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Client Talking Points

DAX

We've said it before here at Hedgeye, and we'll say it again: Respect is earned, not allocated. Over in Germany, Angela Merkel doesn’t have a bunch of Fed heads running around like chickens with their heads cut off making conflicting speeches to manic media people now does she? The DAX “correction” looked nothing like that in the S&P 500. Both DAX, the FTSE and Nikkei are all looking better now than S&P 500. Why not buy them instead?

OIL

With the two greatest threats to Americans at the pump (Syria and Ben Bernanke) finally out of the headline news this morning, Brent is snapping my long-term TAIL risk line of $108.57. That is new. It's also a very good thing on the margin. We need it.

UST 10YR

Mr. Bernanke thinks that down rates is a good thing. Neither I nor the stock market agree. Falling rates is a leading indicator for #GrowthSlowing, and so is a Yield Spread (10-year minus 2-year) that just compressed to +236 basis points wide from 250 (bearish for the Financials yesterday – good for slow growth Utilities) #sad

Asset Allocation

CASH 47% US EQUITIES 18%
INTL EQUITIES 20% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 15%

Top Long Ideas

Company Ticker Sector Duration
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.

HCA

Health Care sector head Tom Tobin has identified a number of tailwinds in the near and longer term that act as tailwinds to the hospital industry, and HCA in particular. This includes: Utilization, Maternity Trends as well as Pent-Up Demand and Acuity. The demographic shift towards more health care – driven by a gradually improving economy, improving employment trends, and accelerating new household formation and births – is a meaningful Macro factor and likely to lead to improving revenue and volume trends moving forward.  Near-term market mayhem should not hamper this  trend, even if it means slightly higher borrowing costs for hospitals down the road.

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

When God created earth, he was thinking Bill Dudley would set gravity's rules @federalreserve

@KeithMcCullough

QUOTE OF THE DAY

“You should never wink at a girl in the dark. Our communications policy is a little off–we should work harder to refine it.”  - Dallas Fed President Richard Fisher

STAT OF THE DAY

This week alone, 13 companies are set to begin trading on the Nasdaq and NYSE -- which would be the busiest week for initial public offerings since November 2007. If all those companies make it to the market, that will bring this year's IPO total to 153. At least 200 companies are now expected to debut this year, according to Renaissance Capital. That would be the most since 2007.