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Client Talking Points

JAPAN

One thing that has USD up is Yen down. Of course, Yen down equals Weimar Nikkei up (even though in the end it's likely going to blow them up). That’s the central planning plan and they’re sticking to it! Nikkei surged +4.9% overnight, recapturing 13,081 TRADE support as the Yen fails at 96.05 TREND resistance (vs USD).

COPPER

Copper was smoked yet again on the potent cocktail of #StrongDollar and bad China data this morning. Chinese Export data got royally crushed to just +1% in May vs +14.7% April (They made up the number in April). Copper remains in a Bearish Formation with immediate-term TRADE resistance = 3.38/lb.

UST 10YR

The 10yr is holding last week’s gains at 2.16% this morning; still looks great to us (Treasury Bonds look bad – Financials look great, XLF). Meanwhile, there’s really no US economic data that matters until Thursday when Retail Sales will show that they grew again sequentially in May. US #GrowthAccelerating and no immediate-term resistance in the 10yr to 2.22%, then 2.41% on the TREND duration

Asset Allocation

CASH 18% US EQUITIES 32%
INTL EQUITIES 20% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 30%

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

If Jimmy Paulsen is out, does that make us the only hyper US stock market bulls left?

@KeithMcCullough

QUOTE OF THE DAY

"If they hate, then let 'em hate and watch the money pile up"

- 50 Cent

STAT OF THE DAY

20% of all divorce cases in the United States cite evidence found on Facebook as grounds for the disillusion of marriage