The Macau CEO's comments this week were probably more of the posturing sort than real substance.



There is some consternation surrounding comments this week by the Macau CEO as it relates to development.  Fernando Chui expressed a desire to slow down casino development and potentially reclaim land that is not actively being developed.  Following the address, at least one analyst expressed concern about Wynn's yet to be developed Cotai project.


The feedback we are getting from our people on the ground is that the policy address was more posture than substance.  The comments to the media after the address were certainly softer.  We do not believe Wynn's Cotai opportunity will be taken away from the company - no land has actually been formally granted to Wynn.  The Cotai option is a very valuable one for both Macau and Wynn given Wynn's track record in Macau.  We see no change in the value of that option based on the policy address.


The Macau Metro Monitor, March 18th, 2010



Holding a mass recruitment fair, Galaxy Entertainment Group plans to hire 2,000 construction workers, including over 1,000 local workers, for its Galaxy Macau project, planned to open in early 2011.



Macau CEO Chui said the 361.65 hectares of land to be reclaimed from Macau's coastal waters would be reserved for social facilities, public housing, and land auctions for private developments, not for casino development. Chui also has "no plans" to resume the government's investment immigration policy, suspended since 2007, which permits non-locals to apply for residency in Macau on the basis of simply owning a local property.


New Jersey's casino enforcement agency said in a confidential report, MGM Mirage knowingly signed on an unfit partner as it tried to gain a foothold in Macau after Chinese officials denied it a license. The report says that the enforcement division found sufficient evidence to conclude that Macau casino heiress Pansy Ho could be susceptible to influence by "unsuitable persons" because of her tight business relationship with her father, Stanley Ho. The report also mentioned a private-investigation firm, employed by MGM Mirage, who concluded that Stanley Ho was "linked closely" to 14K and Sun Yee On, two major Macau "triads," or organized crime groups, and also had links to Russian organized crime and North Korean authorities. 


In a separate article, WSJ reported that Pansy Ho is heir apparent to Mr. Ho's gambling empire. Ms. Ho, the oldest daughter from Mr. Ho's second wife, has said in the past that she is independent of her father, but serves as managing director of Shun Tak Holdings, the transport and property company that her father founded and continues to run as executive chairman. Ms. Ho also sits on the board of SJM Holdings. She acquired her casino license from SJM in 2004.

Moronic Artists

“Monetary policy is an art.”

-Ben Bernanke (March 17, 2010)


Having your office on a college campus can certainly make you over-think things. Then again, thinking outside of Washington’s groupthink isn’t all that bad of a strategy. We think that the artists of the Bubble in Global Politics should consider doing the same. YouTube is a real crusher for those who aren’t used to being held accountable for what comes out of their mouths.


The Yale Poli-Sci department may not completely agree, but political science is an oxymoron. In fact, the word oxymoron is in and of itself an oxymoron (it’s a Greek term derived from oxy, "sharp", and moros "dull").


As I was watching the House Financial Services Committee testimony of Paul Volcker and Ben Bernanke I had to stop and rewind my DVR when I heard Bernanke make the aforementioned statement about art. The man is not only a revisionist historian – he is a self proclaimed artist of political science!


If Bernanke is an artist doing his mini-Maestro thing from the highest church of political science, that must make Greek politicians morons. Or does that make sense? Does any of this make sense? What would Einstein think about applying political art to an interconnected global financial system that’s driven by elements of science and math?


I have a headache again.


I see three major global macro stories to focus on this morning:

  1. German artists breaking rank with Greek artists
  2. American artists preparing their canvases for inflation storytelling (CPI report due out at 830AM EST)
  3. Chinese artists saying to heck with what European and American artists think about ours

So let me sprinkle a little macro math onto all of this and take these paintings on one by one:

  1. Greece’s ATHEX Composite is down -2.6% in early trading this morning, taking its cumulative losses for 2010 YTD and October 14, 2009 to -7.3% and -29.7%, respectively. Since we have intermediate term TREND resistance at 2139, this makes Greece’s stock market broken. Germany is basically breaking rank with socialists from France to the UK this morning saying, look, we need to be re-elected over here at home and it’s not politically palatable to say we trust these Greek morons, nor will we sign off on bailing them out – let the IMF do it.
  2. America’s SP500 closed up at its highest-high since Bernanke said his political and banking bosses were potentially going to have a Great Compensation Depression. After closing up another 0.58%, March 17th marked not only Bernanke’s proclamation of revisionist faith that “monetary policy is an art”, but a +72.5% deflation from the March 9th, 2009 Great Depressionista low. Wait, did I throw some art into that last sentence, or has this stock market inflation been deflationary? After seeing producer prices in America printed at +4.4% year-over-year yesterday, I guess the artists who want to tell you that this morning’s CPI reading is deflationary can go ahead and sound like Moronic Artists too.
  3. China’s Shanghai Composite Index closed down 0.14% last night, taking it’s YTD losses back down to -7% for 2010, after the Chinese government released more of the hounds on the domestic artists formerly known as loan sharks (actually, they call them “land developers” I think). The Chinese Council for Promoting International Trade also issued a release notifying all political artists around the world that they are in the midst of conducting Chinese Yuan “stress tests” of their own on 1,000 domestic companies across 12 industries. Said “communists” posing as political capitalists and medical scientists all at once? Impressive.

