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THE M3: SEPT GGR UP 40%; ONLY 3 DAYS OFF DURING NATIONAL DAY

The Macau Metro Monitor, October 4th 2010

 

MONTHLY GROSS REVENUE FROM GAMES OF FORTUNE DICJ

September GGR hit MOP 15.302 BN, growing 39.8% YoY.  YTD total GGR is MOP 133.237 BN, up 60.1% YoY.

 

CHINA'S MANDATORY VACATION, WITH A CATCH NY Times

During this year's National Day holiday (Oct 1-Oct 7), employees can take a week off; however, they must make up four of those days by working on the weekends before and after the holiday.  This holiday schedule took effect in 2008.


WEEKLY FINANCIALS RISK MONITOR: ADDING MULTIPLE DURATIONS AND NEW SERIES

Financial Risk Monitor Summary (Across 3 Durations):

  • Short-term (WoW): Positive / 6 of 10 improved / 4 of 10 unchanged
  • Intermediate-term (MoM): Neutral / 3 of 10 improved / 3 of 10 worsened / 4 of 10 unchanged
  • Long-term (150 DMA): Negative / 5 of 10 worsened / 2 of 10 improved / 2 of 10 unchanged / 1 of 10 n/a

We are making two notable changes to the Risk Monitor this week. 

 

1) Durations – We now look at changes over three durations: short term (TRADE), intermediate term (TREND), and long term (TAIL). 

            Short term: week over week

            Intermediate: month over month

            Long term: 1-month slope of 150 DMA

 

2) New Series - We are adding two new series we believe are helpful in managing risk: the Baltic Dry Index, which measure shipping rates of bulk dry goods, and Sovereign CDS. 

 

WEEKLY FINANCIALS RISK MONITOR: ADDING MULTIPLE DURATIONS AND NEW SERIES - summary

 

1. US Financials CDS Monitor – Swaps were nearly all positive last week.  Swaps tightened for 28 of the 29 reference entities and remained unchanged for one (MBI).    Conclusion: Positive.

 

Tightened the most vs last week: MET, AIG, GNW

Tightened the least vs last week: BAC, CB, MBI

Tightened the most vs last month: SLM, MTG, AIG

Tightened the least vs last month: C, GS, PGR

 

WEEKLY FINANCIALS RISK MONITOR: ADDING MULTIPLE DURATIONS AND NEW SERIES - us cds

 

2. European Financials CDS Monitor – In Europe, the pattern was similar. Swaps tightened for 34 of the 39 reference entities tightened and widened for the only 5.  After the Greek banks led the pack in CDS widening last week, two of the three were among the best performers this week. Conclusion: Positive.

 

Tightened the most vs last week: BNP Paribas, Alpha Bank A.E., National Bank of Greece

Widened the most vs last week: DnB NOR, Banco Espirito Santo, Banco Pastor

Widened the most vs last month: Bakinter S.A., Caja de Ahorros del Mediterraneo, Svenska Handelsbanken

Tightened the most vs last month: Bank of Ireland, DnB NOR, Banco Espirito Santo

 

WEEKLY FINANCIALS RISK MONITOR: ADDING MULTIPLE DURATIONS AND NEW SERIES - euro cds

 

3. Sovereign CDS Monitor  – Sovereign CDS fell 10 bps on average last week, led by Ireland, Portugal, and Greece. Conclusion: Positive.

 

WEEKLY FINANCIALS RISK MONITOR: ADDING MULTIPLE DURATIONS AND NEW SERIES - sov cds

 

4. High Yield (YTM) Monitor – High Yield rates fell last week, closing at 8.19 on Friday. Conclusion: Positive.

 

WEEKLY FINANCIALS RISK MONITOR: ADDING MULTIPLE DURATIONS AND NEW SERIES - high yield

 

5. Leveraged Loan Index Monitor – The leveraged loan index rose 7.1 points last week.  Conclusion: Neutral.

 

WEEKLY FINANCIALS RISK MONITOR: ADDING MULTIPLE DURATIONS AND NEW SERIES - lev loan

 

6. TED Spread Monitor – Last week the TED spread fell slightly, closing at 14 bps. Conclusion: Neutral.

 

WEEKLY FINANCIALS RISK MONITOR: ADDING MULTIPLE DURATIONS AND NEW SERIES - ted

 

7. Journal of Commerce Commodity Price Index – Last week, the index rose 1.1 points, closing at 16.1 on Friday. Conclusion: Positive.

