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LEISURE LETTER (06/23/2015)



  • June 23 - CCL Q2 2015 earnings 10am 
  • June 23 - Virgin Cruises Announcement 11am
  • June 24 - PENN Opening of Plainridge Park Casino
  • June 25 - AC tax bill 

Headline News

Macau Junkets - Portion of hotel bookings for Junkets collapses. VIP gaming promoters seeking to accommodate their clients now book between 30% and 40% of all the city’s hotel rooms vs 80-90% previously.


Takeaway: More hotel rooms will have to be sold on a cash basis. RevPAR was already heading lower even before the upcoming room supply increases over the next few years, including 25% growth in 2016. 


LVS - The Venetian Macau rips up their sporting event contract. Initially scheduled to broadcast big sporting events, the Venetian rescinded the contract on June 19th.  Spokesperson for the Venetian Macau declined to comment on the matter. 



PENN - Plainridge general manager Lance George reported only minor problems during a trial testing. “The restaurants stressed out at lunch time, in the kitchens and in seating people, but that’s a minor stumble. The machines performed beautifully. We are certainly optimistic about opening for real on Wednesday,” he said.


MA Gaming Commissioner James McHugh explained that Massachusetts has the most restrictive gambling law in the country. More casino profits will go into treatment and prevention of gambling addiction than in other states. Slot machines can warn customers when they hit a self-imposed spending limit. There are no free alcoholic drinks. Taxes are higher. And there will be no smoking allowed inside Plainridge or other casinos being developed in Massachusetts. But, at the invitation-only soft opening Monday for the first of those gambling venues, some customers said they like the smoking ban.



Takeaway: We expect stronger than projected results from Plainridge following tomorrow's opening. We're projecting $400 win per day per slot, well above the Street, and our estimate could prove conservative. 


Macau Visitors - The DSEC indicated that visitor arrivals edged up from April 2,547,435 to 2,548,562 in May 2015, an increase of 0.9% YoY.

  • Same-day visitors totaled 1,386,839 (54.4% of total), up by 2.6% YoY. The average length of stay of visitors increased by 0.1 day YoY to 1.1 days.
  • Visitors from Mainland China totaled 1,690,987, up by 3.6% MoM but down slightly by 0.5% YoY; those traveling under the Individual Visit Scheme increased by 3.5% YoY to 752,982.  Guangdong visitation was up 2.4% in May.

LEISURE LETTER (06/23/2015) - v1

LEISURE LETTER (06/23/2015) - v2

Takeaway: Visitation broke a losing streak in May but Mainland China visitation remain negative. June is not looking good.


Massachusetts - Residents of New Bedford, MA, will vote on a proposed $650 million Foxwood resort casino for the city's waterfront.  Polls open at 7 a.m. Tuesday and close at 8 p.m. Voter approval is critical for the plan to advance in the competition for the state's third and final resort casino license.


Takeaway:  If approved, it is likely that the proposed New Bedford location would lure people from the Cape Cod region, whereas Plainville will service the Central Mass and South of Boston customer base.  


Asia Macro

  • Macau - May CPI +4.93%  YoY, up from +4.51% in April 
  • Singapore - May CPI -0.5% YoY, up from -0.5% in April 
  • China - Flash PMI 49.6 vs. Consensus 49.4 and 49.2 in May

Hedgeye Macro Team remains negative on Europe 

Takeaway:  European pricing has been a tailwind for CCL and RCL but a negative pivot here looks increasingly likely in 2015.


Takeaway: Following the May pause, June has resumed the sequential softening trend of the last 15 months


We are forced to lower our June forecast yet again. Bad luck in the VIP segment may be partly responsible, but volumes also appear softer. Following a few hints of stability in May, June has resumed the softening sequential trend. 2015 and 2016 Street EBITDA estimates are very much in doubt – we’re not even confident with our below consensus projections – not just from a potentially lower top line. We also think the Street has the mix wrong – base mass is worse than expected, with significant margin and EBITDA implications.


Please see our detailed note: http://docs.hedgeye.com/HE_Macau_6.23.15.pdf

Transporting Narratives

This note was originally published at 8am on June 09, 2015 for Hedgeye subscribers.

“Great is exactly what it isn’t.”

-Wallace Stegner


For some reason Willie Nelson is ringing in my head this morning. I’m on the road again.


And going West is where that quote from Stegner comes from. My Angle of Repose for the next 3 days will be across the sunny State of California, where I’m looking forward to debating Institutional Investors on what is really going on out there.


US and Global #GrowthAccelerating is exactly what isn’t right now. A #LateCycle US Labor report only reiterates that.

Transporting Narratives - It s different cartoon 06.08.2015


Back to the Global Macro Grind


For we strategist types, Transporting Narratives is fun. Meeting to meeting, that is what we do. So let’s start this morning’s narrative with the Transportation stocks.


In macro strategy there are some leading indicators that even the most creative storyteller can’t convince you that “it’s different this time.” When we went bullish on US #GrowthAccelerating in 2013, the Dow Transports (IYT) index was breaking out to the upside.


Now, after 73 months of a US economic expansion, it’s breaking down:


  1. Transports (IYT) led losers yesterday, down -2.1% vs. SPY -0.65%
  2. Transports (IYT) have been leading losers for the last month, -4.9%
  3. Transports (IYT) are now -8.7% for 2015 YTD


So what say you Mr. Global Growth Is Back man?


For those of us who have been on both the buy and sell side of the game, what we say with our #Timestamped positions speaks louder than our slide decks. On last week’s bounce, we signaled short the Transports (IYT) in Real-Time Alerts.