All the while, the artists formerly known as Derivatives Salesmen from Deutsche Bank, JP Morgan, and UBS are being charged with fraud by the City of Milan as America’s Made-off artist got beat up again in jail by an allegedly unhappy viewer of this gong show. At least Cramer regularly admits he is an artist (the SEC should give him a few points for transparency as they are investigating his


What a wonderful world we global risk managers get to live in. My headache is actually going away now. Thanks for bearing with me and letting me vent. These Moronic Artists aren’t worth it. They are who they are and it’s our job to capitalize on their proactively predictable behavior.


My immediate term lines of support and resistance for the SP500 are now 1148 and 1175, respectively. I shorted the SP500 (SPY) and bought volatility (VXX) while hope was trading at a premium yesterday and I sold out of the trading long position we took in China (CAF).


Best of luck out there today,





VXX – iPath S&P 500 VIX — With the VIX down -38% since the SP500 bottomed -10.2% lower on February 8th, now (3/17/10) is a good time to buy some volatility for the immediate term TRADE as it is oversold.


USO – United States Oil — Despite a sharp correction in oil prices on 3/15/10, the price of WTIC oil remains in a bullish intermediate term position with TREND line support at $77.39/barrel. Buying on red.


XLV – SPDR Healthcare — Healthcare was down again on 3/9/10 in the face of “Obamacare” inspired fear. While we fear we may be early here, it’s better than fearing fear itself.


UUP – PowerShares US Dollar Index Fund — We bought the USD Fund on 1/4/10 as an explicit way to represent our Q1 2010 Macro Theme that we have labeled Buck Breakout (we were bearish on the USD in ’09).

CYB - WisdomTree Dreyfus Chinese Yuan —The Yuan is a managed floating currency that trades inside a 0.5% band around the official PBOC mark versus a FX basket. Not quite pegged, not truly floating; the speculative interest in the Yuan/USD forward market has increased dramatically in recent years. We trade the ETN CYB to take exposure to this managed currency in a managed economy hoping to manage our risk as the stimulus led recovery in China dominates global trade.

TIP - iShares TIPS — The iShares etf, TIP, which is 90% invested in the inflation protected sector of the US Treasury Market currently offers a compelling yield. We believe that future inflation expectations are mispriced and that TIPS are a efficient way to own yield on an inflation protected basis.



HYG – iShares High Yield Corporate BondSuffice to say, we aren't yield chasers with High Yield priced up here. There is a big difference between high-grade and high-yield; some hopefully learned this lesson back in 2007.


XLP – SPDR Consumer StaplesConsumer Staples was the best performing sector on 3/15/10 in our S&P Sector Model and was immediate term overbought.


SPY – SPDR S&P500We moved to neutral (from bearish) on the S&P500 on the week of February 22. At 1139, for the immediate term TRADE, we’ll go back to bearish. This market is finally overbought. We shorted SPY on 3/5/10 and 3/17.


EWP – iShares SpainThe etf bounced on 3/3/10 in part from a strong day from Banco Santander, the fund’s largest holding in the Financials-heavy (43.8%) etf. We added to our short position for a TRADE on 3/5 and 3/17 as every sovereign debt risk has a time and price to be short of. We have a bearish bias on the country; massive unemployment, public and private debt leverage, and a failed housing market remain fundamental concerns.


IWM – iShares Russell 2000With the Russell 2000 finally overbought from an immediate term TRADE perspective on 3/1/10, we shorted IWM and added to the position on 3/2 and 3/17.


GLD – SPDR Gold We re-shorted Gold on this dead cat bounce on 2/11/10. We remain bullish on a Buck Breakout and bearish on Gold for Q1 of 2010, as a result.


IEF – iShares 7-10 Year TreasuryOne of our Macro Themes for Q1 of 2010 is "Rate Run-up". Our bearish view on US Treasuries is implied.

Early Look

daily macro intelligence

Relied upon by big institutional and individual investors across the world, this granular morning newsletter distills the latest and most vital market developments and insures that you are always in the know.


Into the market strength yesterday we bought the VXX and shorted the SPY.  With the VIX down -38% since the S&P500 bottomed -10.2% lower on Feb 8th, yesterday was a good time to buy some volatility for the immediate term TRADE from its oversold level.


