(Still) Turning Japanese

Client Talking Points

YEN

It was Burning Yen (and up Nikkei) into the Japanese elections, so the Yen caught a bid to cover on the news, and the Nikkei only closed up +0.5% as a result. It's called a crowded trade. It's just how immediate-term market moves roll. No change to the bearish Yen or bullish Nikkei TRENDs.

GOLD

Well, so much for the short position that Gold and Bond bulls kept highlighting. CFTC futures/options contracts showed a +56% week-over-week ramp in the net long Gold position last week. Bernanke was the catalyst, as usual. +55,000 net longs now. Gold is banging the top end of my $1241-1318 risk range this morning. Up Yen, Down rates helped too. Fading all of it.

UST 10YR

Yields are re-testing the low-end of our 2.45-2.75% immediate-term risk range this morning. This should provide another short selling opportunity in Treasuries as they make lower-highs. See our #RatesRising Macro Theme deck for the intermediate-term call on that. Flows should continue into US Equities.

Asset Allocation

CASH 48% US EQUITIES 19%
INTL EQUITIES 10% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 23%

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

TREASURIES: 10yr yield down to start the wk to 2.47%; creates another short selling opportunity in t-bonds

@KeithMcCullough

QUOTE OF THE DAY

"The Federal Reserve is not currently forecasting a recession."

- Ben Bernanke on January 10, 2008


STAT OF THE DAY

Netflix has become the best performing U.S. stock in the S&P 500 Index in 2013 and the second most expensive. The company’s stock reached a 52-week closing high of $267.92 on July 17 and now trades at 383 times 12-month profit, surpassed only by Alcoa. Its estimated price/earnings ratio for 2013 is 184. (Bloomberg)