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MASKING ECONOMIC GROWTH

CLIENT TALKING POINTS

A WHOLE LOT OF NOTHING

Last week’s Jackson Hole non-event came and went. The Bernanke statement was released and the market popped a little (7 handles in the S&P 500). That was about it. That doesn’t seem like a vote of confidence for us. With Mario Draghi failing to show up and Bernanke giving the spiel about how the Fed is prepared to take additional measures to boost the economy if need be (i.e. more QE), it’s clear we’re going to continue to slowly move higher in the market, making lower highs while oil continues to climb towards $150 a barrel.

CHANGING MARKETS

As we head into September, it’s time to examine the sea change that’s occurred in the markets. Let’s examine what’s going on here: volatility is up +30% since its year-to-date closing low two weeks ago, commodities are up 1.9% and US Treasury yields are down 14% this morning. Meanwhile, stocks are falling, bonds are up. Trading this market takes a hell of a good eye and diligence in risk management. Meanwhile, the US dollar continues to take hits to the stomach and is falling further still. Despite last week’s “whole lot of nothing” at Jackson Hole, it appears that people aren’t ready to give up hope in Bernanke just yet.

MASKING ECONOMIC GROWTH

We’ve said it before and are certainly ready to say it again: inflation of market prices does not equate to economic growth. Gold buyers who initiated positions right before Bernanke at Jackson Hole are now enjoying their short-lived gains, but look what you get in return: higher energy prices, no hiring, no economic growth and a lower US dollar. Growth continues to slow and it’s clear that Ben Bernanke has no intention of fixing the economy; he’d much rather placate market participants in the short-term.

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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

“Facebook Has Lost More than $50 BILLION in Value. The Man to Hold Responsible: nyti.ms/OSHqpd--jjc” -@andrewrsorkin

QUOTE OF THE DAY

“The United States is a nation of laws: badly written and randomly enforced.” –Frank Zappa

STAT OF THE DAY

$6 billion. The amount of capital Spain’s Treasury will inject into a rescue fund to help recapitalize failing financial institutions.