 

WEEKLY FINANCIALS RISK MONITOR: ADDING MULTIPLE DURATIONS AND NEW SERIES - joc

 

8. Greek Bond Yields Monitor – We chart the 10-year yield on Greek bonds.  Last week yields fell 90 bps, ending the week at 1015 bps versus 1105 bps the prior week.  Conclusion: Positive.

 

WEEKLY FINANCIALS RISK MONITOR: ADDING MULTIPLE DURATIONS AND NEW SERIES - greek bonds

 

9. Markit MCDX Index Monitor – The Markit MCDX is a measure of municipal credit default swaps.  We believe this index is a useful indicator of pressure in state and local governments.  Markit publishes index values daily on four 5-year tenor baskets including 50 reference entities each. Each basket includes a diversified pool of revenue and GO bonds from a broad array of states. Our index is the average of their four indices.  Spreads were up slightly last week, closing at 217 versus 215 the prior week.  Conclusion: Neutral.

 

WEEKLY FINANCIALS RISK MONITOR: ADDING MULTIPLE DURATIONS AND NEW SERIES - markit

 

10. Baltic Dry Index – The Baltic Dry Index measures international shipping rates of dry bulk cargo, mostly commodities used for industrial production.  Higher demand for such goods, as manifested in higher shipping rates, indicates economic expansion.  Last week the index rose a hair, closing at 245. Conclusion: Neutral.

 

WEEKLY FINANCIALS RISK MONITOR: ADDING MULTIPLE DURATIONS AND NEW SERIES - baltic dry

 

Joshua Steiner, CFA

 

Allison Kaptur


What Makes It So Hard

“What makes it so hard is not that you had it bad, but that you're that pissed that so many others had it good.”

-Melvin Udall

 

In 1997, Jack Nicholson won the Oscar for Best Actor for his portrayal of an obsessive-compulsive Melvin Udall in “As Good As It Gets.” Particularly for anyone who has ever lived and worked in New York City, this movie really resonated. It was human.

 

As the Street makes its final push into year-end bonuses, this Melvin quote may not speak as loudly to some of us, but it’s ringing loud and clear across America. How else could the US stock market have its best September in 71 years and US Consumer Confidence readings go DOWN month-over-month? While Americans may not know what “QE” means, they’re pretty sure they should be pissed about it…

 

Let’s set aside the Manic Media begging Bernanke for more of what he himself has no idea will perpetuate and consider 3 intended consequences that make this so hard for common sense people to accept:

  1. Debauchery of America’s currency.
  2. Record low rates of return on savings accounts.
  3. Economic stagflation.

Now now, don’t get all in a heat here if you are in the perma-deflation camp. At lower prices, we’ll be right there with you. For now prices are inflating. Last week saw gold hit another record high. Oil and copper prices were up another +6.7% and +2.2% week-over-week, respectively.

 

Consequence #3 is a direct function of the US Federal Reserve being willfully blind to points #1 and #2.

 

What makes this so hard is the truth.

 

The truth is that Americans don’t have to buy into Officialdom’s portrayal of the truth. In “A Few Good Men”, Nicholson’s character tried pulling rank by suggesting “you can’t handle the truth!” Sometimes the “authorities” on critical American matters are wrong about the definition of truth.

 

Americans know the truth. Americans don’t like being lied to. The truth is marked-to-market on their desktop and in their bank accounts every single minute of the day.

 

For the 1st week in the last 5, the SP500 was down last week. It was barely down, but the point is that it was down. My submission on why is very straightforward. The Burning Buck starts to morph into a very bad thing, turning reflation into inflation, at a price.