Here are my Top 3 ways to get out of the way on both US and Global #GrowthSlowing:


  1. Short Industrials (XLI) which continue to suck wind -2% YTD
  2. Short Financials (XLF) which failed (again) yesterday and remain in the red -0.4% YTD
  3. Short Transports (IYT) -8.7% YTD


Did I mention the Transports?


Actually there is a 4th way to express the Fed being more dovish (again) at the June 17th meeting, which is to take weakness in the US Dollar as a correlated tax on a #LateCycle and slowing US consumer (XRT).


Don’t forget that the US Retail Sales Growth cycle peaked in Q4 of 2014 at +4.5-4.7% year-over-year growth and has since slowed in its most recent reading (April) to +0.9% due to the sunny East coast weather. Did it rain enough in May?


Nah, let’s not talk about that data point or a 46.2 Chicago PMI reading for the month of May, when we can actually go back to a Durable Goods reading of -2.3% year-over-year in April and hope that the Fed didn’t see that one either.


Instead, let’s look away from the US data and see what Global Equities have been signaling for the last month:


  1. Russia -12%
  2. Portugal -9%
  3. Greece -8%
  4. Brazil -7%
  5. Turkey -7%
  6. Germany -7%
  7. Indonesia -6%
  8. Taiwan -5%


To be fair, I guess the Dow Transports are “outperforming” Taiwanese Stocks by 30 basis points in the last month. That must be the all-systems go on global growth signal, eh?


Oh, then there’s the narrative that “bond yields are rising because growth and inflation are back.”


On that data front this morning:


  1. Swiss consumer prices (CPI) deflated -1.2% year-over-year in May
  2. Chinese producer prices (PPI) deflated -4.6% year-over-year in May
  3. Chinese CPI slowed from +1.5% y/y in April to +1.2% in May


There’s definitely a narrative out there (perpetuated by Mario Draghi which I think was a huge mistake) that both the European and US economies are accelerating. We hear it in investor meetings every day (I think our competition is on the road too).


Unfortunately for the bullish growth narrative, both the economic data and market moves discounting future growth expectations are reminding you that #accelerating is exactly what it isn’t.


Our immediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 2.03-2.41%

SPX 2067-2104
VIX 13.75-15.90
USD 94.64-96.41
EUR/USD 1.08-1.13
Oil (WTI) 56.99-61.50

Gold 1170-1200


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Transporting Narratives - Z 06.09.15 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.

Extend, Pretend and Devalue

Client Talking Points


The Euro is down hard this morning (-1% vs USD) after tapping the top-end of our 1.11-1.14 risk range and the Greeks having 48 hours to put on their best dress – the Euro is worth less as the Eurozone continues to socialize leverage and bad behavior.



Another day, another big rip in Global Yields as Italian and Spanish Yields come off last week’s freak-out highs. The German 10YR is up +13 basis points from 0.78% to 0.91% pressuring both U.S. and JGB yields to the upside again.


The ole “buy everything” call worked, somehow – but this one wasn’t that hard to get right if you had A) a more dovish Fed and B) another Greek bailout right. It’s sad, but front-running predictable central planning behavior works; VIX still range bound 12.29-15.46.


**The Macro Show - CLICK HERE to watch today's edition at 8:30AM ET, with Macro Analyst Darius Dale and Macro & Housing Analyst Christian Drake.

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

Shares of Penn National Gaming are up approximately 9% since it was added to Investing Ideas on May 26. Our Gaming, Lodging & Leisure team reiterates their high conviction on the stock and notes that Ohio and Kansas have both been super-strong revenue generators in the month of May. This positive development has has led our analysts to raise their estimates even higher (and we're already the highest on the street...).


It was a busy week across the housing space with a host of fundamental releases, builder earnings and notable regulatory updates.   Net-net-net....the past week offered another positive update on the state of the residential real estate market with housing turned in a second week of strong, positive absolute and relative performance. The NAHB HMI (Builder Confidence Index) for June surged across all categories and in all regions, posting its best reading in almost 10 years. Total Starts declined -11% MoM to +1.036 MM units with SF and MF starts declining -5.4% and -20.2% month-over-month, respectively.  Permits, meanwhile, rose to an 8-year high advancing +11.8% sequentially and +25% year-over-year.   The strength in permits augurs forward strength in Starts and suggest residential construction spending will be (increasingly) supportive of GDP growth over the next couple quarters.


Bottom line right now remains that Lower-For-Longer is firmly intact as long as US #GrowthSlowing is. As Keith pointed out on Friday, Consensus Macro is still stubbornly sticking to the tired idea that rates have to go higher - they just have to... because, they haven't? All told, it was a great week sticking with the process on the long side of bonds. Here we feature an in-depth discussion from Senior Macro Analyst Darius Dale which does a thorough job outlining where our macro team currently stands with respect to the Fed, interest rates, markets and economy. The prescient discussion occured just hours before release of the FOMC statement.

Three for the Road


We reiterate our bullish bias on Japanese equities. Nikkei 225 up +19.2% YTD vs. a measly +3.1% return for the SPX. 



Great is the human who has not lost his childlike heart.

Mencius, 4th century BCE


Jordan Spieth won the U.S. Open, his victory marks the first time a player has won the first two majors of the year since Tiger in 2002 and the youngest to win the US Open since Bobby Jones 1923.



The Macro Show Replay | June 23, 2015



June 23, 2015

June 23, 2015 - HE DTR 6 23 15