BURNING THE BUCK
CLIENT TALKING POINTS
BURNING THE BUCK
Debasing the dollar is the name of the game these days. With the growth slowing, we’ve increased our fixed-income asset allocation and have it nearly maxed out at 30%. Why? We’re buyers of the TLT ETF on red. Stocks and commodities may get a short-term jolt when Bernanke comes out swinging, but after the party dies down, it’s time to reconsider what to do with your portfolio. You can’t just keep holding on to longs and praying for more Jackson Hole-esque speeches. Yields on the 10-year are up, commodities are up and oil is up with gasoline approaching $4 a gallon (it’s already here in New York). These shenanigans will continue week after week as the US dollar is destroyed by the Fed as It tries to inflate our economy. But things change – remember that.
CHINA CONTINUES TO DETERIORATE
Chinese stocks have been getting smoked and are down nearly -16% since May. And overnight, stocks dropped -2.1%. If this isn’t a sign that China growth is slowing, then we don’t know what is. People still keep warning of a coming “crash” in China. That crash has already happened and is a thing of the past. The crash is continuing, not beginning. And with China down, copper continues to head lower with futures falling -1% this morning and failing March highs. “If you build it, they will come,” worked well for Kevin Costner in Field of Dreams but it doesn’t work for the Chinese housing market. There won’t be any kind of stimulus a la Bernanke anytime soon because they realize the repercussions of higher oil prices and food prices.
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ASSET ALLOCATION
Cash: DOWN
U.S. Equities: Flat
Int'l Equities: Flat
Commodities: Flat
Fixed Income: UP
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
“Overheard on Wall and Broad: "Is this an Occupy protest or are they filming the sequel to Newsies?”” -@ReformedBroker
QUOTE OF THE DAY
“A superstition is a premature explanation that overstays its time.” –George Iles
STAT OF THE DAY
Italy’s short selling ban expired Friday night. Have at it.