Bulls On Parade

RIA DAILY PLAYBOOK  

FOR RELEASE ON MONDAY, JULY 30, 2012

 

CLIENT TALKING POINTS

 

BULLISH BAILOUTS

US equities are currently enjoying a bull rally for one main reason: bailouts. As long as central planners around the world keep bailing out their respective countries, the trend will remain the same. Spain’s getting a blank check along with Greece and soon Spain will pay a visit to the bank known as the ECB to make a multi-billion euro withdrawal. Now we can sit back and wait to see if Ben Bernanke will deliver the drugs for the US in the form of QE3; we’re talking about a full on rate cut here, not another round of MBS buybacks.

 

KEEP THE GROWTH ALIVE

It was the Reverend Jesse Jackson who once said “Keep hope alive!” It appears that market participants and central planners are following in Jackson’s footsteps. It’s no secret that growth is slowing. Throw in asset price inflation, amplify market volatility and shorten economic cycles and you’ve got a delicious jambalaya called disaster and disappointment. We are perpetuating the inevitable consequences of bailouts, QE and all the other problems that remain.

 

But it’s all OK. As long as the S&P 500 rips five handles in the pre-market, no one is going to complain. It’s astonishing that people aren’t ready for lower fuel and food prices yet. King Dollar will make his way to the throne, but it may take him awhile before he gets there.      

 

GREAT INFLATIONS

Speaking of expectations, how about this inflation we’ve been experiencing? Sure, Isaac Newton once noted that “what goes up, must come down” but the commodity perma-bulls seem not to have a care in the world for that idiom. Should Bernanke deliver the goods, $1700 gold and $100+ a barrel oil will again become the “norm.” Oil is up +6% week over week and sugar is up +17% week over week.

 

If you don’t mind coughing up $12 for a Hershey’s bar, then so be it. Keith noted in this morning’s Early Look that CFTC contracts outstanding have passed the 1 million mark. An efficient market needs both hedgers and speculators but this is getting ridiculous. If commodity prices go any higher (and the drought in the Midwest continues to obliterate corn), perhaps we’ll soon see CASH 4 CORN stores popping up here and there.

 

ASSET ALLOCATION

 

Cash:  Flat              U.S. Equities: Down

 

Int'l Equities: Flat     Commodities: Flat

 

Fixed Income: Up     Int'l Currencies: Flat

 

TOP LONG IDEAS

 

JACK IN THE BOX (JACK)

This company is transitioning from cash burn to $75mm annual free cash flow generation thanks to completion of a reimaging program and refranchising of JIB units. Qdoba is the leverage; a maturing and growing store base will bring higher margins. We see 8.5% upside over the next 6-9 months.

                                 

TRADE: LONG

TREND: LONG

TAIL: LONG            

 

FIFTH & PACIFIC COMPANIES (FNP)

The former Liz Claiborne (LIZ) is on the path to prosperity. There’s a fantastic growth story with FNP. The Kate Spade brand is growing at an almost unprecedented clip. Save for Juicy Couture, the company has brands performing strongly throughout its entire portfolio. We’re bullish on FNP for all three durations: TRADE, TREND and TAIL.

 

TRADE: LONG

TREND: LONG

TAIL: LONG

 

LIFEPOINT HOSPITALS (LPNT)

We continue to expect outpatient utilization to pick up in 2H12 alongside stabilization in acuity with ortho and cardiac/ICD volumes supporting both pricing and inpatient admissions growth. Births should serve as a tailwind into year-end, recent and prospective acquisitions offer some upside to 2012/13 numbers and the in place repo offers some earnings flexibility. With European and Asian growth slowing, we like targeted domestic revenue exposure as well.

 

TRADE: NEUTRAL

TREND: LONG

TAIL: LONG

 

THREE FOR THE ROAD

 

Tweet of the Day: “STREITER SAYS SHARED DEBT LIABILITY NOT IN GERMANY'S INTEREST” -@fiatcurrency

 

Quote of the Day: “The glory of great men should always be measured by the means they have used to acquire it.”              – Francois de La Rochefoucauld

 

Stat of the Day: $700 million. The total amount of fines levied by the US due to the company’s failure to squash money-laundering at the bank.


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