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Client Talking Points

JAPAN

The Nikkei ended the month on a red note as the Yen retraced some of yesterday’s weakness - moving higher vs. the $USD ahead of another fun filled central planning (Bernanke) day in the U.S.  Our TREND lines of support for the USD/YEN and Nikkei are 97.39 and 13,505, respectively.  

OIL

The momo might be flagging a bit here with Brent holding red this morning after getting whacked yesterday.  We would like to see Oil breakdown through its TREND line before getting more comfortable with Q313 US Consumption relative to where it was in Q1/Q2.  TREND line support for Brent is still intact at $105.86.

UST 10YR

The northward march continues with 10Y treasuries making higher-lows again to 2.62% and the Yield Spread (10s minus 2s) expanding to 231bps wide; #RatesRising and an expanding yield spread is bullish for the Financials (XLF).  We bought back the XLF in our Real Time alerts after it signaled buy again on red yesterday.

Asset Allocation

CASH 36% US EQUITIES 25%
INTL EQUITIES 15% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 24%

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

@hedgeyeJC @HedgeyeFIG Casteleyn's presentation on Asset Managers yesterday was amazing-changed my view of capital markets in coming yrs $LM

Jay Van Sciver ‏@HedgeyeIndstrls

 

QUOTE OF THE DAY

“I don't think much of a man who is not wiser today than he was yesterday.”

-Abraham Lincoln

STAT OF THE DAY

Shanghai experiences its hottest July in 140 years, according to figures from the Shanghai Meteorological bureau, Shanghai has seen 24 days with temperatures at or above 35C in July. (BBC)