Managing Global Risk

Client Talking Points

JAPAN

After posting the best Japanese auto sales number in 14 months, the Yen continued its latest run and is finally signaling immediate-term TRADE overbought vs US Dollar. No, the Nikkei definitely does not like #StrongYen. It closed down -2.1%, leading the losers in Asia overnight. Japanese stocks are oversold right now. Yes - it's a good spot to buy. 

ITALY

The critical confidence vote appears to be going the right way for Italy's Prime Minister Enrico Letta (not so good for Berlusconi). Italian stocks are up +0.9% in response to that development. Italy is diverging big time versus the rest of European Equities (Swiss -1.1%, France -0.9%, Russia -0.9%).

UST 10YR

After a nice run-up on yesterday’s 56.2 ISM manufacturing print for September, the 10-year yield has pulled back to 2.62% this morning. US Equity futures? They do not like Down Dollar, Down Rates. Politicians (and bond fund managers) do. It's #OctTaper vs Bernanke now. More to be revealed.

Asset Allocation

CASH 50% US EQUITIES 16%
INTL EQUITIES 18% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 16%

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

TREASURIES: 10yr and Yield Spread backing off again this morning - US stock futures dont like that @KeithMcCullough

QUOTE OF THE DAY

It's not that I am smart, it's just that I stay with problems longer

-Albert Einstein

STAT OF THE DAY

According to MarketWatch, it was virtually impossible to sign up for Obamacare on it opening day yesterday. They went went 0-for-51 in trying to apply online for Obamacare in all 50 states and the District of Columbia. (MarketWatch)


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