- Venetian Macau may be reacting to the new visa restrictions put in place last week. As we discussed in our 7/5/08 posting, the Chinese government instituted new restrictions limiting mass market visitation to Macau from once a month to once every two months. Unfortunately, the restrictions were not well communicated to the mainland so many potential customers have been turned away at the border gates. My guys on the ground there tell me that traffic has slowed noticeably at a number of casinos. Discussions with operating level casino workers confirm their observations. Junket commissions and now promotions may continue to eat away at margins as operators battle for market share. It might be time to reset expectations.
There have been a series of smelters idled by lack of power recently (particularly in South Africa) but this work halt is particularly emblematic of the global inflation dilemma -reports in the Chinese press indicated that power had to be diverted for agricultural production. You can't eat aluminum.
Hank Paulson: We should give the government temporary emergency authority.... .
Do you recall in Star Wars Episode 2 When Senator Palpatine said the same thing to the Galactic Senate? Then he had sole authority, for which he subsequently used to take over the universe...
In Goldman do we trust? Ask the people living in the state of New Jersey what kind of a job the other recent ex-Goldman CEO, John Corzine, is doing...
Per the South Jersey News: "The Farleigh Dickinson University Public Mind poll found 40 percent approve of the governor's job performance, with 41 percent disapproving. That's down from a 44 percent approval in April and 48 percent in January."
*Full Disclosure: I am still short GS in my fund.
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While Ron Paul has been accused of having lost his marbles as I often have in the last 9 months, he asked THE QUESTION. "Who is in charge of the US Dollar"?
Of course Paulson's answer was fully loaded with both the stutter and lack of content as I am painfully getting used to hearing.
Paul's statement (within his question) included the lack of a US Savings Rate, negative real interest rates, re-regulation, and Federal Reserve inspired inflation.
Sometimes the guys who sound like they have a few screws loose, are the only guys with a screwdriver.
We fix this mess by raising interest rates.
- These deals are being introduced to help stop declining traffic, which has been decelerating since 3Q06. In the most recently reported 2Q08, the company did not quantify the traffic decline, except to say that trends had significantly deteriorated from 1Q08's 3% decline.
- Although I recognize that SBUX must take the necessary steps to improve its traffic trends, these new promotions bring us back to the traffic versus margin question. To that point, Mr. Stevens would not specify whether or how much the value offerings will impact SBUX's profits. Starbucks' FY07 U.S. operating margins were already down 90 basis points YOY and fell to 10% in 2Q08 so margins are already under pressure.
- Additionally, despite Mr. Stevens saying in an interview the company has no plans to join the likes of McDonald's and Burger King by offering a dollar menu that could clash with Starbucks' luxury image, these types of promotions run the risk of changing the consumer's perception of the SBUX brand. Just as a company can alienate its customer base by abandoning its perceived value messaging, a company can also compromise its brand by trading its customers down as they begin to expect such promotions.
Japan's economic growth is slowing into the head wind of inflation accelerating. This morning's inflation report (PPI for June) came in at +5.6%. That's a 27 year high! Japan's cheap money cycle will continue to haunt their economy until they raise interest rates from where they are now (negative real rates).
Global Stagflation is here.
*Full Disclosure: I am own Taiwan via the EWT country etf as of yesterday.
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