THE PAUL RYAN TRADE
CLIENT TALKING POINTS
THE PAUL RYAN TRADE
Ryan is all about Hayekian economics – that’s the Austrian breed you know. Romney’s pick for vice president is going to change the game with the level at which he is a fiscal conservative. He is bullish on the US dollar and anti-Bernanke. Regarding the central planner, he will likely keep a close eye on the Fed and will delay any sort of QE before the election in November. Ryan will also bring a focus on the debt ceiling debate, an issue of which Congress desperately needs to take care of. Ryan is going to change the market dynamic – no doubt about it. Let’s see how he pulls it off.
FIXING THE DOLLAR
Monetary policy and fiscal policy are the two main drivers of our currency. When Ryan is pounding the table over an issue and Ben Bernanke is lowering rates, it moves the dollar. This is the only thing that has been certain over the last 100 years. According to our numbers, it looks like a Reagan-era surge is about to occur, particularly if Romney wins. The dollar has been down for about three weeks now and a reversal is coming. I mean, show us one person who’s a big fan of these prices of crude oil. Go for it. Consumers are proponents of a strong dollar. They are tired and sick of inflation and expensive fuel and food.
ALL THAT DEBT
Getting our ducks in order with regard to America’s debt problem is paramount. This country is being driven apart over issues that really need to be addressed at this point. Too bad no one in Congress can agree on anything. We’re not cheerleading for any particular side, but Paul Ryan is the closest thing we have to fixing our debt problem. Our President apparently would rather focus on his career rather than pushing Congress to get things done. Whatever the outcome, we better come out of this election with jobs and a better economy or heads are going to roll.
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ASSET ALLOCATION
Cash: Flat
U.S. Equities: Flat
Int'l Equities: Flat
Commodities: Flat
Fixed Income: Flat
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
LAS VEGAS SANDS (LVS)
LVS finally reached and has maintained its 20% Macau gaming share, thanks to Sands Cotai Central (SCC). With SCC continuing to ramp up, we expect that level to hold and maybe, even improve. Macau sentiment has reached a yearly low but we see improvement ahead.
- TRADE: LONG
- TREND: NEUTRAL
- TAIL: NEUTRAL
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THREE FOR THE ROAD
TWEET OF THE DAY
“Zambia has banned dollar-denominated transactions. Offenders can face 10 year jail term. WSJ ” -@insidegame
QUOTE OF THE DAY
“Every composer knows the anguish and despair occasioned by forgetting ideas which one had no time to write down.” – Hector Berlioz
STAT OF THE DAY
$114. The price of Brent crude oil, which is now at a 3-month high.