Political Chaos

Client Talking Points

Get It Together

The markets don't believe that President Obama and John Boehner can come to an agreement on the fiscal cliff as the futures sell off en masse this morning. Ironically, the rest of the world seems to not care about America’s problems as the rest of the global equity landscape is essentially flat. No major sell offs anywhere but here. As we head into the holiday weekend, we can’t help but shake our heads over the political class and how Washington can't get its act together. 

The Cycle Turns

One of our global macro themes of commodity deflation continues as gold sells off further. There are a lot of investors who are long gold and this is a punch to the gut for them. Gold may have little bounces but they can be sold on green. Other commodities like copper to soybeans have had a very rough December. As we move from Growth Slowing to Growth Stabilizing, we will continue to see further commodity deflation.

Asset Allocation

CASH 55% US EQUITIES 21%
INTL EQUITIES 12% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 12%

Top Long Ideas

Company Ticker Sector Duration
NKE

Our competitors are neutral to bearish on the name ahead of earnings, but we think they’re missing the bigger picture. We think concerns over the shoe cycle rolling over are overdone. With R&D in the mid-teens, NKE has the ability to drive the ‘sneaker cycle’ in a case of “the tail wagging the dog”. We also think $NKE is a candidate for releasing a special dividend when they report EPS next week.

SBUX

Uncertainty in US from a macro perspective (jobless claims uptick) gives us pause from TRADE perspective although coffee prices will serve as a tailwind going forward. Company is becoming more complex, taking on risk as it acquires new brands. Longer-term, we view Starbucks, along with YUM, as one of the most attractive global growth stories in our space.

FDX

Margins are in a cycle trough as the USPS is on the brink. FDX is taking more share in the U.S. and following the recent $TNT news flow we think $UPS is in a tough spot.

Three for the Road

TWEET OF THE DAY

“If people we right freaked out about USA credit risk, they'd be selling Treasuries and Dollars - they are buying both” -@KeithMcCullough

QUOTE OF THE DAY

“The power of accurate observation is commonly called cynicism by those who have not got it.” -George Bernard Shaw

STAT OF THE DAY

S&P 500 futures drop 20 points (-1.5%) pre-market amid worries over the fiscal cliff.


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