AHEAD OF THE FED
CLIENT TALKING POINTS
FIXING GREECE
Everyone wants to chat with Angela Merkel these days. Today, it is French President Francois Hollande, who is discussing potential outcomes for Greece and the possibility for a default as the country prepares to release a report next month detailing its finances. Greek Prime Minister Antonis Samaras will be meeting with Merkel on Friday. While no earth shattering headlines have come out of Europe in the past week, the fact of the matter is that the situation with the Eurozone continues to worsen as Germany’s ability to prop up the rest of the region dwindles. The only way out of this mess is to formulate a plan that will get countries like Greece and Spain back on a long-term, sustainable path to growth and fiscal sustainability.
AHEAD OF THE FED
Ahead of the Federal Reserve’s infamous Jackson Hole meeting next week, we went short gold and long the US dollar in the Hedgeye Virtual Portfolio yesterday. We believe that any action that the Fed may or may not take is already priced into the market for the most part and thus, the timing is right for us to initiate positions ahead of the meeting. While we’re of the opinion that the Fed will not introduce another round of QE, there’s not much to do at this point but watch and wait for the Fed to make its next move.
FAUSTIAN INVESTING
Goethe would be pleased with this term we’ve coined this morning. Like the book, Dr. Faust makes a deal with the devil and in exchange for his soul, experiences the pleasures of the world and unlimited knowledge. We think that buying equities with the VIX at 15 combined with no volume rallies is similar to making a deal with the devil or in this case, central bankers.
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ASSET ALLOCATION
Cash: UP
U.S. Equities: Flat
Int'l Equities: Flat
Commodities: Flat
Fixed Income: DOWN
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
“"My mom used to tell us, Carl, put on your shoes. Oscar [Pistorius], put on your legs, so I grew up thinking I had different shoes." Fav #Olympic quote.-@LewisPugh
QUOTE OF THE DAY
“It is easier to forgive an enemy than to forgive a friend.”–William Blake
STAT OF THE DAY
$1665/ounce. The price of gold, which is hitting 16 week highs amid hopes that the Federal Reserve will provide additional stimulus.