FX OF THE DOLLAR
CLIENT TALKING POINTS
A GAME OF CHANCE
Some liken the stock market to a Vegas casino and while comparison can be debated and argued somewhat, we would call the market a particularly unique game of chance. Chinese stocks go up and then down after making YTD lows, US stocks have 2 up days then one down day and oil is up +31% since late June. If you’re looking for some magical pattern to follow, good luck finding it. The market is being whipsawed around these days by Federal Reserve whispers and rumors about market participation and bond buying programs over in Europe. One thing we can assure you is that this is NOT what growth looks like. Anyone telling you that inflation = growth needs to take a few more Flintstone’s vitamins and reconsider their career.
FX OF THE DOLLAR
Pardon the pun, but let’s examine the US dollar for a moment. The falling dollar, perpetuated by Bernanke & Co., inflates asset prices like stocks and commodities in the short-term. In turn growth slows and begging bailouts soon follow when the S&P 500 starts dropping a few handles each day. Meanwhile, you have speculators driving gold up higher and higher based on Fed action (or lack thereof) and next time you’re at the pump, you see $5 a gallon gas - we had the misfortune of paying $4.35 a gallon in New Jersey yesterday. Drive up food and fuel prices enough and you’ll have a lot of supporters of a stronger dollar soon enough.
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ASSET ALLOCATION
Cash: UP
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 (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
“Times like #CTUStrike showcase the problematic ambiguity of liberal wonk writers. Are they reporters? (insta-)experts? opinion columnists?” -@rortybomb
QUOTE OF THE DAY
“Few people are capable of expressing with equanimity opinions which differ from the prejudices of their social environment. Most people are even incapable of forming such opinions.” –Albert Einstein
STAT OF THE DAY
US August Budget Deficit Soars To $192 Billion, $1.17 Trillion In Fiscal 2012
