Reaping The Benefits

Client Talking Points

Moving On Up

The S&P 500 hit a 5-year high yesterday, signaling that #GrowthStabilizing is here to stay. Equities ripped higher all week and the Russell 2000 hit a new all-time high; suffice to say, the market is looking a little overbought here. It’s a time to book gains and take down your exposure to equities. It’s important to follow the risk and the range of whatever you’re trading. Volumes are up in the market and fund flows are up as the institutional crowd becomes awash with new capital to put to work. As far as sectors go, financials (XLF) are leading the charge and are already up +4.6% year-to-date. 

Da Bears

There is a type of trader/investor that exists who is always keen to short everything, all the time and will never take “no” for an answer. This is the Permabear. And the Permabears that have been shorting the market over and over for the last month repeatedly, only to get their head chewed off need to reevaluate their game plan. The economic data that we’ve seen lately has been excellent, indicating that growth is indeed stabilizing, not slowing, and things are getting better. The Permabear is no fan of this but sometimes, you need to go with the flow no matter what your trading style is, rather than go against it.

Asset Allocation

CASH 46% US EQUITIES 18%
INTL EQUITIES 18% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 18%

Top Long Ideas

Company Ticker Sector Duration
ASCA

We believe ASCA will receive a higher bid from another gaming competitor. Our valuation puts ASCA’s worth closer to $40.

ADM

ADM has significantly lagged the overall market in 2012 over concerns that weakness in the company’s bioproducts (ethanol) and merchandise and handling segment will persist. Ethanol margins suffered from higher corn costs, as well as weak domestic demand and low capacity utilization across the industry. Merchandising and handling results were at the mercy of a smaller U.S. corn harvest. Both segments could be in a position to rebound as we move into 2013 and a new crop goes into the ground. With corn prices remaining at elevated levels, the incentive to plant corn certainly exists, and we expect that we will see corn planted fencepost to fencepost.

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

“@FXAlgo @NicTrades Sell Side recommendations: 'would you jump off this bridge for us? thanks!!!'” -volatilitysmile

QUOTE OF THE DAY

"Ninety-eight percent of the adults in this country are decent, hard-working, honest Americans. It's the other lousy two percent that get all the publicity. But then--we elected them.” -Lily Tomlin

STAT OF THE DAY

Wells Fargo (WFC) Q412 profit jumps 24% to record high.


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