CLIENT TALKING POINTS
UST 10YR
Treasury yields are making higher-lows and higher-highs based on strength in the only leading indicator that matters in our employment model (non-seasonally adjusted rolling jobless claims). No, the world probably will not end on the continuing positive developments going on in US employment. 2.66-2.79% is now my 10-year risk range. It's very simple: Buy growth stocks; sell Treasuries – rinse and repeat.
EUROPE
It looks like someone apparently forgot to tell European markets that the world ended in the good 'ole USA yesterday (i.e. the fleeting, freak out "End of World" trade). So what is Europe doing? How about absolutely nothing except holding onto their recent gains. So no, they did not freak out. We finally had our opportunity to buy British Equities on red yesterday via (EWU). We did.
INDIA
If you want to freak out about a country, pick one with A) #GrowthSlowing and B) #InflationAccelerating as their currency implodes. Yes, that there would be India. And that’s the only market that really got tagged overnight. It was down -3.3% to -2.5% year-to-date.Not a pretty market picture there.
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 | 26% | US EQUITIES | 28% | |
| INTL EQUITIES | 24% | COMMODITIES | 0% | |
| FIXED INCOME | 0% | INTL CURRENCIES | 22% |
THREE FOR THE ROAD
TWEET OF THE DAY
TREASURIES: monster move in #RatesRising remains a pro-growth signal that growth bears missed, 2.77% 10yr last @KeithMcCullough
QUOTE OF THE DAY
“Fear is static that prevents me from hearing myself.” -Samuel Butler
STAT OF THE DAY
The Yield Spread (10-year -2-year) which is a great leading indicator for US growth is up +15 basis points this week to +243 basis points wide.