Client Talking Points
Edge Of The Cliff
Now that the holidays have come to a close, it’s time to get back to business. Congress in particular really needs to reach into their mahogany desks and pull out their thinking caps. It’s going to be extremely difficult getting the political class to work together with President Obama to come to a solution on the fiscal cliff, but it must be done. We are fast approaching our debt limit of $16.39 trillion and guess what? Americans have little faith that Congress can get its act together to come to a compromise on spending cuts, taxes and the like. InTrade’s odds of the debt ceiling being raised by year-end are currently at 10% - so much for confidence.
Raise The Roof
Housing is one sector that’s on the fast track to a bright recovery. For the last six weeks or so, we’ve seen positive data from nearly every spectrum of the housing market. This morning October home prices are up 4.3% year-over-year according to S&P/Case-Shiller. Mortgage lending is up and the amount of inventory is decreasing. This is the kind of recovery investors have been wanting/needing for some time now.
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Top Long Ideas
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.
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.
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
“When the #Fed & #ECB truly bring systemic risk in the banking system back to 2004 levels, they will lose complete control over yield curve” -@Convertbond
QUOTE OF THE DAY
“Nature is trying very hard to make us succeed, but nature does not depend on us. We are not the only experiment.” -R. Buckminister Fuller
STAT OF THE DAY
October S&P/Case-Shiller Home Prices rise 4.3% year-over-year.