Scary Dovish

Client Talking Points

US DOLLAR

So after testing our Hedgeye TREND resistance of $81.39, the US Dollar Index (sadly) faded like a wilted flower yesterday. The reality is that this is your centrally planned market life now. Deal with it. On a related note, the Yen might even be a long here going into the Yellen hearing. That’s how scary dovish she is.

UST 10YR YIELD

The 10-Year yield fades at a lower-high and now Hedgeye TREND support of 2.66% comes in play into the Fed front-running circus event in Washington. I don’t think there’s a hope in hell that Janet Yellen signals a December taper. No way, no how. That’s why I am long the long bond (and Gold) here.

GOLD

Gold does not have the pop Silver (+1.4%) has this morning, but at least its not going down. We’re now long of Gold in Yellen terms (closer to $1262), but Mr Market doesn’t care what we own and where. Today is game day. Gold resistance is $1311, then $1342 after that

Asset Allocation

CASH 48% US EQUITIES 8%
INTL EQUITIES 8% COMMODITIES 8%
FIXED INCOME 8% INTL CURRENCIES 20%

Top Long Ideas

Company Ticker Sector Duration
FXB

Our bullish call on the British Pound was borne out of our Q4 Macro themes call. We believe the health of a nation’s economy is reflected in its currency. We remain bullish on the regime change at the BOE, replacing Governor Mervyn King with Mark Carney. In its October meeting, the Bank of England voted unanimously (9-0) to keep rates on hold and the asset purchase program unchanged.  If we look at the GBP/USD cross, we believe the UK’s hawkish monetary and fiscal policy should appreciate the GBP, as Bernanke/Yellen continue to burn the USD via delaying the call to taper.

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

This has to be one of the most confusing weeks of global macro signals in recent years... Lot of fundamental/quant mismatch = #RegimeChange? @HedgeyeDDale

QUOTE OF THE DAY

"Is the program actually proving effective? My short answer is yes."

-Janet Yellen on the efficacy of QE on 1/8/11

STAT OF THE DAY

Kohl's shares fell sharply this morning after posting earnings and revenue that fell far short of market expectations. Shares stumbled 9% in pre-market trade. Hedgeye Retail Sector Head Brian McGough nailed this call. Click here to watch video from Tuesday.


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Neurofinance: The Psychology Behind When To Sell A Bull Market

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Energy Stocks: Time to Buy the Dip? | $XLE

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Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

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Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

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SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

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Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

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Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

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McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

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Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

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Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

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Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

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