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Client Talking Points

SPY

The S&P 500 is up +3.1% for October. It's up +21.5% year-to-date. The perma fear-mongers nailed it. Right? Moving on… now with a lot of hands forced to cover-and-chase, there’s a lot to do. In a Burning Bernanke Buck tape, we like being #EuroBulls more than buying more USA up here. Yes, it’s been a great year being long US growth stocks, lock more of that in.

DAX

We are not selling our long Germany (via EWG) position. We like European Equities more than USA (from this price) for the exact same reason we got bullish on USA in December 2012. #StrongEuro and #StrongPound increases European purchasing power and pulverizes the inflation tax. That is a very good thing for consumption and #GrowthAccelerating.

US DOLLAR

Shame on Ben Bernanke and Janet Yellen if they don’t put a consistent tapering expectation back on the table. And soon. On the margin, Down Dollar, Down Rates is going to slow real-inflation adjusted growth from this healthy +2.5% US GDP level. What to I do? I go out and buy Europe and China ahead of USA on that.

Asset Allocation

CASH 42% US EQUITIES 18%
INTL EQUITIES 22% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 18%

Top Long Ideas

Company Ticker Sector Duration
DAX

In line with our #EuroBulls Q4 theme, we’re long the German DAX via the etf EWG. With European fundamentals showing improvement off low levels, we expect outperformance from Germany, and in turn for the region’s largest economy to pull the rest of the region higher. ECB policy remains highly accommodative and prepared to aid any of its sovereign members to preserve the Union. Inflation remains moderate and fundamentals are positive: confidence readings and PMIs are up since June, with factory orders trending higher and retail sales inflecting to push the trade balance higher. Finally, the unemployment rate has held steady at the low level of 6.9%, all of which signals to us that Germany’s economic climate is ramping up. 

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.

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

Google earnings up +36% (EPS $10.74 vs $10.36) as ad volumes rip - but "earnings season is a risk", eh? @KeithMcCullough

QUOTE OF THE DAY

My goal is to get home every day in time for dinner with the family - and then we play with the kids for a while, and then I go to bed around the time they do and sleep from nine to three or nine to four. It's the same six hours everyone else gets. I'd just rather do my e-mails and my reading in the morning rather than late at night, that's all.
- David Einhorn 

STAT OF THE DAY

JPMorgan Chase has sold the One Chase Manhattan Plaza skyscraper to Fosun International for $725 million, the latest in a series of New York real estate purchases by Chinese investors.