Falling Down

FALLING DOWN

 

 

CLIENT TALKING POINTS

 

FALLING DOWN

Today, we’re not going to talk about the hit 1993 Michael Douglas film where a pissed off, unemployed American is sick of his situation and is out for revenge; we have that occurring on a daily basis already in our country. Instead, let’s focus on how stocks have been down 7 out of the last 8 sessions. Since Bernanke announced he’d be buying every mortgage-backed security he can find, the S&P 500 has dropped -2.8%. With this sort of correction, we’re ready to start buying stocks and that’s what Keith did yesterday if you go and check our Real-Time Alerts. 

 

We covered shorts, we bought Consumer Discretionary (XLY) and you know why? Because we manage the risk and the range out there. Global Macro signals, quantitative setups and managing risk - that’s the name of the game we play.

 

 

MANAGE THE RISK

Correlation risk has been discussed before but now it has become more important than ever. Two metrics you need to focus on are the CBOE Volatility Index (VIX) and the US Dollar. Get the US Dollar right, you’ll get a lot of other things right, including gold and the euro, should that be your kind of trade. For the VIX, you can look at it to make an educated trade on the S&P 500. Yesterday, the VIX was overbought, up +20% this week. Selling that index is what we would recommend.

 

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ASSET ALLOCATION

 

Cash:                DOWN

 

U.S. Equities:   UP

 

Int'l Equities:   UP   

 

Commodities: Flat

 

Fixed Income:  DOWN

 

Int'l Currencies: Flat  

 

 

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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

“The harder it gets to manage this immediate-term price volatility, the more insider trading (cheating) you'll see” -@KeithMcCullough

 

 

QUOTE OF THE DAY

In the land of the blind, the one-eyed man is stoned to death.” –Joan D. Vinge

                       

 

STAT OF THE DAY

U.S. 2Q GDP Growth Revised Down to 1.3% 

 


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