Making It Up

Client Talking Points

Making It Up

We truly get a kick out of those who try to forecast economic data. After all - what’s the point? Show us someone who has been right more than 1/3rd of the time on the jobs number and we’ll call BS. People make stuff up, just like the jobs number. So when the number comes out better than expected and the futures rip higher, remember that it’s an election year and someone is probably making those numbers more malleable than expected.

Asset Allocation

CASH 52% US EQUITIES 9%
INTL EQUITIES 0% COMMODITIES 0%
FIXED INCOME 24% INTL CURRENCIES 15%

Top Long Ideas

Company Ticker Sector Duration
TCB

After a long downward slide, TCB has finally turned the corner. The margin has stabilized after the balance sheet restructuring. Loans are growing thanks to the equipment finance business. Non-interest income is more likely to go up than down going forward, a reversal from the past 18 months. Credit quality has a tailwind from a distressed housing recovery in TCB’s core markets: Minneapolis, Detroit and Chicago. On top of this, the CEO, Bill Cooper, is one of the oldest regional bank CEOs, which raises the probability that the bank will be sold. Expectations are bombed out at this point, so we think it’s time to move from bearish to bullish on TCB.

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.

HCA

While political and reimbursement risk will remain near-term concerns, on the fundamental side we continue to expect accelerating outpatient growth alongside further strength in pricing as acuity improves thru 1Q13. Flu trends may provide an incremental benefit on the quarter and our expectation for a birth recovery should support patient surgery growth over the intermediate term. Supply costs should remain a source of topline & earnings upside going forward.

Three for the Road

TWEET OF THE DAY

“Only morons have "forecasts" for a jobs number the government makes up” -@KeithMcCullough

QUOTE OF THE DAY

“Tragedy is when I cut my finger. Comedy is when you walk into an open sewer and die.” -Mel Brooks

STAT OF THE DAY

$50 billion. The amount of economic losses expected because of Hurricane Sandy.


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