CLIENT TALKING POINTS
US DOLLAR
Our intermediate-term TREND support line of $81.63 held and the US Dollar had a good day yesterday. Commodities? No, they did not fare as well. Incidentally, they aren’t having a good morning today either. This keeps the bullish US growth theme intact and moving along. Exactly what we want to see.
OIL
Brent is backing off our long-term TAIL risk line of $108.14. And that is a very good thing. It's the most bullish macro event of the week. The bad thing is our intermediate-term TREND line of support ($106.37) is still intact; we need that to snap to get this massive net long futures/options position under pressure. We are watching this one closely.
RUSSIA
Russian stocks do not like Bernanke tapering. Good. And they don’t like down Oil either (For the record, I like both!). With #RatesRising (10-year yield of 2.58%, great week) Russian stocks lead the losers down -1.3% this morning after failing to recapture TREND resistance of 1374. It ain't a pretty picture for Mr. Putin. Russia is down -9% year-to-date. I like it.
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 | 40% | US EQUITIES | 22% | |
| INTL EQUITIES | 12% | COMMODITIES | 0% | |
| FIXED INCOME | 0% | INTL CURRENCIES | 26% |
THREE FOR THE ROAD
TWEET OF THE DAY
OIL: Brent backs off the @Hedgeye TAIL risk line of $108.14; most bullish macro event of the week
QUOTE OF THE DAY
He who lives by the crystal ball will eat shattered glass.
- Ray Dalio
STAT OF THE DAY
One big reason for Facebook's surge (up over 23% pre-market this morning): The number of people using Facebook on mobile phones or tablets increased by 51% to 819 million, year-over-year. That said, FB is still off its May 2012 IPO price of $38 per share.