"I Got Nowhere Else to Go!"

Client Talking Points

YEN

Keeping a close eye on currencies remains key. Yen vs USD is failing at our 96.17 intermediate-term TREND line of support this morning. This comes after the propaganda of down currency, up exports (Japan reported +10% exports for May, but their 3rd worst monthly trade deficit ever) was being cheered on by Japanese bureaucrats. The #WeimarNikkei gained +1.8%, but failed to close above 13,641 TREND resistance again.

CHINA

#GrowthSlowing in most things Chinese continues... Meanwhile, the rest of Asia (ex-Japan) traded very poorly again overnight. Over in Hong Kong, the Hang Seng led the losers, down another -1.1%. It is now down -5.1% year-to-date. It's bearish TRADE and TREND for most Asian Equity markets now, including Singapore, KOSPI, and BSE Sensex. Be alert here.

RUT

All the while the Russell 2000 quietly (volume was -15% yesterday vs my TREND duration average) clocked a new all-time closing high yesterday of 999. Yes, all-time is a long time. The continuing flows to US Equities (and out of everything Treasuries, Gold, Sovereign Debt, etc) make sense to me. A lot of sense. The world is running out of places to flow capital. That's bullish for US stocks.

Asset Allocation

CASH 53% US EQUITIES 17%
INTL EQUITIES 15% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 15%

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

Marty Feldstein on @SquawkCNBC : I think the Fed made a mistake in doing as much as it has ... it's created a bubble in the long-term bond

@beckyquickcnbc

QUOTE OF THE DAY

Be wary of the arrogant intellectual who comments from the stands without having played on the field.

-Ray Dalio

STAT OF THE DAY

The IRS is about to pay $70 million in employee bonuses despite an Obama administration directive to cancel discretionary bonuses because of automatic spending cuts enacted this year.


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