Philippine gaming regulator (PAGCOR) has confiscated a PHP100-million (US$2.2 million) guarantee payment from Tiger Resort, Leisure and Entertainment Inc – developer of casino resort Manila Bay Resorts (pictured in a rendering) – citing delays in the project.

 

Francis Hernando, VP of PAGCOR said that the provisional gaming licence is in danger of being suspended because Tiger Resort has not met the minimum requirement of 50 percent project completion by the March 2015 deadline.

In February, Tiger Resort sought for an extension of the deadline to the second quarter of 2017, citing changes in the design of the casino project – a request denied by Pagcor, the news agency reports.

ARTICLE HERE 

Takeaway: Okada's Philippines project is in serious trouble.

 

Viking - Delivery of Viking Sky has been rescheduled from June 2016 to February 2017.

INDUSTRY NEWS

Singapore licenses - Singapore has "no plans" currently to offer additional casino licenses when the moratorium on such licences expires in 2017, Senior Minister of State for Trade and Industry Lee Yi Shyan said yesterday.

 

The Government will instead focus on working with the two integrated resorts (IRs) to ensure their attractions and services continue to meet the needs of Singaporeans and enhance the country's tourism appeal, he added in Parliament.

ARTICLE HERE

 

Macau Cash Handouts - The head of the Social Welfare Bureau, Iong Kong Io, said yesterday that the government does not intend to bring an end to its cash handout program next year, Radio Macau reported. “I don’t think the cash handout program will be canceled. The government is assessing this matter according to its budget; so the cash handout value will either decrease or be maintained,” he stated.

ARTICLE HERE

 

Iowa SS April Gaming Revs: -2% YoY

 

Puerto Vallarta port calls canceled - Civil unrest and violence around Puerto Vallarta led to cruise lines canceling ship calls there.

ARTICLE HERE 

MACRO

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.


ICI Fund Flow Survey | Slippery Slope in Active Equity Flows | Worst Week in Almost a Year

Takeaway: Domestic equity flows continue to stand out. The category had its worst net outflow in 44 weeks with a -$7.3 billion redemption.

This note was originally published May 07, 2015 at 07:32 in Financials. For more information on how you can subscribe to our services click here.

Investment Company Institute Mutual Fund Data and ETF Money Flow:

Domestic equity fund flows in 2015 continue to accelerate to the downside. In the 5-day period ending April 29th, investors withdrew a net -$7.3 billion from the asset class, the category's largest outflow in 44 weeks. As previously outlined, seasonality plays a substantial part of investor allocations and the first quarter since 2007 has been the most robust period annually with capital flow declining linearly into the fourth quarter (see our seasonality outline here). While this week's redemption is alarming, we are expecting continued soft sledding especially considering weaker equity market perform during the past month. We continue to highlight our highest conviction Short/Avoid idea T Rowe Price as most impacted by this trend.

 

ICI Fund Flow Survey | Slippery Slope in Active Equity Flows | Worst Week in Almost a Year - z 44

 

In the most recent 5-day period ending April 29th, total equity mutual funds put up net outflows of -$3.2 billion, trailing the year-to-date weekly average inflow of +$988 million and the 2014 average inflow of +$620 million. The outflow was composed of international stock fund contributions of +$4.1 billion and domestic stock fund withdrawals of -$7.3 billion. International equity funds have had positive flows in 48 of the last 52 weeks while domestic equity funds have had only 10 weeks of positive flows over the same time period.

 

Fixed income mutual funds put up net inflows of +$3.1 billion, outpacing the year-to-date weekly average inflow of +$2.3 billion and the 2014 average inflow of +$929 million. The inflow was composed of tax-free or municipal bond funds contributions of +$1.0 billion and taxable bond funds contributions of +$2.1 billion.

 

Equity ETFs had net subscriptions of +$3.7 billion, outpacing the year-to-date weekly average inflow of +$1.9 billion and the 2014 average inflow of +$3.2 billion. Fixed income ETFs had net outflows of -$363 million, trailing the year-to-date weekly average inflow of +$1.5 billion and the 2014 average inflow of +$1.0 billion.

