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
TOP LONG IDEAS
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.
Asset Allocation
| CASH | 48% | US EQUITIES | 8% | |
| INTL EQUITIES | 8% | COMMODITIES | 8% | |
| FIXED INCOME | 8% | INTL CURRENCIES | 20% |
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.