Faceplant

FACEPLANT

 

 

CLIENT TALKING POINTS

 

PLAYING GAMES IN EUROPE

Last week, European credit default swaps are tightening because Germany’s Angela Merkel came out and spun some positive commentary about the situation in the Eurozone. In these dog days of summer when everyone is on vacation (including volume and volatility), a little bit of discourse is all it takes to get the market excited. Despite European bank swaps widening across the board (Spain, Greece, Italy, etc.), participants are generally breathing a sigh of relief as Europe all of a sudden becomes “better.” The EUR/USD remains at $1.23. Any higher, and it’ll be a bull case. Break $1.23 and in particular, $1.225, and you have a bear case.

 

 

THE NEW ISSUE: BONDS

Bond issuance in 2012 is through the roof – it’s like banks and corporations are reproducing like bunny rabbits and the offspring is multi-year paper. Everyone’s doing it, too and with good reason. Refinance with the Fed’s “extended” low rate environment, crank out muni bonds for projects which in turn create jobs. When money is cheap, might as well use it. Looking at the investor  side of things, people are desperately chasing yield. They’ll buy anything offering more than 100 basis points it seems like. When your savings account has been collecting cobwebs for the past 5 years and CDs are as pointless as the media format with the same acronym, you need to get creative. For an idea of just how crazy the bond market has become, check out these facts from our research team:

 

Firstly, in the municipal bond market in the United States, as of May, issuance is up 70% compared to the same period in 2011.  Secondly, in the U.S. corporate bond market issuance is up 5% year-over-year, but has seen a serious acceleration in the last few months with investment grade issuance up 54% and high yield up 30% in July 2012.”

 

 

FACEPLANT

We won’t gloat long here, especially after booking 7 consecutive winning trades last week in the Virtual Portfolio. Facebook (FB) stock tanked last week. On Thursday, Keith went on CNBC’s Fast Money Halftime Report and basically slammed Facebook, saying it could go lower. “Don’t try to catch a falling knife,” he said. Some guests disagreed and said they’d be buying more at “these levels,” which are the time was around $20-$20.50. Friday the stock fell even further and closed at $19.05 a share. Keith thinks it’s going lower and guess what? It probably will.

 

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ASSET ALLOCATION

 

Cash:                  DOWN

 

U.S. Equities:   UP

 

Int'l Equities:   Flat   

 

Commodities: Flat

 

Fixed Income:  Flat

 

Int'l Currencies: UP   

 

 

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TOP LONG IDEAS

 

NIKE INC (NKE)

Nike’s challenges are well-telegraphed. But the reality is that its top line is extremely strong, and the Olympics has just given Nike all the ammo it needs to marry product with marketing and grow in the 10% range for the next 2 years. With margin pressures easing, and Cole Haan and Umbro soon to be divested, the model is getting more focused and profitable.

  • 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

“Must. Invent. Products. For. Quantitative. Arbitrage. NASDAQ to create 150,000 Indexes this fall: tinyurl.com/9umevyu $$ #valueadded” -@SalArnuk

 

 

QUOTE OF THE DAY

“Money talks, so listen to it.” – 10cc, Art For Art’s Sake (1975)

                   

 

STAT OF THE DAY

$5.7 billion. The amount Aetna (AET) is offering to buy Coventry Health (CVH) for in cash and stock. The move will boost Aetna’s foray into Medicaid and other government-backed programs.