 

Mutual fund flow data is collected weekly from the Investment Company Institute (ICI) and represents a survey of 95% of the investment management industry's mutual fund assets. Mutual fund data largely reflects the actions of retail investors. Exchange traded fund (ETF) information is extracted from Bloomberg and is matched to the same weekly reporting schedule as the ICI mutual fund data. According to industry leader Blackrock (BLK), U.S. ETF participation is 60% institutional investors and 40% retail investors.   

 

Most Recent 12 Week Flow in Millions by Mutual Fund Product: Chart data is the most recent 12 weeks from the ICI mutual fund survey and includes the weekly average for 2014 and the weekly year-to-date average for 2015:

 

ICI Fund Flow Survey | Slippery Slope in Active Equity Flows | Worst Week in Almost a Year - ICI2

 

ICI Fund Flow Survey | Slippery Slope in Active Equity Flows | Worst Week in Almost a Year - ICI3

 

ICI Fund Flow Survey | Slippery Slope in Active Equity Flows | Worst Week in Almost a Year - ICI4

 

ICI Fund Flow Survey | Slippery Slope in Active Equity Flows | Worst Week in Almost a Year - ICI5

 

ICI Fund Flow Survey | Slippery Slope in Active Equity Flows | Worst Week in Almost a Year - ICI6

 

 

Most Recent 12 Week Flow Within Equity and Fixed Income Exchange Traded Funds: Chart data is the most recent 12 weeks from Bloomberg's ETF database (matched to the Wednesday to Wednesday reporting format of the ICI), the weekly average for 2014, and the weekly year-to-date average for 2015. In the third table are the results of the weekly flows into and out of the major market and sector SPDRs:

 

ICI Fund Flow Survey | Slippery Slope in Active Equity Flows | Worst Week in Almost a Year - ICI7

 

ICI Fund Flow Survey | Slippery Slope in Active Equity Flows | Worst Week in Almost a Year - ICI8

 

Sector and Asset Class Weekly ETF and Year-to-Date Results: With GDP coming in lower than expected and concerns over the Fed raising rates, investors made net redemptions from almost all sector SPDR ETFs. The long-treasury TLT and materials XLB experienced the highest percentage withdrawals. The TLT lost -3% or -$142 million. The XLB lost -4% or -$113 million.

 

ICI Fund Flow Survey | Slippery Slope in Active Equity Flows | Worst Week in Almost a Year - ICI9

 

 

Net Results:

The net of total equity mutual fund and ETF flows against total bond mutual fund and ETF flows totaled a negative -$2.2 billion spread for the week (+$555 million of total equity inflow net of the +$2.8 billion inflow to fixed income; positive numbers imply greater money flow to stocks; negative numbers imply greater money flow to bonds). The 52-week moving average is +$1.1 billion (more positive money flow to equities) with a 52-week high of +$27.9 billion (more positive money flow to equities) and a 52-week low of -$15.5 billion (negative numbers imply more positive money flow to bonds for the week.)

  

ICI Fund Flow Survey | Slippery Slope in Active Equity Flows | Worst Week in Almost a Year - ICI10

 

Exposures: The weekly data herein is important for the public asset managers with trends in mutual funds and ETFs impacting the companies with the following estimated revenue impact:

 

ICI Fund Flow Survey | Slippery Slope in Active Equity Flows | Worst Week in Almost a Year - ICI11 

 

 

Jonathan Casteleyn, CFA, CMT 

203-562-6500 

jcasteleyn@hedgeye.com 

 

Joshua Steiner, CFA

203-562-6500

jsteiner@hedgeye.com

 

 

 

 

 


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.

Keith's Macro Notebook 5/12: 10YR | Europe | India

 

Hedgeye Director of Research Daryl Jones shares the top three things in CEO Keith McCullough's macro notebook this morning.


