USA AIN'T ASIA

Client Talking Points

CHINA

The Shanghai Composite had a big move off its lows... all the way up to our 2,123 TREND line... and then it failed. China's stock market is now down two consecutive days (-1.2%) from a critical signaling line in our model. The only major economic indicator that went less bearish was the Chinese Yield Spread (+44 basis points). Incidentally, Japan was also in the red down -2.1% overnight. Bottom line? Cisco's recent comments summarize our Global Macro view – USA is not Asian demand right now.

UK

Across the pond, the economic data continues to surprise on the upside. UK Retail Sales for July were up +3% year-over-year vs up +2.2% in June. We call that #GrowthAccelerating. And now, both the Pound and the FTSE are bullish TREND in our Hedgeye model. No, we have not seen that combination in a long time. Yes, I need to buy both.

OIL

The rip of the morning? It belongs to Brent. It jumped +1.1% to $111.39. Now that rip is certainly not going to help anyone in this world other than those folks who are long of it. Our long-term TAIL risk line for Brent is $108.11. So keep a close eye on that on your screens. We have no position here.

Asset Allocation

CASH 28% US EQUITIES 27%
INTL EQUITIES 23% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 22%

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

BREAKING: SP500 closes down -0.52% on the day, extending correction from all-time high to a whopping -1.4% @KeithMcCullough

QUOTE OF THE DAY

It is better to remain silent and be thought a fool than to open one's mouth and remove all doubt. - Mark Twain

STAT OF THE DAY

It will cost an estimated $241,080 for a middle-income couple to raise a child born last year for 18 years, according to a U.S. Department of Agriculture report released yesterday. That's up almost 3% from 2011 and doesn't include the cost of college.