RIA DAILY PLAYBOOK
FOR RELEASE ON THURSDAY, JULY 19, 2012
CLIENT TALKING POINTS
CROPPED HEAT
Nearly 20% of the corn crop has been destroyed in the US due to the massive heatwave that has engulfed the Midwest. Forget the policy of devaluing the dollar for now – the lack of QE combined with a massive upward flux in commodity prices is taking place. Corn is wiped out. Wheat isn’t doing well. You need corn to feed cows, pigs, etc. See the chain effects we’re referring to? Expect higher prices at your local grocer soon.
BAD BANKS, BAD BANKS
Did you see what Morgan Stanley did? It had a mess of a quarter, slashed 700 jobs, and proved that Old Wall Street is dying. All these banks are running into nothing but trouble. No volume, no market. A bunch of algo guys at the banks are trying to tweak their algos so their algo can front run another algo for a basis point. Sheesh.
VOLATILITY SIGNALS
The VIX is headed to 15. The volume is abysmal out there but should the VIX get to 15, we’ll look to short the S&P 500. It’s simple: look at the levels, look at the volume and make the connection. There’s no volume in between our S&P 500 levels, so when we got to 1374, we knew it’d make for a good short. Pay attention out there.
ASSET ALLOCATION
Cash: Up U.S. Equities: Down
Int'l Equities: Down Commodities: Down
Fixed Income: Up Int'l Currencies: Down
TOP LONG IDEAS
PSS WORLD MEDICAL (PSSI)
The bulk of the bad news is on the table following disappointing F2012. Rebased F2013 estimates far more reasonable, and revenues should be supported by our expectations for rising physician utilization, and in the near-term, a flu season that is shaping up as a considerable tailwind.
TRADE: LONG
TREND: LONG
TAIL: NEUTRAL
HCA (HCA)
SS volume accelerated in 1Q12 and employment remains a tailwind to both admissions & mix. We expect acuity to stabilize and births and outpatient utilization to accelerate out of 1Q12, while supply cost management continues as a margin driver and acquisition opportunities remain a source for upside.
TRADE: NEUTRAL
TREND: LONG
TAIL: NEUTRAL
UNDER ARMOUR (UA)
The company continues to control its own destiny through investments in all the right areas. We think 30%+ top line and EPS growth for 5+ years. One of its failures, however, has been in penetrating markets outside the US. That will happen. But for now, its failure is a competitive advantage in the face of a strengthening dollar. We like it in sympathy with a LULU sell-off.
TRADE: LONG
TREND: LONG
TAIL: LONG
THREE FOR THE ROAD
Tweet of the Day: “I couldn’t care less about who’s delivering alpha. Much more concerned with who’s delivering pizza..”-@ilkandcookies
Quote of the Day: “Get all the fools on your side and you can be elected to anything.” –Frank Dane
Stat of the Day: 700. The amount of additional job cuts taking place by year-end at Morgan Stanley.
