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Client Talking Points

POUND

The British Pound is up another +0.4% versus the US Dollar this morning after another solid accelerating in UK Services PMI to 52.9. 10-year Gilt Yields are up 10 basis points in two days. And they should be. Reality check: Bank of England Governor Mark Carney is not Mervyn King. And Carney is not going to be like Janet Yellen either. #StrongPound.

SWISS

We bought both the Eurostoxx50 (FEZ) and Swiss stocks (EWL) on yesterday’s European stock market correction. Almost half of my long positions in #RealTimeAlerts are #EuroBull related at this point. #StrongerCurrencies and still long Germany via EWG

UST 10YR

Yields shocked some to the upside yesterday as Bernanke/Yellen superimpose a) rising volatility and b) less liquidity in parts of the bond market via policy confusion. Either they whispered to Goldman Sachs' Jan Hatzius that they’re going to move the goal posts on the unemployment rate again or they did not. Which is it? Either way, this is a circus on tapering expectations.

Asset Allocation

CASH 32% US EQUITIES 6%
INTL EQUITIES 22% COMMODITIES 8%
FIXED INCOME 6% INTL CURRENCIES 26%

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

There's an #OldWall backslapping network out there that gets paid ad dollars to bs you, then there's us @KeithMcCullough

QUOTE OF THE DAY

”A successful man is one who can lay a firm foundation with the bricks others have thrown at him.” -David Brinkley

STAT OF THE DAY

$1.35 Billion: Found! A stash of 1,500 artworks that may be worth 1 billion euros if confirmed to be by artists such as Pablo Picasso, Max Beckmann and Marc Chagall. The works originally may have been seized by the Nazis from German museums and private collectors. They were found amid piles of garbage and outdated food packets, according to a report in Focus magazine.