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Client Talking Points

USD

At the recent US Dollar lows in June ($79.11 is the long-term TAIL risk line of support), the Yen tested 94 vs USD and the S&P 500 was probing 1575. A lot changed in a hurry come the beginning of July, and the USD strengthening off those higher all-time-lows was a big driver of that. Bottom line here right now is the USD needs to hold $79.11 to keep buying US Equity corrections. We continue to keep a close eye on this.

SENTIMENT

One of my key weekly looks on sentiment is probing its June lows all of a sudden too (that’s actually bullish). This morning’s Bull/Bear Spread is +2170; that’s down -34% from when it peaked at +3310 in the first week of August as the S&P 500 and Russell made all-time highs. Bulls have dropped to a shockingly low level of 43.3%. Professional market top calling? It is still in vogue

INDIA

Got #AsianContagion? It’s officially a race to the bottom for the Rupee (India) vs the Rupiah (Indonesia). Growth continues to slow as currency-adjusted inflation accelerates in these countries. What's the message here? Don’t buy those equity markets. Don't do it. India was down -1.9% overnight. It is now down -11.8% since July 23 and -6.7% year-to-date.

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

Seeing clients in CA yesterday, biggest risk discussion centered on whether USD can hold its June lows vs Yen @KeithMcCullough

QUOTE OF THE DAY

"Courage is fear holding on a minute longer."

- General George Patton 
 

STAT OF THE DAY

Crash or correction? The S&P 500 and Russell 2000 both closed -3.3% from their all-time highs yesterday, while the Nasdaq closed -2.1% from its year-to-date high.