Great quarter but call wasn't as entertaining as recent earnings conference calls.




  • Cotai timing/positioning: Wynn Encore Macau--has " extended space" as biggest asset;  we will build on Cotai "if we are encouraged to do so... and we will be encouraged..... won't happen until early 2014"
  • LV room rates trends in 2Q: not really seeing any improvement...very stable; growing capacity impacting rates
    • comps in LV was tough; beach club construction closed down the front of Encore; construction will finish in 4 weeks.
  • Wynn Macau strong 1Q: higher mix of direct vip; non-gaming revs up significantly; hold % was "a little below normal" (historical hold is 2.85%)
  • Thinks government deficits will continue to adversely impact US economy
  • Sustainability of high growth rates in Macau/China: Chinese people's "good life is going through Macau"--not just gambling, but also shopping and dining.
    • Asian markets are very aware of "top brands". Wynn needs to meet that demand
    • Government pulled back on visas to discourage people who can't afford to gamble.
    • "We increased Chinese ownership in our company by listing on HK Exchange"
    • Steve believes market share should be derived from fair share ratio
  • Cost of living in Macau is not improving.  Wynn increased Macau workers' wages by 10%.  Infrastructure contribution is 4% of revenues
  • Macau government limiting of licenses/construction activity in Cotai; construction will be done at a slower pace for resorts.
  • While checking out regional casinos, Steve impressed by River City Casino (PNK);
  • Next project will be in China unless there is a Massachusetts opportunity.
  • Reception on Macau Encore: "Nicest property in Macau. Good supply in the market helps everyone"
  • Wynn Encore: wants to attract customers who are willing to dish out $350 per night for hotel luxury living.
    • Encore fulfills "non-gaming" customer requests, learning from customers--Steve calls it "organic growth."
  • Zero impact from MBS's opening.
  • "It is appropriate for us to spend more time and focus on Macau"
  • Philly renewal license: yes, Steve would be interested if opportunity pops up.
  • LV Baccarat trends: YOY change should be up but not at levels seen during peak of US economy.

Results from the Macro Survey of the Day

At 3:10pm today, we sent out a survey regarding to Mark Mobius' shirt. Below are a few of the responses:


"I think this is what Goldman Sachs would call 'a shirty deal'."


"Bearish if he is wearing a thong"




"Squeamish… Or if that's not okay, then bearish."


"Pukish, perhaps?"


"It made me want to wrap a big turban on his head and give him a crystal ball.

I think I am going find a company that makes golden genie lamps……"


"Mr. Clean never looked so good…"






“Tigerish – Snoopy’s calling the shots”


“I could get to c)tiger by connecting the same dots but I am going to offer the Krute.  Mobius looks like Yul Brynner in the King and I.  The National emblem of Thailand (Siam in the King and I)is the Krute.  There are also a lot of Tigers in Thailand also.  Nevertheless, "The Krute is believed to appear whenever the country's in turmoil, in its greatest form, Aroonsuck, Thai for the beginning or Alpha, to serve its role as defender of Thailand."  So...Mobius, a value investor looks for Alpha(Aroonsuck)when prices are lowest (turmoil).”


“[In the] what was he thinking category!”


"Extremely Bearish… Dude, seriously? Laid back"


"I’d say Tigerish, but I am haunted by the photo of Putin standing on top of the Siberian Tiger that he popped a cap into… Maybe that’s where Moby got his shirt."


"Bullish, aliens contributing to macro"


"Spain Rallied on huge volume when the shirt hit the tape"


"Bullish on retail, this will be the new apparel style! I like it"


“Gonna have to go with Tigerish. WOW that's a bit much...”


"Definitely tigerish"


Results from the Macro Survey of the Day - Pic of the Day


Thanks for participating, everyone.


Your Macro Team

Hedgeye Risk Management

Macro Survey Of The Day

Did the sheen of Templeton’s Mark Mobius’ shirt make you: 

  1. Bullish
  2. Bearish
  3. Tigerish 

We will post all replies relating to this Macro Man’s influence in driving your global equity view today.


Anonymously, of course,


Your Macro Team 


Macro Survey Of The Day - Pic of the Day

the macro show

what smart investors watch to win

Hosted by Hedgeye CEO Keith McCullough at 9:00am ET, this special online broadcast offers smart investors and traders of all stripes the sharpest insights and clearest market analysis available on Wall Street.

Germany: 4 Bullish Charts

Position: Long Germany (EWG); Short Spain (EWP)


Below we refresh you with four bullish German charts, including unemployment that was released today at 7.8% in April, a sequential decline. In the face of European sovereign debt concerns, we continue to like Germany as a lower beta play on safety for an economy that should benefit from the government’s fiscal conservatism, an increase in exports alongside a weaker Euro, and an environment of low inflation. As one play on our Q2 2010 Theme Sovereign Debt Dichotomy, we’re long Germany (EWG) and short Spain (EWP). See the charts below. 


Matthew Hedrick



Germany: 4 Bullish Charts - c1


Germany: 4 Bullish Charts - c2


Germany: 4 Bullish Charts - c3


Germany: 4 Bullish Charts - c4


Until this week, the performance of the restaurant industry has been remarkably resilient.  Driven by the smaller cap names, the group has outperformed every month this year and did not come close to bottoming with the broad market in February.  Today the group is moving higher again with the broader market.  If the restaurant group was more high-profile like the Technology or Financial sectors, it would be considered a leadership group. 


Of course, it’s a leadership group because everyone needs to eat.  So with the Restaurant group rolling over this week, is it a leading or lagging indicator?  


The stocks have been outperforming in 1Q10 as…..


