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Client Talking Points

JAPAN

It's one big certified central planning circus at this point with the Nikkei down -3.5% on the lows, up +3.5% on the highs, and closing up +0.89% (that's inside my TRADE resistance line of 15,097 by a relatively wide margin). Get this: the market didn’t like it when the BOJ's Kuroda said “we have announced sufficient easing.” In other words, the market doesn’t think 50 TRILLION in incremental easing is enough! Yes ... we are still short JGBs.

AUSTRALIA

Got Mining Capex Bubble (within the Bernanke Commodity Bubbles)? It's finally playing out in full (currency and stocks) in the "Land Down Under." AORDs -1.6% last night and is now bearish TRADE and TREND in our model, which is new for Aussie stocks (AUD is broken too).

UST 10YR

It's been a really bad week for long-bond bulls. Why? Because A) Bernanke didn’t get them paid (despite trying to talk down tapering) and B) the US Economic data (jobless claims and new home sales) continued to surprise on the upside. How long can Bernanke refute economic gravity? I don’t think the market trusts him like it used to. Losing credibility is a problem folks. 2.01% and climbing on 10s.

Asset Allocation

CASH 50% US EQUITIES 12%
INTL EQUITIES 12% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 26%

Top Long Ideas

Company Ticker Sector Duration
IGT

Decent earnings visibility, stabilized market share, and aggressive share repurchases should keep a floor on the stock.  Near-term earnings, potentially big orders from Oregon and South Dakota, and news of proliferating gaming domestically could provide near term catalysts for a stock that trades at only 11x EPS.  We believe that multiple is unsustainably low – and management likely agrees given the buyback – for a company with the balance sheet and strong cash flow as IGT.  Given private equity’s interest in WMS (they lost out to SGMS) – a company similar to IGT that unlike IGT generates little free cash – we wouldn’t rule out a privatizing transaction to realize the inherent value in this company.  

WWW

WWW is one of the best managed and most consistent companies in retail. We’re rarely fans of acquisitions, but the recent addition of Sperry, Saucony, Keds and Stride Rite (known as PLG) gives WWW a multi-year platform from which to grow. 

FDX

With FedEx Express margins at a 30+ year low and 4-7 percentage points behind competitors, the opportunity for effective cost reductions appears significant. FedEx Ground is using its structural advantages to take market share from UPS. FDX competes in a highly consolidated industry with rational pricing. Both the Ground and Express divisions could be separately worth more than FDX’s current market value, in our view.

Three for the Road

TWEET OF THE DAY

The LINN $LINE energy management team have been busy little beavers trying to discredit our analysis ... We aren't going away, lads.

@HedgeyeDJ

QUOTE OF THE DAY

"You cannot escape the responsibility of tomorrow by evading it today. -Abraham Lincoln

STAT OF THE DAY

Current World Population: 7,118,612,000