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Client Talking Points

Ruffling Feathers

Japan is ruffling the feathers of China and Korea as it devalues the Yen in order to keep that “2% inflation target” in check. If it doesn’t end well, Japan won’t have China there to bail them out like Europe did. Caveat Emptor. What’s interesting is that while US equities are busy ripping higher week after week, South Korea, Brazil and China saw their stocks drop last week:

 

1.       South Korea = KOSPI -2.1% (breaking TRADE and TREND support)

2.       Brazil = Bovespa -1.3% (holding TRADE and TREND support)

3.       China = Shanghai Composite -1.1% (holding TRADE and TREND support)

 

When the TRADE and TREND support snaps, we wait and watch rather than buy the dip. When support holds, we’ll buy ‘em. Anyone who bought China on Friday is enjoying the upside surprise this morning to the tune of +2.4% on the Shanghai Comp. Korea’s KOSPI is doing the opposite and is heading lower after last week. It goes to show you that markets work until they don’t.

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.

HOLX

HOLX remains one of our favorite longer-term fundamental growth companies given growing penetration of its 3D Tomo platform and high leverage to the 2014 Insurance Expansion from the Affordable Care Act.

Three for the Road

TWEET OF THE DAY

“US Durable Goods Orders rip the bears a new one, +4.6% vs +2% ‘expected’” -@KeithMcCullough

 

QUOTE OF THE DAY

“Most people are other people. Their thoughts are someone else's opinions, their lives a mimicry, their passions a quotation.” -Oscar Wilde

STAT OF THE DAY

TREASURY 10-YEAR NOTE YIELD RISES TO 2% FIRST TIME SINCE APRIL