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Client Talking Points

Dollars and Commodities

The US dollar is driver of many economic events, hence why it’s important to keep an eye on it at all times. If you get the dollar right, you’ll get a lot of other things right. The US dollar is now up for 8 of the last 9 weeks. If this continues, along with the S&P 500 recapturing our TAIL line of support at 1364, we’ll see food inflation come down and the commodity bubble exploding. Institutional bets on commodities cannot withstand these strong dollar gains and they will be forced to fold their hand eventually. 

 

Wheat, Soybeans and Coffee have been big losers on a week-over-week basis. Eventually you’ll see some products coming down in price at the supermarket but it will take time. This is also a positive for stocks like Starbucks (SBUX), Walmart (WMT) and others who are reliant on the price of commodities. Net long contracts at the CFTC continue to drop; it’s easy to see what’s happening in commodity-world right now and it ain’t pretty.

 

Asset Allocation

CASH 61% US EQUITIES 6%
INTL EQUITIES 0% COMMODITIES 0%
FIXED INCOME 18% 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.

IGT

There is improving visibility on 20%+ EPS growth with P/E of only 11x with better content leading to market share gains. New orders from Canada and IL should be a catalyst. Additionally, many people in the investment community are out in Las Vegas at the annual slot show (G2E) and should hear upbeat presentations by management.

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

“Haldane: ‘As UK banks increased leverage, they managed to maintain constant capital ratios by seeking out assets with lower risk weights’” -@edwardnh

QUOTE OF THE DAY

“It is by the goodness of God that in our country we have those three unspeakably precious things: freedom of speech, freedom of conscience, and the prudence never to practice either of them.” -Mark Twain

STAT OF THE DAY

Bad debt at Spanish banks hit new highs as debts that are mostly related to home buyers and property developers reached 182 billion euros or 10.7% of bank assets.