CLIENT TALKING POINTS
RUSSIA
Putin continues to try to puppeteer markets, bouncing the Russian Trading System (and Ruble) from the lows. The RTSI is up +4% this morning and all of Europe is chasing that (on bad German/French/Italian economic data - ISM Services for Italy breaches 50 in AUG to 49.8 vs 52.8 JUL).
OIL
At least Vladimir Putin didn’t leak the ceasefire to his boys yesterday; I guess Putin the peacemaker is the new bull case for those who love U.S. consumer stocks – makes sense, until the companies have to report. After getting smoked yesterday, Brent Oil holds $100.74 TRADE support, but remains bearish TREND.
UST 10YR
UST 10Yr Yield is up +11 basis points in less than 2-days, so this will be our worst start to a month since bonds got blasted in 1st week of July (to higher-lows); they chased the Russell to 1208 on July 7th on that too – painful position for us in the moment then, and it is now – staying with long TLT, short RUT.
TOP LONG IDEAS
HOLX
Hologic is emerging from an extremely tough period which has left investors wary of further missteps. In our view, Hologic and its new management are set to show solid growth over the next several years. We have built two survey tools to track and forecast the two critical elements that will drive this acceleration. The first survey tool measures 3-D Mammography placements every month. Recently we have detected acceleration in month over month placements. When Hologic finally receives a reimbursement code from Medicare, placements will accelerate further, perhaps even sooner. With our survey, we'll see it real time. In addition to our mammography survey. We've been running a monthly survey of OB/GYNs asking them questions to help us forecast the rest of Hologic's businesses, some of which have been faced with significant headwinds. Based on our survey, we think those headwinds are fading. If the Affordable Care Act actually manages to reduce the number of uninsured, Hologic is one of the best positioned companies.
BOBE
The level of activism in the restaurant industry has never been more rampant. In the past year alone, we’ve seen CBRL, DAVE, DRI, BJRI and BOBE attract largely uninvited attention from these investors. BOBE has a long history of mismanagement, evidenced by flawed strategic rationale, an excessively bloated cost structure and severe underperformance relative to peers. Fortunately, its poor operating performance presents a tremendous opportunity. After almost a year of pushing for change at Bob Evans, activist investor Sandell Asset Management is claiming a big victory. Activist investor Sandell won at least five seats on the board of the restaurant operator and food processor, based on preliminary results from the company’s annual shareholder meeting last month. This is precisely the sort of bullish catalyst that was central to our high conviction on BOBE.
TLT
Fixed income continues to be our favorite asset class, so it should come as no surprise to see us rotate into the Shares 20+ Year Treasury Bond Fund (TLT) on the long side. In conjunction with our #Q3Slowing macro theme, we think the slope of domestic economic growth is poised to roll over here in the third quarter. In the context of what may be flat-to-decelerating reported inflation, we think the performance divergence between Treasuries, stocks and commodities may actually be set to widen over the next two to three months. This view remains counter to consensus expectations, which is additive to our already-high conviction level in this position. Fade consensus on bonds – especially as growth slows. As it’s done for multiple generations, the 10Y Treasury Yield continues to track the slope of domestic economic growth like a glove.
Asset Allocation
| CASH | 52% | US EQUITIES | 0% | |
| INTL EQUITIES | 18% | COMMODITIES | 2% | |
| FIXED INCOME | 24% | INTL CURRENCIES | 4% |
THREE FOR THE ROAD
TWEET OF THE DAY
Another rock solid econ print on the consumption side of the UK economy, AUG Services PMI 60.5 vs 59.1 last
@KeithMcCullough
QUOTE OF THE DAY
You get self-satisfaction from pushing yourself to the limit, knowing that all the effort is going to pay off.
-Mary Lou Retton
STAT OF THE DAY
Our two favorite stock markets; China is up another +1% to 11.5% year-to-date and India is up another +0.7% to +30.1% year-to-date.