Buy the Dip? Nope

Client Talking Points

YEN

Pay close attention tho this relationship. Versus the Burning Buck, a breakout in the Yen from here would matter to global correlation risk. Big time. Our intermediate-term TREND line for the YEN vs US Dollar is 97.88. The market is trading right at it here. As I have said many time before, the Nikkei "no likey" the #StrongYen. The Nikkei was down -2.1% overnight. It broke my immediate-term TRADE support line of 14,616. Blame Bernanke and Congress for my not buying this dip.

ITALY

From Rome to Washington D.C., the political class is raging, globally, this morning. Don’t you just love it? A "no confidence" vote is now scheduled in Italy for Wednesday and the Italian MIB Index leads European losers. It's down -1.6% to start the week after breaking TRADE support of 17,493. Congress clearly has major problems, but we're keeping a close eye on this one too.

OIL

Phew. A bright spot. One of the few positives in global macro markets this morning is of course the price of Brent Oil. It snapped our long-term TAIL risk line of $108.57. It's down -0.8% last to $107.72. Guess what? A strong US employment report later this week could wreak total havoc on Oil bulls (and the bond market).

Asset Allocation

CASH 51% US EQUITIES 16%
INTL EQUITIES 18% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 15%

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

Yield Spread (and US growth expectations embedded therein) continues to compress thanks to Bernanke + Congress

@KeithMcCullough

QUOTE OF THE DAY

We are continually faced by great opportunities brilliantly disguised as insoluble problems. -Lee Iacocca

STAT OF THE DAY

800,000: The number of federal workers who would be sent home tomorrow if Congress fails to pass a stopgap spending bill before funding expires tonight. 


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