Keynesian Mega Party

KEYNESIAN MEGA PARTY

CLIENT TALKING POINTS

KEYNESIAN MEGA PARTY

If you thought the party known as Keynesian central planning was coming to a close, you are sorely mistaken. Pop the champagne bottles, light the cigars and hand out the Quaaludes – we’re due for another round of easing any day now. The Federal Reserve has just seen the August jobs report (which missed expectations) and will have to go back  to printing more money and injecting it into the economy. It may not be pretty but hey, as long as we have drugged up, no volume rallies that push the S&P 500 as high as it can go, we’re groovy, right?

WHERE’S THE GROWTH?

Ask yourself this question and then ponder for a minute what the correct answer is. Is it the US stock market or bond market? Is it German stocks or the EUROSTOXX 50? Is it the S&P 500 or the Russell 2000? Keith highlights some of these questions in this morning’s Early Look and we wonder where exactly the growth is. It’s like that Paula Cole song from the 1990s “Where Have All The Cowboys Gone?” Ask yourself: where has the growth in America gone?

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ASSET ALLOCATION

Cash:                  UP

U.S. Equities:   DOWN

Int'l Equities:   DOWN   

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            

PACCAR (PCAR)

Emissions regulations in the US focusing on greenhouse gases should end the disruptive pre-buy cycle and allow PCAR to improve margins. Improved capacity utilization, truck fleet aging, and less volatile used truck prices all should support higher long-run profitability. In the near-term, Paccar may benefit from engine certification issues at Navistar, allowing it to gain market share. Longer-term, Paccar enjos a strong position in a structurally advantaged industry and an attractive valuation.

  • 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

“#EaseToPlease was just officially green-lighted ~ #QE3” -@TheKillir

QUOTE OF THE DAY

“There are three kinds of lies: lies, damned lies, and statistics.” – Benjamin Disraeli

STAT OF THE DAY

Unemployment fell from 8.3% to 8.1% for August.