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Client Talking Points

ASIA

Equities are still all over the place here. Volatility should continue to breed contempt. China was down small (-0.1%) overnight while Hong Kong was up for Day Two of a bounce (+0.5%). Since every major index in Asia is bearish TREND right now, tonight’s move in the Hang Seng will be a very important tell. Failing here? That would be a very bad thing.

EUROPE

We are already seeing European Equities fail after their 2-day no volume bounce. Say it ain't so, but the train wreck that is Greece is actually crashing again. Greece down -2.7% this morning and -29% since May 17th. #Nasty. Spain is another loser down -1% after failing at 7887 resistance (IBEX). Meanwhile, in Germany TREND resistance for the DAX remains intact at 8019.

UST 10YR

It is still all about the speed of the move (higher) on the long end of the curve. Today’s US jobless claims print is the most important (current) US economic data point of the week. Since US consensus still seems afraid of being long growth, it will be interesting to see what another positive surprise in claims would do to stocks (yields up). Of course, if claims miss, stocks could go down on that too.

Asset Allocation

CASH 65% US EQUITIES 10%
INTL EQUITIES 5% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 20%

Top Long Ideas

Company Ticker Sector Duration
HCA

Health Care sector head Tom Tobin has identified a number of tailwinds in the near and longer term that act as tailwinds to the hospital industry, and HCA in particular. This includes: Utilization, Maternity Trends as well as Pent-Up Demand and Acuity. The demographic shift towards more health care – driven by a gradually improving economy, improving employment trends, and accelerating new household formation and births – is a meaningful Macro factor and likely to lead to improving revenue and volume trends moving forward.  Near-term market mayhem should not hamper this  trend, even if it means slightly higher borrowing costs for hospitals down the road. 

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

Bill Gross is officially talking up what's best for his own book, not his country #sad @PIMCO

@KeithMcCullough (commenting on Gross' statement earlier this morning that the 10-year Treasury may be as much as 35 basis points too cheap.)

QUOTE OF THE DAY

Every strike brings me closer to the next home run.

– Babe Ruth

STAT OF THE DAY

Worldwide arms exports are surging, up nearly 30% since 2008, according to a new report from defense analyst IHS Jane's. Weapons exports totaled $73B in 2012, up from $57B four years earlier. Total worldwide defense spending in 2012 was $1.6 trillion.