Client Talking Points
The #StrongDollar is loving the continued strength in US economic data. Witness the August ISM beating big with an impressive New Orders print of 62.3. Boom. That looks very 2003 breakout-ish. It's something to noodle over as bearish consensus loathes the idea. It's the 4th up week in a row for US Dollar. The Yen is down in the face of that. Cue a +3.5% two-day move for the Nikkei to start September. Nikkei is now up +36.5% year-to-date. Correlation matters.
The 10-year Treasury punched the 2.90% line again yesterday. Economic surprises continue to fight the Fed’s dogma. It's at 2.87% this morning as we continue to see a healthy back-and-fill to another higher-low. We remain short the long-bond (TLT) and Junk (JNK) on our Top Q313 Global Macro Themes of #RatesRising and #DebtDeflation. Rinse and repeat.
The Doctor definitely does not like this whole commodity bubble revival hope dance. It's fading fast (again) after yesterday’s bounce. Our Hedgeye TREND resistance of $3.39/lb remains firmly intact. Incidentally, our trend resistance for Gold is $1483. FYI, we’ve been just day trading the emotional side of that commodity.
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Top Long Ideas
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.
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.
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
QUOTE OF THE DAY
"America will never be destroyed from the outside. If we falter and lose our freedoms, it will be because we destroyed ourselves." -Abraham Lincoln
STAT OF THE DAY
The six heirs of Wal-Mart founder Sam Walton have as much wealth as the bottom one-third of all Americans combined.