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Textbook Bounce

Client Talking Points

UST 10YR

Witness the textbook bounce off our first line of support (immediate-term TRADE support is 2.69%) as the 10-year makes yet another higher-low. Both the US currency and growth side of the US stock market like that this morning. Gold? Not so much. We re-shorted Gold for the first time since July 12th on Tuesday. We also re-shorted TLT there too. The Queen Mary has turned.

USD

One of the biggest risk management questions in my notebook was whether or not the US Dollar Index would hold its higher-lows versus the June lows. It did. And it’s having a good morning again here vs the Yen too (USD/YEN held 96.59 TREND support). If these FX levels hold, some of the recent counter TREND commodity reflation pressure should abate. That would be a good thing for growth.

INDONESIA

Finally! A country does what a serial currency debaucher at the Federal Reserve wouldn’t dare – they actually raised rates to protect the purchasing power of their people. Surprise, surprise... both the foreign exchange and equity markets liked that move (as they should). Indonesia gains +1.6% on the news. Bravo to the Indonesian Hawks.

Asset Allocation

CASH 28% US EQUITIES 26%
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

GOLD: which we re-shorted for the 1st time since July 12, is in the $; hate mail pending @KeithMcCullough

QUOTE OF THE DAY

"When you expect things to happen - strangely enough - they do happen." - J.P. Morgan

STAT OF THE DAY

Fast food workers in 50 cities across the U.S. are walking off the job today to protest for higher wages. Currently, the median pay for the fast food workers is just over $9 an hour, or about $18,500 a year. (CNN)