 

Now slowing US economic growth + accelerating inflation growth = economic stagflation for those countries who have a higher nominal rate of inflation than they do economic growth. For countries that have to implement austerity measures, this problem will compound itself by real-wage growth starting to go negative year-over-year. The only thing worse than not having a job is getting a pay cut.

 

Back to a real-time update on the intended consequences of Bernanke’s plan:

  1. US Dollar = down another -1.64% last week; down for the 15th week out of the last 18; and down -11.8% since June!
  2. US Treasury Yields = down another -6.8% last week to 0.41% 2-yr yields; and down again this morning to a record low 0.40%

Again, that’s just the truth. And the truth is that a country has never devalued its way to prosperity. Sure, in the short term, inflation makes this good for some of us. But, in the long run, some of us need to remember that it’s the rest of us that matter most.

 

My immediate term support and resistance lines for the SP500 are now 1141 and 1155, respectively. I currently have a 52% position in Cash in the Asset Allocation Model (down from 55% on Friday as I added a 3% position in corn). In the Hedgeye Portfolio, I’ve moved to 13 long positions and 11 shorts.

 

Best of luck out there this week,

KM

 

Keith R. McCullough
Chief Executive Officer

 

What Makes It So Hard - 2yryield


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THE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP - October 4, 2010

As we look at today’s set up for the S&P 500, the range is 14 points or -0.46% downside to 1141 and 0.76% upside to 1155. Equity futures are trading below fair value in a subdued start to trading in a week which is likely to be dominated by the start of the Q3 earnings season, Friday's employment data and speculation surrounding the timing of any fresh QE.  Today's macro headlines include: August Pending Home sales and Factory Orders.

 

  • AT&T (T) agreed to pay $300m to the IRS in 4Q to settle disagreement over 2008 tax return
  • Dynamex (DDMX) agreed to be bought for $21.25 per share by Greenbriar Equity Group; 58% premium to average close over past 30 days
  • Icad (ICAD) filed to sell as much as $75m in common stock
  • Iridium Communications (IRDM) settled lawsuit filed by Motorola in February 2010; terms not disclosed
  • Barron’s - JPMorgan (JPM) may boost dividend next year and rise as much as 45% during next two years
  • Sunday Telegraph - New York Times (NYT) plans to pay back $250m loan from Carlos Slim three years ahead of schedule
  • Prudential Financial (PRU) got a term loan of as much as $3b to finance purchase of AIG Japan units
  • Barron’s - Snap-On (SNA) may rise as overseas automobile-repair growth boosts sales
  • Barron’s - United Technologies (UTX) may rise as much as 20% during next year on demand for elevators and escalators, improved profit at carrier air-conditioning unit
  • WD-40 (WDFC US) boosted Q dividend by 8% to $0.27 per share
  • Barron’s - World Wrestling Entertainment (WWE) may decline as fans increasingly turn to mixed martial-arts rival Ultimate Fighting Championships instead

PERFORMANCE

  • One day: Dow +0.39%, S&P +0.44%, Nasdaq +0.09%, Russell +0.47%
  • Month/Quarter-to-date: Dow +0.39%, S&P +0.44%, Nasdaq +0.09%, Russell +0.47%.
  • Year-to-date: Dow +3.85%, S&P +2.79%, Nasdaq +4.48%, Russell +8.62%

EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: 1113 (+1047)
  • VOLUME: NYSE - 1072.22 (-16.45%)  
  • SECTOR PERFORMANCE: Outsized strength in energy, materials and financials; tech lags as the space missed out on the afternoon rally.
  •  MARKET LEADING/LOOSING STOCKS YESTERDAY: Citi 4.87%, Metro PCS +4.49% and Freeport MC +3.38%/Tenet -4.03,Abercrombie -3.99% and Sears -3.35%
  • VIX: 22.50 -5.06% - YTD PERFORMANCE: (+3.87%)
  • SPX PUT/CALL RATIO: 1.32 from 1.72, -24.96%

CREDIT/ECONOMIC MARKET LOOK:

