CLIENT TALKING POINTS
Strong Markets
There’s a strong correlation between the S&P 500 and the US Dollar vis-a-vis the 90-day inverse correlation (-0.90). That means if you can get the dollar right, you can get a lot of other things right. Take the inverse correlation into account and a down week for the dollar makes sense as stocks, junk bonds, and commodities moved higher last week. Want a stronger equity market with volume to boot? We’re going to need stronger growth in America first. Grow GDP and quit pussyfooting around in Congress and we might just make this happen.
Consider Treasuries
Last week’s selloff in Treasuries brought the yield on the 10-year up to 1.68%, up 11 basis points on a week-over-week basis. That came close to our immediate-term TRADE line of resistance at 1.69% but we couldn’t break on through to the other side. As the 10-year drops back to 1.66% this morning, we find ourselves in a bearish formation so in turn, we raised our fixed-income asset allocation up to 27%. You have to go with what’s right, not with what’s wrong.
TOP LONG IDEAS
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.
Asset Allocation
| CASH | 46% | US EQUITIES | 9% | |
| INTL EQUITIES | 0% | COMMODITIES | 0% | |
| FIXED INCOME | 27% | INTL CURRENCIES | 18% |
THREE FOR THE ROAD
TWEET OF THE DAY
“You know it's Monday morning when a @NYSEEuronext trader is still whistling the @NBCSportsfootball anthem #NYGiants” -@carlquintanilla
QUOTE OF THE DAY
“It is impossible to defeat an ignorant man in argument.” -William G. McAdoo
STAT OF THE DAY
UBS fined $47.5 million in insider trading case as #OldWall keeps with tradition.
