#RatesRising

Client Talking Points

UST 10YR

Game on. After a big +25 basis point week-over-week move to 2.83% last week, the 10-year yield is punching another new high this August morning now up at 2.85%. It's finally within a beep of an immediate-term TRADE overbought signal. Apparently, at +36 basis points month-over-month, the US Jobless Claims data is now evidently too good! 

YEN

Yen (vs USD) is still a touch weaker this morning after dropping -1.3% last week. This is a good thing, but it needs to continue in order to keep the positive Japanese and US Equity correlation TRENDs in play. The USD/YEN risk range is 97.22 - 98.16. That is relatively tight and trade-able, so it’s not an all-or-nothing trade like many think everything macro still has to be.

INDIA

Yup. India continues to get crushed. Why? A) Growth Slowing and B) Inflation Accelerating (driven by the weakening Rupee). The Sensex was down another -2.1% this morning to -5.1% year-to-date. Folks, this is why we call it #AsianContagion. Pervasive Asian currency weakness is not good for countries who catch that cold.

Asset Allocation

CASH 26% US EQUITIES 28%
INTL EQUITIES 24% 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

Top Global Equity Market YTD (b/c they burned their currency) = Venezuela +173% - Worst Global Equity Market YTD (b/c of mining exposure) = Peru -20% @KeithMcCullough

QUOTE OF THE DAY

"There are no shortcuts to any place worth going" - Helen Keller

STAT OF THE DAY

The S&P 500 was down -2.1% last week (still up +16.1% year-to-date); Russell was down -2.3% (still up +20.6% year-to-date).