Rolling the Bones

Client Talking Points

JAPAN

You may as well just "roll the bones" at the craps table to trade daily volume in the #WeimarNikkei. Overnight, Yen down -0.75% had Nikkei +2.7%, but that's still below our broken TREND line of 13,773. The USD/YEN pair needs to recover 96.35 TREND line now to matter in our model too. In other words, I’d fade today’s move.

KOSPI

Away from the Japanese gong show, Asia is really starting to slow in the aggregate. KOSPI and Shanghai Comp both closed -0.3% last night, despite the move in Yen/Nikkei.Meanwhile, Singapore posted an ugly export number of -4.6% year-over-year for May as well. More to be revealed.

OIL

Brent’s breakout (on USD breakdown + Syria) is not a good thing for the marginal rate of change in Consumption in our model. Brent is now back above my immediate-term TRADE line of $105.84 this morning too. That’s good for oil, not consumers. We are paying close attention to these unfolding developments.

Asset Allocation

CASH 58% US EQUITIES 15%
INTL EQUITIES 15% 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

Big day for $LINE energy on Tuesday as @HedgeyeENERGY goes through the "not so top 10" about Linn Energy ...

@HedgeyeDJ

QUOTE OF THE DAY

"He who lives by the crystal ball will eat shattered glass."
- Ray Dalio 

STAT OF THE DAY

300 million: The number of pictures uploaded to Facebook every day via Instagram.


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