GLOBAL MACRO GRIND

Client Talking Points

CHINA

We reiterated our short call earlier this week on emerging markets and China. (Ping us if you want a copy of this concise presentation.)  Our short call has played out positively and is backed by asset flows out of emerging markets funds. In the most recent week the exodus from emerging market funds was $9 billion - the third largest weekly outflow ever (after March 2007 and January 2008). Credit growth in China is slowing and the increasing likelihood that the PBOC tightens will provide an impediment to credit growth.

UNITED STATES

#GrowthAccelerating. The dreary global growth outlook we have continues to push us back to the one economy (and stock market) we remain positive on – the US. As it relates to macro data coming out today, the big one is of course Michigan Consumer Confidence. It will be a decent “tell” on how the US consumer is feeling on top of yesterday's nice retail sales number. As we look at today's setup for the S&P 500, the range is 48 points or 1.92% downside to 1605 and 1.02% upside to 1653.          

Asset Allocation

CASH 48% US EQUITIES 20%
INTL EQUITIES 20% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 12%

Top Long Ideas

Company Ticker Sector Duration
NSM

Financials sector head Josh Steiner is the Street’s head bull on residential mortgage originator/servicer Nationstar, projecting $9 in earnings for the company in 2014.  This is well above the company’s own guidance range, which tops out at around $7.50. NSM had a successful start to the year as it won servicing bids on substantial mortgage portfolios.  They also reported significant increases in their profit margins on those portfolios, and double-digit increases in their own originations.  Housing prices are ramping significantly higher, as Steiner predicted, as demand continues to exceed supply in both new and existing homes.  Steiner says this quality mortgage company could ride the crest of a sustained wave of sector improvement.

MPEL

Gaming, Leisure & Lodging sector head Todd Jordan says Melco International Entertainment stands to benefit from a major new European casino rollout.  An MPEL controlling entity, Melco International Development, is eyeing participation in a US$1 billion gaming project in Barcelona.  The new project, to be called “BCN World,” will start with a single resort with 1,100 hotel beds, a casino, and a theater.  Longer term, the objective is for BCN World to have six resorts.  The first property is scheduled to open for business in 2016.  

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. We think that the prevailing bearish view is very backward looking and leaves out a big piece of the WWW story, which is that integration of these brands into the WWW portfolio will allow the former PLG group to achieve what it could not under its former owner (most notably – international growth, and leverage a more diverse selling infrastructure in the US). Furthermore it will grow without needing to add the capital we’d otherwise expect as a stand-alone company – especially given WWW’s consolidation from four divisions into three -- which improves asset turns and financial returns.

Three for the Road

TWEET OF THE DAY

Today the High Freaks will know before everyone else how confident Americans are in the stock market (Reuters/UMich invoice in the mail) @zerohedge

QUOTE OF THE DAY

"One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute."

- William Feather

STAT OF THE DAY

340,000,000: The # of tweets that are sent every day on Twitter.


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