GLOBAL MACRO GRIND

Client Talking Points

FTSE

Boom! Another solid #GrowthAccelerating data point out of the UK this morning (60.2 in JUL vs 56.9 last month). It's just a fantastic number. The UK Services PMI print for July was one of the best macro data points of the year (relative and both absolute = 6 year high). That's well above Germany’s 51.3 (which was a miss) as well as France and Italy which were both just inside of 49. Incidentally, the FTSE is up +16% year-to-date. It remains one of the most bullish equity markets in my model.

OIL

A mounting headwind for global consumption. Brent was up +1.7% last week and is up again (+0.3%) this morning. It just won’t go down. This is definitely a sequential headwind for Q3 13 US GDP growth. So keep that in mind as we dig into August. Net long (futures/options) position in crude finally went down last week (that was the first down week since late June) to +318,819 net long contracts. It's the biggest net long position in all of big macro, by far.

USD

I've said it before and I'll say it again: Get the dollar right, you get a lot of things right in the market. The US Dollar was up +0.7% last week versus the Yen. But half those gains are lost this morning. We are watching this one very closely. Why? It’s still the intermediate-term TREND front-runner for both US and Japanese Equities from a correlation perspective. USD Index TREND support is now $81.53.

Asset Allocation

CASH 36% US EQUITIES 23%
INTL EQUITIES 17% 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

Fear continues to crash. VIX -5.8% w/w to -33.5% YTD. Gold had another bad wk -0.9%, still crashing YTD -22.3%

@KeithMcCullough

QUOTE OF THE DAY

What’s money? A man is a success if he gets up in the morning and goes to bed at night and in between does what he wants to do.

– Bob Dylan

STAT OF THE DAY

Treasuries are the world’s worst-performing sovereign bonds this year. U.S. government securities due in 10 years or more fell 6 percent in the past six months, the biggest decline among 144 debt indexes tracked by Bloomberg and the European Federation of Financial Analysts Societies. (Bloomberg)


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