  • TED SPREAD: 13.75 -0.304 (-2.166%)
  • 3-MONTH T-BILL YIELD: 0.16%
  • YIELD CURVE: 2.12 from 2.11

COMMODITY/GROWTH EXPECTATION:

  • CRB: 285.69 -0.41% - first down day in seven
  • Oil: 81.58 +2.01% - up 6.65% last week
  • COPPER: 369.05 +1.07%
  • GOLD: 1,315.55 +0.61%

CURRENCIES:

  • EURO: 1.3791, +1.25%
  • DOLLAR: 78.08 -0.80% - down 1.65% last week

OVERSEAS MARKETS:

 

Europe

  • European markets: FTSE 100: (0.70%); DAX (1.20%); CAC 40 (1.28%)
  • Major indices are weaker in a quiet start to the trading week with all sectors showing losses although Autos are underperforming (2.4%) amid speculation that improving economic data will reduce the need for governments to stimulate growth
  • Sanofi goes hostile in bid for Genzyme
  • Chinese Premier has restated that they do not intend to reduce their holdings of European government bonds
  • Eurozone Aug PPI +3.6% y/y vs consensus +3.6%

 

Asia

  • Asian markets: Nikkei (0.25%); Shanghai Composite (closed)
  • Markets were mixed in a follow-through to Friday's US data, but volumes remain light on account of the holiday in China.
  • The Nikkei initially traded lower, but finished the morning session higher as the euro strengthened vs the yen before giving back some earlier gains during the afternoon session.
  • The Hang Seng, which was closed Friday, saw resource stocks advance with higher commodity prices and property stocks higher after strong weekend sales 

Howard Penney

 

Managing Director 

 

THE DAILY OUTLOOK - levels and trends

 

THE DAILY OUTLOOK - S P

 

THE DAILY OUTLOOK - VIX

 

THE DAILY OUTLOOK - DOLLAR

 

THE DAILY OUTLOOK - OIL

 

THE DAILY OUTLOOK - GOLD

 

THE DAILY OUTLOOK - COPPER


WMT: Dispelling Analyst Day Hype

Wal-Mart’s analyst day is likely to yield less information about merchandising strategy and vendor pricing than in years past – at the precise time it’s needed most.  Furthermore, a smaller format urban location is likely to be more of a test than anything else- at least for now. There are simply too many new executives in new roles to have made any tangible progress in the effort to reverse the negative same store sales trend. 

 

 

Wal-Mart is set to host its 17th annual investor/analyst meeting in Bentonville on October 12th and 13th and this year is no different than year’s past. There’s much speculation brewing about what the world’s largest retailer is going to say and reveal.  This year’s topic du jour likely centers around two main areas, domestic store growth in the form a smaller, urban concept and a revamped merchandising strategy.  The former speculation arises out of ominous comments made from newly appointed Wal-Mart U.S CEO Bill Simon at a recent investor conference. 

 

Recall that Simon was quoted as saying, “We have lots of learnings around the world from Wal-Mart in small formats. Our group in Mexico and Central America, Latin America operates small formats very well and very profitably, and we are going to beg, borrow, steal and learn from them as quickly as we can, because it is important for our urban strategy.”   This in turn has led the media and some on the Street to expect a multi-hundred unit rollout of some convenience/grocery/dollar store hybrid in urban centers across the country.  We do not believe this will be the case.  While it possible that some new, smaller format (i.e 20k feet or less) will be announced, we believe it will only be in the context of a test or prototype.  History reminds us that both the Supercenter and Neighborhood Market were tested for several years before Wal-Mart made a full commitment to the format.  In fact, the Neighborhood Market is still more of a test than a viable growth contributor for the company.  We believe it is overly optimistic to expect an acceleration in U.S square footage growth in the near-term driven by a new and yet unnamed small store format.

