Ahhhh. They say that, “it takes money to make money.” And, Steve Wynn knows that all too well. He is a genius extraordinaire that has gobs of money and just made more. This last play even helped him save a ton of taxes to boot…

Remember over the last 2 weeks when Wynn Resorts (WYNN) shares were on a roller-coaster? The company had a successful IPO of the Wynn Macau property to the tune of $1.3billion and then refinanced about $500 million of debt. Then came the awful earnings report that took the stock down hard.

A couple of weeks ago we added a position of DeVry (DV) after they posted excellent earnings and discussed a rosy outlook. That was on the heels of the announcement that Apollo (APOL) was being investigated over some of their accounting practices related to student recruitment.

While we do like DeVry as well as some of the other names in the sector such as Corinthian (COCO) and ITT Education (ESI), there was a great deal of weakness that these names showed after the Apollo news. We felt that there were a few possible scenarios that could play out.

It appears that the short haul carriers are picking up market share. Whether it is a company like Allegiant (ALGT) or Continental’s (CAL) Express, many been making strides in this tough climate. At the same time United and American are still increasing load factors. How much is at below market price though in an attempt to fill seats?

The big names are also doing a very good job with what they have to work with. We know that business travel is tough and cost conscience consumers are helping to drive down pricing. Overall there are few names in the industry that we would call “solid” at this time.

We are regularly watching the trends in the retail sector. It has been a real treat to watch as these companies are on the front line with the consumer. What we are noticing is the continued shift by the consumer.

There was a mixed bag of results from the retailers and some of the apparel manufactures were hit hard, while others were bid higher. The difference this time was the obvious spread that showed most of the lower end retailers did better than the higher end. That may seem obvious at first, but it is abundantly clear that consumers are trading down.

We are carefully entering portfolio positions in this environment. (Note: Portfolio positions vs. trading positions) A company that we like for its specialty product is Cubist Pharmaceuticals (CBST). It has made all of our screens recently, but we were reluctant to add it to portfolios as the very recent trends have been down, down, down. The official line from the company’s description page:

Cubist Pharmaceuticals, Inc. (Cubist), is a biopharmaceutical company focused on the research, development and commercialization of pharmaceutical products that address unmet medical needs in the acute care environment. The Company’s products are used primarily in hospitals but also may be used in acute care settings including home-infusion and hospital outpatient clinics. Cubist has one marketed product, an intravenous (IV) antibiotic, CUBICIN (daptomycin for injection). CUBICIN is approved in the United States for the treatment of complicated skin and skin structure infections (cSSSI), caused by Staphylococcus aureus (S. aureus) and certain other Gram-positive bacteria, and for blood-stream infections (bacteremia), including right-sided infective endocarditis, caused by methicillin susceptible and methicillin resistant S. aureus (MSSA and MRSA).

Last month (September 23) we saw a very small shift in a few of the key areas of the Fed statement. In particular the wording change that showed that the Fed saw economic activity has picked up following its severe downturn from “leveling out.”

They also had the following changes:

There was a draw-down on oil inventories that helped to push markets higher. (Note: Correlations these days are unbelievably high across many market segments.)

We have seen these numbers see-saw on a weekly basis, giving us little trend to lock onto. Clearly total inventories have been dropping as the demand has stabilized. Just as the draw-down this week was larger than expected, next week can easily show just the opposite.

Allegiant Air (ALGT) came with impressive numbers for October. The load factors were slightly down but we saw healthy increases in most areas as compared to 2008. Allegiant has one of the best load factors in the industry as they manage flight loads well.

Yet, we also looked deeper and saw that there is a rising number of non-paying passengers that are making up this load factor. That can be caused by a variety of factors including frequent fliers and crew transfers. It can also be caused by giveaways to fill up planes and goose load factors. But, for now, we will assume that is is the former.

Last month (September 23) we saw a very small shift in a few of the key areas of the Fed statement. In particular, the wording change that showed that the Fed saw economic activity has picked up following its severe downturn from “leveling out.”

