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Client Talking Points

It All Adds Up

You can put together clues like a detective to come up with a thesis on where things are headed and how markets interact with each other. Get the EUR/USD right and guess what? You’re going to get some other things right, too. In this case, we think it’s a good time to short the Euro with the EUR/USD at $1.286 - up against our TRADE line of resistance. The time is also right to short high-beta stocks and commodities while buying up bonds and the US dollar. 

Lowering Expectations

The days of decent (read: >3% a year) GDP growth are now behind us. We’re on track for a growth number akin to 1.4% a year and adjusted growth of 0.9%. That can be hard to swallow but sometimes the truth isn’t what you want to hear. Our macro theme of #GrowthSlowing continues to press on and coalesce into the #EarningsSlowing game. Despite all the negative data points we continue to see, housing is actually offering a glimmer of hope as mortgage applications pick up and the glut of supply begins to shrink. Despite the good news, however, we have a long way to go before we’re back to the way things used to be before the financial crisis; it won’t be an easy journey.

Asset Allocation

CASH 52% US EQUITIES 6%
INTL EQUITIES 0% COMMODITIES 0%
FIXED INCOME 24% INTL CURRENCIES 18%

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

“Locked eyes with the security guard at Brookstone. He knew that I would take his life before surrendering this vintage gumball machine.” -@ReformedBroker

 

QUOTE OF THE DAY

“Traditions are group efforts to keep the unexpected from happening.” -Barbara Tober

STAT OF THE DAY

Hurricane Sandy may ultimately deliver $240 billion in reconstruction and rebuilding costs helping to drive US economic growth.