(1)    Top line trends continue to improve sequentially

(2)    Margins are expanding due to lower food costs

(3)    The Private Equity mania


The current pull back centers on….


(1)    Some high profile EPS misses

(2)    Food inflation is around the corner

(3)    Too far too fast….


With the rising tide having lifted all boats so far this year, I don’t expect this run up to continue for the balance of 2010.  I continue to believe there is some powerful momentum behind SBUX and would focus on EAT as we progress toward FY11.  MCD is taking share in the US but upside is limited as valuation is approaching a stressful level.  I see the BWLD business model as being broken and some restructuring is needed to fix the real estate issues.  PFCB has picked up some momentum in the Bistro’s traffic trends, but the risk parameters are on the rise with incremental pricing and lower discounting.




Howard Penney

Managing Director



Great quarter, guidance conservative but not exactly sandbagging.



“Lodging demand for our nine global brands accelerated as we moved through the first quarter, allowing us to beat expectations on robust top-line growth. We continued to hold the line on costs. Most encouraging for us was that occupancy gains were led by the luxury market. This benefits Starwood, thanks to our leading presence in the four and five star categories. With the depths of the downturn behind us, we have a long runway ahead as we move into the upcycle.”

- Frits van Paasschen, CEO


As we wrote about earlier this morning, HOT reported a very solid quarter and impressive guidance.  We saw that at least one sellside firm mentioned that people may be disappointed that the guidance implies 2H2010 moderation in RevPAR growth and "light" flowthrough.  While we are still going through the numbers, we are not at all surprised. 


First of all, Starwood got hit harder earlier on than its competitors given its outsized exposure to luxury, urban and international hotels.  All one needs to do is look at the occupancy declines they experience in 1H and especially 2Q09 to see this point. Those declines moderated materially as the year went on and were actually positive last quarter for W, Luxury/St. Regis, Le Meridian, and Westin brands.  Secondly, at current rates, currency will turn into a headwind for their owned portfolio in the 2H.  Thirdly, fx also impacts costs and given that the RevPAR gains are largely occupancy driven there is a lot of cost creep that should come back into the system.  Finally, since much of the upside was driven by late breaking transient demand, visibility remains lower than normal.


Given the momentum in this space, exaggerated expectations may finally kill these stocks.  We may have further thoughts post the call, but for now, please see our conference call notes.




  • Lots of businesses are done cutting costs and shifted to try and grow revenue by hitting the road to drum up business
  • Hopeful but cautious on the back half the year
  • Refuse to give back the savings that they have achieved
  • Plan to continue deleveraging the balance sheet
  • Strong transient demand and in the quarter for the quarter group bookings drove the upside in the quarter
  • ADR did improve month on month throughout the quarter and are approaching turning positive in many markets
  • Leisure and transient demand offset lower group bookings - Paris was up 43% for example
  • New bookings are up 30% in 2010, and cancellations are below historical levels
  • Lead volumes were also up, especially for small group meetings
  • Group business on the books for 2010 is approaching flat to 2009
  • Expect positive RevPAR for their hotels in every region
  • NYC alone has almost as many rooms as all of India (ah this reminds me of Jason Ader's India Hospitality road show years ago)
  • Pheonician - occupancies were up 30% in the quarter.  Restarted ballroom properties
  • W's were their best performing brands. NYC close to peak occupancy
  • Sold $20MM in residences at Bal Harbour
  • Some deals put on hold are coming back to life (luxury development)
  • Given the recovery going on, they want to postpone their asset sale program, since assets are trading well below replacement costs (although replacement costs don't capture depreciation)
  • Asia was up 20% in April. Japan and Thailand are the only 2 laggards. There was significant late breaking business.  ADR's are now up 2% in April.  Expect Asia to contribute over 20% of their fees
  • North America had the biggest upside surprise in the quarter.  Occupancy in NYC was 75% in 1Q and rate was down 7%. In April they are seeing the first positive ADR change in NA. 
  • Continental Europe recovery is also underway.  First quarter is a loss season so its hard to extract trends.  Late breaking corporate business is the driver of recovery here.  Don't expect the Iceland incident to impact 2Q
  • ME & Africa: Wil derive 13% of their fees from this region.  Didn't see growth here because of weakness in the UAE (-12%)
  • Latin America: South America was very strong (Brazil up 30%) but Mexico was very weak but is slowly recovering.  In Q2 Mexico will lap H1N1 - so far in April Mexico is up 7%.
  • Vacation ownership:  Price reductions help close rates.  On track to generate record cash levels through timeshare- more then enough to fund Bal Harbour
  • Exchange rates remain a tailwind in 2Q- adding 200bps. 
  • Expect to have their first quarter of margin improvement in Q2.  However, occupancy driven recovery doesn't help margins, and fx doesn't either (well not by much at least)
  • Fees and other income included a non-recurring $7MM last year
  • Still have little visibility issues as the booking window is very short 



  • Sheraton... is the pruning done? 
    • They are 4/5 done with the pruning. Now they are going back and promoting the brand. Launching the "Rediscover Sheraton" campaign
  • Comps get harder in the back half so they would need to see absolute increase from here to see back half growth
  • Look at the 2004 recovery it also started off very strong and moderated
  • Impact of cancellation fees in 1Q09 and FY2009
    • It's a single digit number not very meaningful
  • They basically want peak multiples on peak EBITDA for asset sales - lol.  no wonder there is a wide bid/ask spread
  • Their NOL expires at the end of next year.  Plan to use as much as they can before it expires.  That will influence their sale strategy.  There are ways to extend it though
  • One of the reasons that group bookings are looking better is because more people are showing up to group events
  • Timeshare securitization in the $100MM range for the back half

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.