CLIENT TALKING POINTS
INDIA
India's new central bank chief Raghuram Rajan raised rates (I liked that call) in order to fight inflation with India’s currency. India’s stock market didn’t like it because it's addicted to Down Dollar, and the dollar is up this morning. The key to emerging markets not imploding again is Ben Bernanke devaluing the Dollar and US relative growth rates slowing – we’ll see what he can do.
US DOLLAR
The US Dollar is trying really hard to hold a) higher-lows vs the year-to-date low (February) and b) our long-term TAIL risk line of $79.11 on the US Dollar Index. If it can hold here, things get more volatile and tougher to manage. I think Bernanke calls this kind of thing “price stability” or something like that. Stay tuned. Right now it's economic gravity vs central planning.
GOLD
Gold doesn’t like both the US Dollar and 10-year Treasury rates arresting their smack-down declines. Gold down -1% this morning and Silver down -2.5%. I’m not shorting either because of Bernanke, but it’s interesting to see that there was simply no follow through to Gold’s 1-day bid.
TOP LONG IDEAS
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.
Asset Allocation
| CASH | 45% | US EQUITIES | 20% | |
| INTL EQUITIES | 20% | COMMODITIES | 0% | |
| FIXED INCOME | 0% | INTL CURRENCIES | 15% |
THREE FOR THE ROAD
TWEET OF THE DAY
The Fed's forecasting of growth has been wrong 63-71% of the time since Bernanke started @KeithMcCullough
QUOTE OF THE DAY
“The Fed is the greatest hedge fund in history.” -Warren Buffett
STAT OF THE DAY
Apple increased over 9,000% from 2002 to 2012, but declined on 48% of all trading days. In other words, it's never a straight path up.
