Weak Volume Beggars

WEAK VOLUME BEGGARS

CLIENT TALKING POINTS

LOOKING AT TREASURIES

US Treasuries have been something like a bucking bronco these days. Traditionally known as a safe haven, the 10-year is starting to trade like the S&P 500 with the VIX at 35. We’re seeing a big drop here as the yield heads straight down to the 1.62%. Yes, 1.62%. Remember when it was at 1.8% the other week? What gives? It snapped TRADE support of 1.65% like a hot knife through butter, is what gives. Today’s US GDP report may have a temporary effect on the yield but as things guess worse, the “safe haven” play will kick back in and that yield will drop like skydiver.

WEAK VOLUME BEGGARS

The weak volume beggars you may recognize. It may be the guy working the sales trading desk at the bulge bracket firm that used to be a top player in the mid-2000s but now has jack for products. It may be the broker-dealer who promised low rates when things were high-flying and the VIX was way up and is now snarling at his commission checks. Whoever it may be, realize that these are Old Wall, Weak Volume Beggars. The volume has dried up and it isn’t coming back to equities anytime soon. If your desk can’t realize and absorb that, then you’re going to have a problem on your hands.

THAT ‘70s SHOW

Skip the Ashton Kutcher and Mila Kunis – we’re talking about monetary policy in the 1970s. Back then, Fed Chairman Arthur Burns was debauching the dollar just like Bernanke was, minus the pomp and circumstance on TV and in print. I guess the power of the Internet and media these days is just too much to resist. We’re doing the same thing we did back in the 1970s and look where it got us. At this point, it probably wouldn’t hurt to put the brakes on the QE and lowering rates further.

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ASSET ALLOCATION

Cash:                  UP

U.S. Equities:   DOWN

Int'l Equities:   Flat   

Commodities: Flat

Fixed Income:  Flat

Int'l Currencies: Flat  

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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

“FRENCH PM SAYS STABILIBITY MECHANISM 'MUST' BE IMPLEMENTED NOW. need some work on those desperation vibes” -@zerohedge

QUOTE OF THE DAY

“It is better for civilization to be going down the drain than to be coming up it.”–Henry Allen

STAT OF THE DAY

1.7%. The rate at which US GDP grew in the second quarter of 2012.