Talk Is Cheap

Client Talking Points

CHINA

Down hard, then rumor, then bounce ... It looks like a "Bernanke/Draghi" type playbook in Beijing as the entire world attempts to watch what we cannot see. The Shanghai Composite closes down -0.2% overnight. #Oversold, but still crashing. Looks like hell down -19.5% since Feb 5. Bouncing on rhetoric doesn’t solve the long-term issue.

FTSE

Doing the dead cat bounce thing within a developing bearish TREND across all of European Equities. I learn the most during the bounces. This bounce in European Equities hasn’t seen one - not one-  major index recapture any of my intermediate-term TREND lines. The FTSE gained +0.8% to 6075, but it's still well below 6398 TREND resistance. DAX TREND line = 8014.

GOLD

A bear market "bounce" in gold of just +0.14%. Guess what? That is not going to get anyone excited about Gold. Nor will a 10-yr UST Yield of 2.5%. Nor will a US Dollar recapturing $81.21 TREND support. Gold is turning into a good proxy for deflation – deflating Bernanke Bubbles, that is...

Asset Allocation

CASH 63% US EQUITIES 13%
INTL EQUITIES 6% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 18%

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

We've had a 0% asset allocation to Fixed Income recommended to clients for almost 6 months

@KeithMcCullough

QUOTE OF THE DAY

"I am a man of fixed and unbending principles, the first of which is to be flexible at all times."

- Everett Dirksen

STAT OF THE DAY

Looking for a mortgage? Bankrate US Home Mortgage 30-Year Fixed National Average pops up to 4.51%. That's up another 15 basis points overnight. (Bloomberg)


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