Got Growth Right?

Client Talking Points

JAPAN

The Weimar Nikkei is really starting to underperform now. It doesn’t even go up on dead cat bounce days in China or Europe. The Nikkei was down another 1% overnight and is down -17.8% since May 22. It remains well below our 13,683 TREND line of resistance. #Ugly.

GOLD

The crash in Gold continues after both US Durable Goods and New Home Sales showed that Bernanke needs to taper. That of course was the May data; our models suggest that April - June may be the top in sequential US #GrowthAccelerating. That said, we remain data dependent on this. Go ahead and ask Gold (down -4% this morning and a monster -27% YTD) how US growth is doing. I'm sure he'll tell you it's doing just fine. #Nasty

UST 10YR

Can you spell R-I-P? 2.59% last on the 10-yr. Folks, there is no immediate-term TRADE resistance to 2.69%. Velocity and volume here matters. The simple speed of the move, combined with the most bond outflows since October 2008 is not a buy signal for bonds. That whining you're hearing in the distance is bond bulls begging for Bernanke.

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

Who the hell signs off on a central planner telling you what he "intends" a market price to do? @federalreserve

@KeithMcCullough (responding to a Fed President's statement on CNBC that the bond market reaction was outsized versus the Fed's intentions).

QUOTE OF THE DAY

“Many men go fishing all of their lives without knowing it is not fish they are after.” -Thoreau

STAT OF THE DAY

About $60 billion has been wiped from the value of precious metals exchange-traded product holdings this year. (Bloomberg)



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