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CLIENT TALKING POINTS

 

BERNANKE EFFECT: With every quantitative easing, we have been met with a shorter, steeper, asset price rally, but a faster correction. What we’re experiencing these past two weeks is no exception, and it doesn’t inspire price stability and employment. Financials (XLF) and Commodities (CRB) down 4.2% and 4.3%, respectively, since what will be remembered as a historic morning-after in US economic history on September 14, the last time Fed Chairman Bernanke announced quantitative easing.

GET THE US DOLLAR RIGHT…

When you get the US Dollar right, you get a lot of other things right. That’s the story of the last seven trading sessions – stocks are down six of the last seven sessions as the US Dollar  bounces straight up  off its TAIL support line of $78.11 on the US Dollar Index. Right here the USD is immediate-term TRADE overbought while the Euro at 1.28 is immediate-term TRADE oversold.

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ASSET ALLOCATION

Cash:                  Down

U.S. Equities:   Up

Int'l Equities:   Up 

Commodities: Flat

Fixed Income:  Down

Int'l Currencies:Down  

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TOP LONG IDEAS

WENDY’S COMPANY (WEN)

Our conversations with Wendy’s franchisees indicate that sales have been trending sequentially higher in 3Q versus 2Q. We believe the company is about to announce the end of the company’s Sisyphean breakfast initiative after a prolonged “testing” phase. Given the capital demands on the company over the next few years as it invests to upgrade its asset base, shifting capital from the distraction that has been breakfast is a positive. The tail is less certain as it will take years for the system to rejuvenate the asset base and push out the older franchisees that don’t want to make the necessary investments to bring the asset base in line with contemporary industry standards..

  • TRADE:  LONG
  • TREND:  NEUTRAL
  • TAIL:      NEUTRAL            

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

“Plenty of mixed messages out there - your job is to balance them and remain sane” -@KeithMcCullough

QUOTE OF THE DAY

“If you put the federal government in charge of the Sahara desert, in 5 years there’d be a shortage of sand.” -Milton Friedman

STAT OF THE DAY

$16 million, the amount of money that separates the NFL owners and referees from reaching a conclusion to their standoff