CHEAP MONEY
CLIENT TALKING POINTS
QE TAKES PRECEDENT
What matters most at the end of the day is how we can continue to juice the market further and further. It’s all about the easing these days and the Federal Reserve looks about ready to deliver another round of it. Friday’s jobs numbers essentially sealed the deal, all but guaranteeing the Fed will step into the markets yet again. We suppose that people don’t mind the high gas prices and $8 boxes of Pop Secret at the supermarket. It’s all part of the plan, so just go with the flow, right?
CHEAP MONEY
People are still going out and saying that stocks are cheap at these levels and there’s room to buy. They continually remind us that the market is up year-to-date. We kindly ask them to remember October of 2007 when the S&P 500 was at 1565 – was that considered cheap back then? 18 months later Starbucks (SBUX) was at $11 a share and you could go on a buying spree like a kid with a dollar at a penny candy store. Central planners continue to shorten economic cycles and amplify price volatility. This market is not cheap by any means. It is toppish and we are comfortable trading the proper risk and range.
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ASSET ALLOCATION
Cash: Flat
U.S. Equities: Flat
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
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
“Today we learn how much more student debt and subprime GM loans US consumer took out in July” -@zerohedge
QUOTE OF THE DAY
“A pessimist sees only the dark side of the clouds, and mopes; a philosopher sees both sides, and shrugs; an optimist doesn't see the clouds at all - he's walking on them.” – Leonard Louis Levinson
STAT OF THE DAY
$8.5 billion. The amount of money Japan Airlines is expected to raise in an IPO.
