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CLIENT TALKING POINTS

MARIO’S TURN

So the Fed basically extended low rates until 2014 yesterday and the market didn’t think much of it. Perhaps they were dealing with the market making debacle over at Knight Capital OR perhaps they were waiting for the real catalyst, which is Mario Draghi amd the ECB. It really matters what happens today at his meeting because if you’ll recall, Draghi is ready to do “whatever” it takes. Too bad they didn't cut rates and said they "may" do open market operations. That doesn't inspired confidence; European stocks hopped into  a freefall afterward.

NOT AGAIN

The Keynesian central planners love to get their tightie whities in a bunch. Perhaps they are finally wising up to the fact that they are the ones perpetuating slowing growth and have gotten exactly where we didn’t want to be. They are realizing that the family on welfare is not so keen on high fuel prices and higher food prices, despite the government assistance. It’s like one of those movies about the Civil War where someone gets shot: we’re going to have to bite down hard and pull through the pain before we’re back to normal.

GEITHNER THE GREAT

China’s stock market has basically been going down since April. It tried to go up yesterday but people decided they didn’t really like that. They’re down -14% since May, which doesn’t exactly inspire confidence. The country might have

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ASSET ALLOCATION

 Cash:                  Flat                        U.S. Equities:    DOWN

 Int'l Equities:   Flat                        Commodities:    Flat

 Fixed Income:  UP                         Int'l Currencies: Flat

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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

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THREE FOR THE ROAD

TWEET OF THE DAY

“KCG owns substantial minority stake in Direct Edge, which has been exploring capital-market opportunities for some time...” -@JustinRBLT

QUOTE OF THE DAY

“An economist is a man who states the obvious in terms of the incomprehensible.” – Alfred A. Knopf

STAT OF THE DAY

$440 million. The loss Knight Capital (KCG) will take from yesterday’s market structure breakdown.