CLIENT TALKING POINTS
UST 10YR
#RatesRising and #DebDeflation remain two of our team's Top-3 Global Macro Themes here in the third quarter of 2013. And they are both playing out as a) U.S. economic data delivers sequential #GrowthAccelerating in July and b) Jackson Hole gets discounted as a hawkish event. The UST 10-year yield is now 2.70%. It's a nice step up of higher-lows and higher-highs. We are now up +13 basis points month over month.
UTILITIES (XLU)
No, utilities do not like #RatesRIsing. Neither do these over-owned and sketchy Master Limited Partnerships (MLPs). Of course, I'm referring to these shady, yield-chasing securities that make a buck and payout 4 bucks in “dividends” (see Linn Energy ticker: LINE). Utilities (XLU) are already down -1.4% for August to-date vs the S&P 500 which is up +0.4%. Utilities (XLU) was the first U.S. Sector to snap my immediate-term TRADE line yesterday.
SPY
With QQQs chasing year-to-date highs yesterday, now the S&P 500, Russell, and Nasdaq are taking turns shocking bears to the upside. The bottom line right now is that everything growth (High Beta, High Short Interest, etc) continues to rip higher as slow growth (see XLU, Bonds, etc) continues to be the dogs that consensus has wanted SPY to be for about the last 8 months. Sorry bears, there's no resistance to all-time highs of 1714.
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 | 33% | US EQUITIES | 25% | |
| INTL EQUITIES | 20% | COMMODITIES | 0% | |
| FIXED INCOME | 0% | INTL CURRENCIES | 22% |
THREE FOR THE ROAD
TWEET OF THE DAY
TREASURIES: monster move in 10yr #RatesRising yesterday sees yield hold 2.70% this morning @KeithMcCullough
QUOTE OF THE DAY
”Luck is a dividend of sweat. The more you sweat, the luckier you get.” - Ray Kroc
STAT OF THE DAY
Europe's recession? Over. GDP across the 17-nation eurozone grew by 0.3% in Q2, according to official estimates released Wednesday. That's the first time the region has grown since Q3 of 2011, and compares with a decline of 0.3% in Q1 of 2013.