The Fed also had the following changes:

The numbers posted Friday are a touch concerning as we are seeing the biggest drop in spending over the past 9-months. This ties into the drop in consumer sentiment numbers we saw earlier this week. Retailers may not take well to this trend.

Wages and salaries that had been on the mend are again dipping and have seen the a massive drop on a year over year basis. That is caused by the combination of less hours worked and the lesser shown side-effect of part time employees. Of course demand and manufacturing are down and companies are continuing to lay off employees, further adding to the destruction of income.

There was good news Wednesday. The Case-Schiller index rose for a 3rd straight month. Otherwise it was not a very good day for the economy.

While some sectors (energy and health) were up Wednesday, there was a good amount of carnage left by these reports and earnings announcements.

If you have been reading along, you would have scooped up two short calls that we made on Wynn Resorts (WYNN). The most recent was last week when we identified conditions that we found to be troubling for the casino operator. (Click here.)

To top it off, Steve Wynn said in Wednesday’s conference call: “… it will not be expanding in the U.S. until management understands what is going on in the country.“

Here are a few indicators we are watching. A few are showing some signs that the rally is getting strained. Last week we saw some very good news on the earnings front with a few decent economic reports. Even so, markets fell on increased volume. Not a good sign.

Sentiment seems to have changed last week. Sell on good news?

Wasn’t it just a week or so ago that Wynn Resorts (WYNN) successfully completed the IPO of the Macau properties? If memory serves, they collected somewhere around $1.5 billion in order to fund expansion and operations.

Now why would they be needing an additional $500 million so quickly? Well, of course it is because when fish are feeding, they will even bite on a baitless hook. So, investors are seen as fish and throwing anything into the investment pond is being gobbled up. Wynn knows this.

After the close on Monday, there was a shock to the Brazilian markets as an announcement was made that Brazil will be slowing foreign investment into the country. In as effort to cool the hot currency and speculation within the stock markets, they are reinstating policy from a few years ago.

Brazil has been one of the countries that has been concerned about the U.S. dollar’s status as the world’s reserve currency. Obviously this is of importance as their country has both oil and commodities as a core export. With the U.S. dollar under fire (due to the systematic devaluation through debt monetization by the Fed) many countries are worried about a long, healthy and sustainable global recovery when relying on the U.S. dollar as the backbone currency.

U.S. Federal Reserve Meeting Minutes For September 23

Good and bad news mixed in, but no surprises.

In another interesting move, Meredith Whitney cuts her rating on Goldman Sachs (GS) just before earnings on Thursday. This is reminiscent of last quarter. If you remember, it was a Monday morning and markets were continuing to sell off more than 7% over the previous few weeks. Then, she announced on CNBC that Goldman was going to provide blowout numbers and raised her rating and price target.

That provided a quick turn for markets as it turned a 1% early loss for the S&P 500 into a 2%+ gain by day’s end. Financial stocks exploded and the world cheered. She did clarify that it was not a commentary on the broader economy or on other financial stocks. But that did not matter as it was taken as a buy-the-dip signal.

So, where is gold heading? Some believe that it will be $2,000 in the not-too-distant future. Others think that it is well overvalued even at these levels. While the U.S. dollar has done a good deal to the recent upswing and concerns about inflation have helped to fuel the recent rally…. What next?

Click chart for video discussion.

According to a chart that Corey Rosenbloom over at Afraid to Trade sent to me, we are seeing for the first time in a while the ominous RED color come out to visit us for the S&P 500. This is not an ordinary chart. It uses a few indicators inclusive of Average True Range and the Red color bar sell signal on the daily S&P 500 chart corresponds with a downside break of the 20 day exponential moving average on higher volume.

Initial short-term target is the rising 50 day EMA at 1,020, if not a test of the “round number” support at 1,000. Targets below 1,000 include the 960 price high from June and then middle of the “value area” and “round number” support at 900.

We have calculated that there is a significant correlation between the ADP Non-Farm payrolls and the BLS Non-Farm. In fact it is as high as 95% when looking at the data since the inception of the ADP numbers in 2001.

So, while many have placed little creed in the ADP number, it has done a pretty good job of predicting what the BLS survey will show only a few days after the ADP release.