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Client Talking Points

How Low Can You Go?

The Japanese yen recently hit a 27-month low against the US dollar. The Bank of Japan has accepted the task of devaluing the yen in a style not unlike the Federal Reserve. Their theory is that the yen is too strong and thus, they must burn the yen until it glows bright. This, combined with bailouts and other maneuvers is their plan to save the Japanese economy.

 

And much like our stock market, it has inflated the Nikkei and Japanese equities quite a bit, with the Nikkei 225 up 22% for 2012, up 9% in December alone. We mentioned what would happen with Japan if they went this route back in November on our Best Ideas call and here we are. If following in the footsteps of the United States is what Japan is aiming for, they’re doing quite well thus far.

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

“Chinese iron ore prices have seen a 54% rally in the last month. Who saw that coming?” -@HedgeyeDJ

QUOTE OF THE DAY

"Sure there are dishonest men in local government. But there are dishonest men in national government too.” -Richard Nixon

STAT OF THE DAY

November Chicago Fed Midwest Manufacturing Index: 93.7 v 92.2 prior