CLIENT TALKING POINTS
CHINA
Witness the solid market follow through following Friday’s China #GrowthStabilizing data for Q313 and September. The Shanghai Composite closes up another +1.6% overnight, leading Asian Equities. Look, if China bases here on the growth curve, an acceleration in 2014 could be next. We're watching this closely here.
GERMANY
Here's a straightforward equation for you: #StrongEuro = Strong Germany. Nope, you won’t get that from your Keynesian textbook (which is precisely why its truth). German PPI (producer prices) came in NEGATIVE in September at -0.5% year-over-year. Guess what? That is fantastic news for German producer margins. For more on this see our #EuroBull Macro theme deck
UST 10YR
It's game time going into the jobs report (tomorrow) with the 10-year yield sitting right on @Hedgeye TREND line support of 2.58%. We have no position into going into this print. Why? We have no idea what this report will bring. Incidentally, Ben Bernanke wants to lean on the yield curve regardless, pandering the to the perma bond bull lobby not to taper.
TOP LONG IDEAS
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.
Asset Allocation
| CASH | 44% | US EQUITIES | 16% | |
| INTL EQUITIES | 22% | COMMODITIES | 0% | |
| FIXED INCOME | 0% | INTL CURRENCIES | 18% |
THREE FOR THE ROAD
TWEET OF THE DAY
Is the Italian 10yr going to drop below 4%? 4.18% last
QUOTE OF THE DAY
Remember that not getting what you want is sometimes a wonderful stroke of luck. –Dalai Lama
STAT OF THE DAY
In the first nine months of the year, global high-yield-bond issuance reached $378.2 billion, up by 27% on the same period in 2012, according to Dealogic, a financial-data firm.
