Don't Get Piggy

Client Talking Points

ASIA

Japan up a beep (only one down day for the Nikkei so far in September; Up +39.6% year-to-date). China and KOSPI both punch fresh TREND highs, and the two laggards (India and Indonesia) stopped going up after Indonesian FX (Rupiah) has its worst day in three weeks. This is a good spot for a breather for anything you like long side. It's also a good spot to re-short some indices too.

DAX

I'm selling my long German Equity (EWG) position on the immediate-term TRADE overbought signal. There’s no fundamental reason to sell it. It’s just called managing the immediate-term risk of a trade-able range. The FTSE and MIB are both overbought within their bullish intermediate-term TRENDs here too.

SPY

The S&P 500 is up +3.12% for the month-to-date. Yet another one of the 2013 bear cases bites the beta dust. Meanwhile, oil corrected in a hurry down -3.5% from the highs. The VIX? It's down -18.4% since people sold fear again in August. That’s really the story of the year, fade the fear – but also have the discipline to sell some at the high end of the risk range on the recurring squeezes.

Asset Allocation

CASH 28% US EQUITIES 24%
INTL EQUITIES 22% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 26%

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.

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.

TROW

Financials sector senior analyst Jonathan Casteleyn continues to carry T. Rowe Price as his highest-conviction long call, based on the long-range reallocation out of bonds with investors continuing to move into stocks.  T Rowe is one of the fastest growing equity asset managers and has consistently had the best performing stock funds over the past ten years.

Three for the Road

TWEET OF THE DAY

Mostly every Global Equity market we like is now immediate-term TRADE overbought; dont get piggy

@KeithMcCullough

QUOTE OF THE DAY

"Time is passing. Yet, for the United States of America, there will be no forgetting September the 11th. We will remember every rescuer who died in honor. We will remember every family that lives in grief. We will remember the fire and ash, the last phone calls, the funerals of the children." -President George W. Bush, November 11, 2001

STAT OF THE DAY

#RatesRising? It isn't just a USA thing; 10-year Bund is up +40 basis points month-over-month to 2.08%; Gilt is up 56 basis points month-over-month to 3.02%.


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