CLIENT TALKING POINTS
CHINA
Newsflash: Chinese growth is slowing. Since virtually everyone already knows that, the reaction to the news is pretty much mute this morning (Hang Seng up +0.12%). China is doing her very best to massage the numbers while we all wait on the next leg down in industrial demand. Industrial Production in China down to +8.9% in June. There is no reason to believe that improves in July or August.
GREECE
Since there’s really nothing else going on out there this morning, let’s go ahead and pick on Greece crashing again. It's yet another negative divergence for the Greek stock market this morning down -1.2%. But the more important point here is that it's down -31% since May 17. Just really ugly. Illiquid markets are becoming more enticing on the short side (weekly) at this point.
EURO
The Euro is backing off at our long-term TAIL risk line of $1.31 vs USD again this morning. This takes some of the bloom off Bernanke’s hopes to devalue the US Dollar. Look, if the EUR/USD fails here, and Ben Bernanke is less dovish during his testimony on Wednesday and Thursday, there is no downside support to $1.27. We're watching this one closely.
TOP LONG IDEAS
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.
Asset Allocation
| CASH | 58% | US EQUITIES | 14% | |
| INTL EQUITIES | 6% | COMMODITIES | 0% | |
| FIXED INCOME | 0% | INTL CURRENCIES | 22% |
THREE FOR THE ROAD
TWEET OF THE DAY
Both the US Dollar and 10yr Treasury Yields have stabilized at higher-lows again; Bernanke is back at it on Wednesday
QUOTE OF THE DAY
The real truth of the matter is,as you and I know, that a financial
element in the large centers has owned the government ever since
the days of Andrew Jackson…
-Franklin D. Roosevelt (in a letter to Colonel House, dated November 21, 1933)
STAT OF THE DAY
5.37%: The average yield on 10-year Treasuries over the past 25 years. (Bloomberg)