 

Secondly on the topic of merchandising.  There is no question that Wal-Mart’s negative same store sales are in some part suffering from its unsuccessful efforts to drive purchases of non-consumable goods.  The leadership at the company has been in flux since June and has still yet to settle into their new roles.  Just this week alone, a CFO transition was announced, replacing a 10 year veteran with an internal promotion.  The names and faces of the executives coming and going is largely irrelevant in the near-term.  It’s not who is moving up and who is moving out, but rather that the world’s largest retailer is seemingly scrambling to make leadership changes in an effort to reverse the negative trend.  Change can be good, but it can also be unsettling in the near-term.  We do not believe that WMT will show (or convince) the Street that its merchandising strategy is fully baked and working at its meeting in Arkansas.  There are simply too many new faces in new roles for one to put forth a credible and cohesive strategy on such short notice.  Furthermore, it is highly unlikely that the suppliers and manufacturers could even produce enough product to meet WMT’s demands in such a short time before the holiday shopping season approaches.  If there is one thing we know, retailers of all sizes do not use the November/December time frame for taking big risks or making big, unproven changes.  Therefore, we’d expect the meeting to be centered on the “long-term”. Changes made in the next six months will impact the subsequent year.  We anticipate that this will be a long, drawn out process and one that still remains unproven.

 

Take a look at the following major management changes that have taken place since June alone:

 

  • 9/29- CFO promotion announced.  Former CFO, Tom Schowe, leaving company after 10 years.
  • 9/3- U.S CEO Bill Simon announces Chief Merchant position will not be filled.  Instead the company will operate with four merchants reporting to Simon.  Each one is responsible for a particular category.
  • 7/3- Chief Merchant John Fleming resigns a few days after new U.S. leadership is announced.  Role initially filled by two merchants on an interim basis.  Eventually each of these merchants is named to the team of four that replace Fleming on a permanent basis.
  • 6/29- Bill Simon, former COO of U.S, named to U.S. CEO role.  Replaces Eduardo Castro Wright who remains Vice Chairman and becomes head of Global.com and supply chain.  Castro Wright relocates to California.  COO role remains vacant.
  • 6/9- EVP/Corporate Secretary retires.  Position is filled by General Counsel, who assumes the additional role.   Ethics and global security responsibilities attached to Secretary role are reassigned within the organization.

 

The chronology above does not even scratch the surface of all the tertiary role changes within the U.S organization.  The bottom line here is that change is surely underway led primarily by people in new roles and an underlying approach which leaves nothing sacred.  For those expecting any major changes in top or bottom line results in the near to intermediate term, we caution that this is highly unlikely.  There simply has not been enough time yet for which the new team could have crafted and executed a revised merchandising strategy.  At best we believe this is 6 months out – but even then we need flawless execution.  So the many people that will attend the meeting looking for derivative plays out of suppliers will be also be disappointed. The same goes for insight on Wal Mart’s stance on passing through raw materials costs to customers and vendors. Expect less information than in the past (at the precise time when it is needed most). In the near-term those expecting some major announcements out of the investment meeting are also likely to be disappointed.  The strategy is still not defined, nor are the architects fully in place.

 

Eric Levine

Director


Athletic Footwear - Confirming the Trend

Athletic footwear sales up +8.3% on a trailing 3-week basis on a +4.8% comp confirms just how strong the trend is as we head into Q4. More importantly, with tough comps now in the rear-view, the outlook over the intermediate-term looks increasingly favorable. Despite what appears to be diverging trends between both footwear and retail sales according to ICSC and apparel, the underlying trends in all three remain positive on a trailing 3-week basis. Nike (both Brand and Jordan), Reebok, and Saucony all continue to outperform.

 

Have a great weekend.

 

 

Casey Flavin

Director

 

 

*Note: due to system upgrades at our service provider, the release of footwear data was delayed until today. It will return to a normal Wednesday release schedule next week.

 

Athletic Footwear - Confirming the Trend - FW App Industry Data 1yr 10 1 10

 

Athletic Footwear - Confirming the Trend - FW App Industry Data 2yr 10 1 10

 

Athletic Footwear - Confirming the Trend - Fw App Ind Data 1 10 1 10

Athletic Footwear - Confirming the Trend - Fw App Ind Data 2 10 1 10

 


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