BEGGING FOR QE
CLIENT TALKING POINTS
BEGGING FOR QE
The time has come and rightfully so. With the Federal Reserve meeting this week at Jackson Hole, everyone and their mother is expecting some form of quantitative easing that they can swallow and use to buoy the market higher. This, despite lower highs being made in European equities over the last two weeks and Chinese equities continuing to go lower like it’s going out of style. People need to remember that Bernanke has not delivered on the last two meetings he’s participated in. Basically, everyone is riding the wave of hope, thinking he’ll come through despite essentially proving he won’t.
MANAGING THE RISK
You need to manage the risk and the range. We’ve said this over and over again. Look at the levels, see what the market’s doing and make proper decisions. Last week, many investors were keen on putting on shorts at covering highs and selling fixed-income on the lows. That’s not proper risk management! With the S&P 500 and 10-year yield dropping, we covered shorts in the Virtual Portfolio and our Asset Allocation Model, which we should note are two entirely different products.
AVOIDING COMMODITIES
As you’ve probably noticed, our asset allocation for commodities remains 0%. For believers in QE, that’s just wishful thinking. To quote Keith: “what’s really happening here is that people are front-running him, getting all lathered up in what slows real (inflation adjusted) consumption growth (rising commodity prices).” Yeah. That’s about right. People are going gah gah for gold and oil contracts. And when the Fed comes out at Jackson Hole and is all like “Sorry, no relief, bozos.” A lot of people are going to be disappointed.
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ASSET ALLOCATION
Cash: UP
U.S. Equities: DOWN
Int'l Equities: Flat
Commodities: Flat
Fixed Income: Flat
Int'l Currencies: DOWN
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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
“$CL_F trendguide...nice spike up overnight on Issac heading towards the oil producing GOM...high of $97.72 so far. twitpic.com/ao9e9e”.-@Bain_Energy
QUOTE OF THE DAY
“A man is not idle because he is absorbed in thought. There is a visible labor and there is an invisible labor.”–Victor Hugo
STAT OF THE DAY
Sinopec posted a 40% decline in earnings as high crude costs squeezed its refining unit and exposure to government-mandated price controls.