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Client Talking Points

US DOLLAR

You have to separate the front-running moves (Wednesday) versus this morning because USD Down, Gold Up isn’t happening this morning. The most important line in my model is the Dollar trading inside of $81.41 TREND resistance. (EUR/USD TREND line is $1.34.)

UST 10YR YIELD

I had to sell that long Treasuries position. I couldn’t gut it out past the 11am EST portion of Janet Yellen's chat yesterday with the Senators. The proverbial waterfall of fund flows continues out of this epic Bernanke Bond Bubble. There will be nothing “tight” about timing that – it happens slowly, then all at once (h/t Ernest Hemingway). The 10-year Yield is holding its 2.64% TREND support. More to be revealed.

YEN

Rip-roaring fun for the biggest net short position in FX land! But, will the Yen break to lower-lows versus the September low versus the USD? That remains the question. We will let the market tell us on this one, but the Yen could be a long for the 1st time in a while in my model; research would back that as ECB and Fed are going to battle it out on the burning currency front

Asset Allocation

CASH 64% US EQUITIES 6%
INTL EQUITIES 8% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 22%

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

The Mother of All Doves rocked the #KeynesianCrack house yesterday; Gold Bond beta chasing is back! (or is it?) @KeithMcCullough

QUOTE OF THE DAY

What's the subject of life - to get rich? All of those fellows out there getting rich could be dancing around the real subject of life. -Paul Volcker

STAT OF THE DAY

By the age of 4, the average child in a professional family has heard 20 million more words than a child in a middle-class family.