CLIENT TALKING POINTS
INDIA
No, India is definitely not the USA. India’s stock market got tagged for another -1.8% loss overnight. It is moving back to down -2.3% year-to-date as the other side of #StrongDollar this year is Red Rupee. A weak currency imports inflation to local economies. We have a name for this. We are calling this the #AsianContagion (one of Hedgeye's three Q3 Macro Themes). Our advice? Buy US stocks instead.
UST 10YR
Well, there you have it. Another week, another up move in Treasury yields following a bullish ISM non-manufacturing print for July. Economic growth ostriches beware. The 10-year is yielding 2.65% and continues to make a series of higher-lows and higher-highs. Yield Spread (10s minus 2s) is +235 basis points this morning. That’s now +84 basis points year-to-date. That is very good signal for the Financials.
GOLD
The precious metal does not like this whole #RatesRising thing. Yes, Gold is breaking down yet again this morning. It's down -0.9% to $1291 and is still crashing year-to-date at -22.9%. Boom. Stop for a moment and imagine what Gold would do if people actually believed the Fed was objective and data dependent. Stay out of the way of this total train wreck.
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 | 35% | US EQUITIES | 24% | |
| INTL EQUITIES | 17% | COMMODITIES | 0% | |
| FIXED INCOME | 0% | INTL CURRENCIES | 24% |
THREE FOR THE ROAD
TWEET OF THE DAY
In the last two days, Washington Post and Boston Globe have been sold. Both at 1/10th of their value of two decades ago. #OldMedia
QUOTE OF THE DAY
"I think gold is a great thing to sew in to your garments if you're a Jewish family in Vienna in 1939, but I think civilized people don't buy gold. - Berkshire's Charlie Munger
STAT OF THE DAY
$148,587: The amount of money Yankees slugger Alex Rodriguez will forfeit per game of his MLB suspension for violating league rules prohibiting performance-enhancing drugs. (Wall Street Journal)
