The Global Connection

Client Talking Points

Cause And Effect

The NFL Playoffs aren’t the only game in town these days. The Global Macro game is one that is active 24/7 and one you need to pay attention to even if you only trade US equities. For instance: Chinese stocks are up +18% since November 2012 and the Japanese Yen vs the US Dollar is down -11% for the same time period. Since Japan is keen on following in the footsteps of the US in terms of monetary policy, this game of destroying the value of the Yen has given a boost to Japanese equities, which are up +25% since November 13.

 

As for the growth in China, that can affect certain commodities like steel rebar and oil, so keep a close eye on them. With the US dollar down last week, several commodities shot up several hundred basis points. The point is you can’t ignore what’s going on in another country just because you don’t trade that market. The world is one big interconnected place where the actions of one place affect the markets of another. Get the dollar right and you'll get a lot of other things right.

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

“People like to hide things.. & its when you stumble upon that occurrence that you need to open your eyes and pay close attention to details” -@tjtakes

QUOTE OF THE DAY

“Few things are harder to put up with than the annoyance of a good example.” -Mark Twain                 

STAT OF THE DAY

The best performing stock market in the world is Vietnam, up +12% year-to-date.