Client Talking Points
I was dead wrong on the no-taper call, so I covered the US Dollar short position and sold my Pound long on strength. Being net long equities yesterday (as we were) was effectively pure luck. Bernanke did the right thing, protecting the Dollar (that was in a 6 week free fall). The question now is did he do it too late? Tapering into US #GrowthSlowing (sequentially) in Q1 won’t be for the faint of heart. But if the US Dollar can breakout above our TREND line of $81.14, that gives US growth a shot. Stay tuned.
Got #RatesRising? The bond market had this right. Don't forget: the 10-year yield is up +17 basis points month-over-month and up +108 basis points year-over-year. Ex the no-taper decision in September (which evidently Bernanke now has the growth data, on a lag, to have tapered in SEP), this flow call out of bonds and into growth equities is very straightforward, and very well may continue.
Thank God my signals said stay out of gold into yesterday’s Fed decision. Gold hates #RatesRising and is being tapered (hard) this morning back down to its June lows. If it doesn’t hold the June 27th closing low of $1200, and the USD breaks out above $81.14, I’ll have no problem going back to the bear side of Gold. We get the bear case.
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Top Long Ideas
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.
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
Being wrong in macro happens; you have to move quickly so that your mistakes don't run against you @KeithMcCullough
QUOTE OF THE DAY
More than anything else, what differentiates people who live up to their potential from those who don't is a willingness to look at themselves and others objectively. -Ray Dalio
STAT OF THE DAY
Mark Zuckerberg, the CEO of Facebook (FB), is selling shares to help pay taxes, joining the company and some other shareholders in an offering worth about $3.9 billion. About 27 million shares will be offered by Facebook, and almost 43 million shares are being sold by certain stockholders, including 41,350,000 shares by Zuckerberg, the company said in a statement today. Facebook fell as much as 5.3% in pre-market trading.