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Client Talking Points

OIL

Someone always knows something. The way Oil, Gold, and Silver are acting (Bernanke Dollar Devaluation carry trades of the century), this jobs print could be a beat. West Texas Intermediate snapped our Hedgeye TAIL risk line of $101.37 – that’s fresh. Silver is down -1.1% ahead of this morning's print. More to be revealed.

US DOLLAR

Despite what Ben Bernanke just tried doing to it, the U.S. Dollar still held its long-term TAIL line of $79.21 support. That line is of paramount importance. It matters more than any other macro line in my multi-factor model. So this jobs report does too. The 10-year US Treasury Yield TREND support is a close second behind the dollar. It's at 2.57%.

BRAZIL

Question: Why do emerging markets love Bernanke Burning the Buck? Simple. It gives them their currency back. A stronger Real is taking consumer inflation down sequentially in Brazil. The Bovespa likes that until it doesn’t. Witness the breakout yesterday over 54,515 TREND. The U.S. Dollar needs to be pressured further for that to hold.

Asset Allocation

CASH 46% US EQUITIES 16%
INTL EQUITIES 20% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 18%

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

Someone always knows something - we'll see if Mr Macro Market has this jobs preview right @KeithMcCullough

QUOTE OF THE DAY

"The Federal Reserve is not currently forecasting a recession." -Ben Bernanke on January 10, 2008

STAT OF THE DAY

Since the Federal Reserve was created, the U.S. dollar has declined in value by more than 95 percent and the U.S. national debt has gotten more than 5000 times larger.