CLIENT TALKING POINTS
US DOLLAR
Are Ben Bernanke and Barack Obama trying to burn the US Dollar’s credibility at the stake? Because if they are, they are doing a darn good job of it. In case you turned your head away, the US Dollar Index continues to implode. That, combined with #RatesFalling, is a bearish leading indicator for US growth. Period.
OIL
The only thing more dangerous than Syria to rising Oil prices is this aforementioned Bernanke/Obama combo. Take a look back over economic history: No US President or Fed Chief has overseen a lower US Dollar and higher Oil price over their respective tenures. Brent is back above our TAIL risk line of 108.57. As always, we are watching this closely.
CHINA
Alas, it's not all doom and gloom this morning. On a cheerier note, take a look at China’s September Services PMI print. It was the best in the global macro data pack this morning coming in at 55.4 vs 53.9 in August. China’s stock market is closed, but the Hang Seng liked that and rose +1%. For the record, we’re long China now via FXI.
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 | 53% | US EQUITIES | 14% | |
| INTL EQUITIES | 18% | COMMODITIES | 0% | |
| FIXED INCOME | 0% | INTL CURRENCIES | 15% |
THREE FOR THE ROAD
TWEET OF THE DAY
FX: Euro punching a fresh new high of 1.36 vs Bernanke and Obama's Burning Buck @KeithMcCullough
QUOTE OF THE DAY
I try to do the right thing with money. Save a dollar here and there, clip some coupons. Buy ten gold chains instead of 20. Four summer homes instead of eight. -LL Cool J
STAT OF THE DAY
Shares of electric car maker Tesla (TSLA) slumped 6% on an Baird analyst downgrade yesterday. That said, Tesla is still up more than 450% in 2013.