CLIENT TALKING POINTS
CHINA
The UK relaxing some Chinese visa rules and the world marches forward despite USA Sunday talk show fear-mongering. Chinese stocks could not care less about the US media’s noise. It was up another +0.43% overnight. It's back in black for the year-to-date at +1.6%.
EUROPE
Do European stock and bond markets care about the “default risk” yip-yap overseas? Nope. Italy’s stock market is punching another year-to-date high this morning. Meanwhile, Germany’s DAX is correcting a whopping -0.18% after gaining another +1.2% last week. Take a look at Hedgeye's Q413 Macro Themesdeck on why we like Germany (DAX) more than the U.S. (S&P 500) right now. Incidentally, the SPX risk range is 1. We sold into Friday’s rip and moved back to 5 LONGS, 5 SHORTS (versus 9 LONGS, 3 SHORTS on Friday’s open). There will be plenty to do today on red if they try to freak out again.
GOLD
You’d think that if #EOW (End of the World) Republicans and Democrats were credible that Gold would be ripping higher right? Nope. It's still crashing. Gold was down -3.2% last week, and barely has a 30 basis point bid this morning. Don’t make the mistake of confusing the real risk of US #GrowthSlowing with “default risk.” They are two very different things.
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 | 50% | US EQUITIES | 15% | |
| INTL EQUITIES | 20% | COMMODITIES | 0% | |
| FIXED INCOME | 0% | INTL CURRENCIES | 15% |
THREE FOR THE ROAD
TWEET OF THE DAY
If the USA was going to "default", I doubt Gold would still be crashing (-25% YTD)
QUOTE OF THE DAY
“If you just set out to be liked, you would be prepared to compromise on anything at any time, and you would achieve nothing.” -Margaret Thatcher
STAT OF THE DAY
At the end of July 2013, foreign holders of U.S. Treasury securities totaled close to $5.6 trillion. China is the largest holder of U.S. debt with $1.28T, followed by Japan with $1.14T.