Volatility (VIX) declined 4.4% yesterday, while the VIX continues to be broken on TRADE, TREND and TAIL.  The Hedgeye Risk Management models have levels for the volatility Index (VIX) at:  buy Trade (16.90) and sell Trade (18.64). 


There was no obvious catalyst behind yesterday’s 0.58% move in the S&P 500, though there is a clear pick up in the RISK appetite and the REFLATION trade is gaining momentum.  The pullback in the dollar provided support for most commodities and commodity equities.  The Hedgeye Risk Management models have levels for the Dollar Index (DXY) at:  buy Trade (79.52) and sell Trade (80.31).


Riding the REFLATION trade were Materials (XLB) and Energy (XLE), and were two of the three best performing sectors yesterday.  Financials (XLF) rounded out the top three spots, with the focus on diminishing regulatory headwinds and capital needs.  Within the XLF, life insurance stocks were among the best performers.


Within the XLE, coal names led the index higher, with the focus on M&A after MEE announced that it would acquire Cumberland Resources Corp for $960M. The oil services group was another bright spot, with the OSX +0.8%.


Technology was a strong outperformer last week, but the XLK is unable to sustain the momentum this week.  The semis put in a strong showing with the SOX +1.2% yesterday, underpinned by strong fundamentals.  Industrials were also a relative underperformer, though the machinery space fared well after lagging earlier in the week. 


Yesterday, the Consumer Staples (XLP) and Consumer Discretionary (XLY) sectors finished higher, but were relative underperformers.  Retail also underperformed, although the S&P retail index finished higher for a sixth straight day.  Restaurant stocks continue to outperform on the back of some positive commentary in the QSR space - JACK +5.1%. BKC +3.1% were two notable standouts in the space. 


As we wake up today, equity futures are trading below fair value ahead of Feb CPI and as Greece pushes back into the spotlight as Germany is breaking ranks with the rest of the EU.  As we look at today’s set up the range for the S&P 500 is 27 points or 1.6% (1,148) downside and 0.8% (1,175) upside.


Today's MACRO highlight will be:

  • US CPI Core Index (February)
  • US Continuing Claims (6-March)
  • US CPI MoM (February) consensus 0.1%; ex-food/energy 0.1%
  • US CPI YoY (February) consensus 2.3%; ex-food/energy 1.4%
  • US Initial Jobless Claims (13-March) consensus 450K
  • US Current Account Balance (Q4) consensus ($119.8B)
  • Philadelphia Fed (Mar) consensus 17.6
  • US Leading Indicators (Feb) consensus 0.1% 

In early trading, copper is trading lower as the dollar strengthened on concern that Greece will fail to secure financial assistance from the European Union.  The Hedgeye Risk Management Quant models have the following levels for COPPER – Buy Trade (3.32) and Sell Trade (3.44).


In early trading Gold is trading sideways.  The Hedgeye Risk Management models have the following levels for GOLD – Buy Trade (1,110) and Sell Trade (1,137).


Oil is trading slightly lower on the back of a stronger dollar.  The Hedgeye Risk Management models have the following levels for OIL – Buy Trade (80.20) and Sell Trade (83.47).


Howard Penney

Managing Director














NKE: Tough to Poke Holes in This One, Folks

I debated writing a response to Nike's quarter, because I truly don't want to come across as being self-promotional. But I've gotten hit with a dozen questions over the past 40 min...So here goes...


The bottom line is that there's not a whole lot to say relative to our expectations.


1) But we said the company would earn a buck compared to the Street’s $0.89.  They earned $1.01.

2) We said it would largely come from a meaningful revenue beat. They printed 7% compared to the Street at 3.4%.

3) We said inventories looked tight, which bodes well for Gross Margins. They SMOKED the gross margin line with a 300bp kicker vs last year. (More than we thought)

4) In typical Nike fashion, they invested the upside. If they wanted to, they could have printed $1.15 how I’m doing the math (I’m glad they didn’t).

5) Constant dollar futures grew by 6% -- double the Street’s estimate.

7) Inventories were down by 13%.


Big caveat…My sense is that about 25min into the call, Don Blair will douse the excitement of many folks who love these numbers. They’ll come up with a reason to keep expectations grounded. They’re fans of Shakespeare at Nike…”Expectations are the root of all heartache.”



Bottom line is that they beat on revenue and gross margins with accelerating futures while inventories were down double digits. We’ve been touting this as our top pick for the last two months. This is not a one quarter story, and not a one year-story. But rather, this is the beginning of a 2-3 year run where Nike will meaningfully accelerate top-line growth due to structural changes that will facilitate a new ‘go to market’ strategy that will allow it to tack on another $8bn in revenue. Yes, with the stock acting so well over the past month, and now with squeaky clean results one can argue that this is known. But I’d argue against that. Faster money could care less about the bigger call, and many others out there (esp the sell side) like it for the wrong reasons, and are missing the really big call here.

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 80.46%
  • SHORT SIGNALS 78.35%