MACAU WEEKLY ANALYSIS (MAY 1-10, 2015)

Takeaway: While better sequentially, the first 10 days of table revs were disappointing. Remain negative on Macau.

CALL TO ACTION

While sequentially better due to the May holidays, daily table revenues dropped 40% from the comparable period last year. Comps ease in the 2nd and 4th period of the month so the full month GGR decline should look a little better – we’re forecasting -35% YoY for May.  Our thesis remains intact: Street estimates and valuations still do not appropriately reflect the deteriorating trends in the high margin base mass segment.

 

Please see our detailed note:  

http://docs.hedgeye.com/HE_Macau_5.12.15.pdf

 


Yields, Europe and India

Client Talking Points

UST 10YR

The UST 10YR move is getting a lot of coverage obviously, but it’s hard to believe consensus still isn’t contextualizing it within the broader move in Global Yields – this is massive volatility for sovereign bonds – on the day UST 10YR Yield +3bps, JGB +6bps, Bund +7bps, France +9bps, Spain +13bps. We didn’t nail this one. Looks #behavioral at this stage to us #charts.

EUROPE

If you can’t make money in stocks or bonds, what do you do? This is one of the main reasons for raising cash to the highest level (Hedgeye Asset Allocation Model) of the year. European stocks continue to break our immediate-term TRADE lines of support with the DAX leading losers this morning down -2.3%. If Mario Draghi lets Euro rates do this, he’ll let stocks drop faster. 

INDIA

India is one of the few markets that has been flat out weak throughout the year, irrespective of global bond/stock market moves. The BSE Sensex failed to recover @Hedgeye TREND support on the bounce last week, it is down -1.9% overnight to -1.8% year-to-date = Global #GrowthSlowing.

 

Asset Allocation

CASH 62% US EQUITIES 2%
INTL EQUITIES 4% COMMODITIES 2%
FIXED INCOME 28% INTL CURRENCIES 2%

Top Long Ideas

Company Ticker Sector Duration
VNQ

One way to invest in Lower-For-Longer, from an equity perspective, is being long U.S. REITS (VNQ). The highly anticipated Non-Farm Payrolls report came and went Friday, and it was largely a non-event. The change in non-farm payrolls was +223K vs. consensus estimates of +228K for April. Considering last month’s report was a bomb (revised to 85K from 126K), April had an easy comp. Our thesis on interest rates remains lower-for-longer, but that view is being tested in the short-term.

ITB

iShares U.S. Home Construction ETF (ITB) is a great way to play our long housing call. It was a relatively light data week for housing with weekly mortgage application data and the March employment report offering incremental updates on the current state of housing demand.  On the market side, interest rate volatility remained a concern for the public homebuilders but one we believe remains shorter-term in nature absent another expedited, step function increase in interest rates. We think the rate related pressure will be largely transient unless we see a further back-up in mortgage rates on the order of +50-100bps from here – a potentiality we would not view as probable at this point. On the fundamental side, the drumbeat of improvement remains ongoing.

TLT

iShares U.S. Home Construction ETF (ITB) is a great way to play our long housing call. It was a relatively light data week for housing with weekly mortgage application data and the March employment report offering incremental updates on the current state of housing demand.  On the market side, interest rate volatility remained a concern for the public homebuilders but one we believe remains shorter-term in nature absent another expedited, step function increase in interest rates. We think the rate related pressure will be largely transient unless we see a further back-up in mortgage rates on the order of +50-100bps from here – a potentiality we would not view as probable at this point. On the fundamental side, the drumbeat of improvement remains ongoing.

Three for the Road

TWEET OF THE DAY

MUST SEE TV

Hedgeye CEO @KeithMcCullough joins @MariaBartiromo on @FoxBusiness @OpeningBellFBN at 9:00am.

@Hedgeye

QUOTE OF THE DAY

I know nothing with any certainty, but the sight of the stars makes me dream.

-Vincent van Gogh

STAT OF THE DAY

China's Shanghai Composite Casino tacks on another +1.6% to +36.1% year-to-date (as Chinese growth slows).

 


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