Client Talking Points
The US Dollar was weak last week (Bernanke was speaking) and down again yesterday. But it is holding our immediate-term TRADE support line of $82.07 (TREND support underpinning that at $81.53). Of particular note, over the last six months, the correlation between the USD and SPX is 0.76. So, despite all the whining out there about strong USD and #RisingRates, you actually should want more of this.
Good news as Brent is backing off our long-term TAIL risk line of $108.03/barrel again this morning. Meanwhile, Gold, Silver, Copper, Corn, etc are all making lower-highs. Bottom line here is that the only way to get that Consumption "Tax Cut" is via #StrongDollar Commodity Deflation.
Witness the 10-Year Treasury holding our immediate-term TRADE support line of 2.45%. Like a champ! And then backs up to 2.51% this morning. TREND support here is 2.21%. There’s no resistance to the year-to-date closing highs as the market starts baking in a September tapering of at least $20 billion a month.
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Top Long Ideas
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.
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$1 billion gaming project in Barcelona. The new project, to be called “BCN World,” will start with a single resort with 1,100 hotel beds, a casino, and a theater. Longer term, the objective is for BCN World to have six resorts. The first property is scheduled to open for business in 2016.
Health Care sector head Tom Tobin has identified a number of tailwinds in the near and longer term that act as tailwinds to the hospital industry, and HCA in particular. This includes: Utilization, Maternity Trends as well as Pent-Up Demand and Acuity. The demographic shift towards more health care – driven by a gradually improving economy, improving employment trends, and accelerating new household formation and births – is a meaningful Macro factor and likely to lead to improving revenue and volume trends moving forward. Near-term market mayhem should not hamper this trend, even if it means slightly higher borrowing costs for hospitals down the road.
Three for the Road
TWEET OF THE DAY
Another all-time high for US stock market bulls Monday - all-time is a long time ($SPY and Russell +18.9% and +24% YTD)
QUOTE OF THE DAY
"I made a killing in the stock market. My broker lost all my money, so I killed him." - Jim Loy
STAT OF THE DAY
The future heir to the British throne has arrived (still unnamed) - and retailers are ready to cash in on him. The Centre for Retail Research estimates that £80 million ($121 million) alone will be spent on royal baby-related toys and souvenirs.