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Client Talking Points

US DOLLAR

It held! The U.S. Dollar Index TAIL risk line of $79.21 support holds as the Burning Buck v-bottoms off USD/YEN $96.45 TREND support too. Yes, Japanese and U.S. stocks will definitely like that development, especially if SPX recovers its 1663 TREND line. There are 23 handles of immediate-term upside in the S&P 500 if the VIX snaps 18.98. 

VIX

Front month-fear is as much an opportunity on the upside for U.S. Equities now as it was a risk to the downside. If our 18.98 TREND line snaps today (and 1663 SPY holds), this could be one of the many 2013 #EOW (end of world) head-fakes perpetuated by #OldWall’s government access media. Sell the fear.  

DAX

We bought Germany’s stock market back on red yesterday as it tested and held our immediate-term TRADE line of 8508 support. The fact of the matter is that European stocks couldn’t have cared less about US “default” fear-mongering.Our macro team will go through why we like German stocks in our #EuroBulls Macro Theme for Q413 tomorrow.

Asset Allocation

CASH 49% US EQUITIES 16%
INTL EQUITIES 20% 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

TREASURIES: 10yr yield holds our #RatesRising @Hedgeye TREND line of 2.58% like a champ @KeithMcCullough

QUOTE OF THE DAY

One of the greatest pains to human nature is the pain of a new idea.
-Walter Bagehot 

STAT OF THE DAY

The Yield Spread (growth signal) is up 8 basis points in the last 48 hours. In other words, there is no default fear there this morning.