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Client Talking Points

US DOLLAR

I guess if you have the head of the US Treasury in charge of fear-mongering recklessly about a US “debt default,” some people might actually believe him. It also drives ad dollars. Meanwhile, the bond market still doesn’t care. What's going on right now is that the credibility of the US Dollar continues to melt down. As it should. Shame on Lew. It's sad to watch.

UST 10YR YIELD

Bond market has moved 2 basis points this morning to 2.62% on the 10-year. In other words, the bond market still doesn’t believe Jack Lew. The line that matters most in our model is intermediate-term TREND support of 2.58%. We’ll soon see if it holds. Stocks do not like the slow-growth message implied by Down Dollar and #RatesFalling.

OIL

The only good economic news this morning? Brent Oil is down -0.9% and testing a $108.57 TAIL risk breakdown (again). It’s a little like watching a game of ping-pong. But with more than 360,000 net long contracts (futures/options) still out there, John Kerry isn’t the Oil bull’s best-friend-forever this morning with his niceties to Assad.

Asset Allocation

CASH 55% US EQUITIES 12%
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

GOLD: you'd think Gold bulls would get paid by Congress - nope, -2.2% last wk and flat this morn @KeithMcCullough

QUOTE OF THE DAY

The person who says it cannot be done should not interrupt the person who is doing it. –Chinese Proverb

 

STAT OF THE DAY

The median estimate of more than 60 economists in a Bloomberg survey is for the 10-year yield to rise to 3.36% by the end of 2014; that would still leave it below the average over the past decade of 3.53%. (Bloomberg)