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Client Talking Points

JAPAN

It was a big week for the #Weimar Nikkei (up +2.1% overnight, capping a +4.6% week overall) and a bad week for the Yen. Another better than bad US employment report will only fuel this FX/Equity correlation trade. So keep that in mind with no support for USD/YEN to $100.85.

EURO

A dovish European Central Bank was the reason for EUR/USD down and a wicked bounce off the tree line to keep European Equities from going out of bounds yesterday. The Euro is broken again (vs USD). Anything that puts upward pressure on anything USD is bearish for Gold and Silver. Both are down -1.2 and 3.2% again this morning after failing @Hedgeye TRADE resistance.

UST 10YR

I still think higher-lows and higher-highs for rates are in order as both the Fed and Fixed Income consensus are still too bearish on both US Employment #GrowthAccelerating and #RatesRising. If you ask the 10-year at 2.54% this morning, what’s in the envelope for this jobs report, it’s the same that’s been in the non-seasonally adjusted rolling Jobless Claims data for the last 4 weeks (better). Keep an eye on 2.64% which is next resistance.

Asset Allocation

CASH 56% US EQUITIES 16%
INTL EQUITIES 0% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 28%

Top Long Ideas

Company Ticker Sector Duration
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.

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. 

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. 

Three for the Road

TWEET OF THE DAY

Higher rates and crashing Gold were pro-growth signals in 1982 inasmuch as they were again in 1993

@KeithMcCullough

QUOTE OF THE DAY

Successful people are always looking for opportunities to help others.  Unsuccessful people are always asking, “What’s in it for me?” – Brian Tracy

STAT OF THE DAY

500 years of YouTube video are watched every day on Facebook, and over 700 YouTube videos are shared on Twitter each minute. (ReelSEO.com)


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