Client Talking Points
The impact of Janet "Mother of All Doves" Yellen was precisely what it should have been on both currencies and interest rates. See Dollar Down, Rates Down with no plan to taper anytime soon. The US Dollar Index failed at our Hedgeye TREND of $81.39 which makes the EUR/USD look stronger now even though the ECB cut rates.
Treasury yields sold off into and out of the Yellen Dove-Fest. Now it gets interesting as my TREND line of support is 2.63%. Resistance is 2.81%. For now, I’m looking for 2.63% to hold. So shorting Treasuries is back in my head again.
It's been just a disaster of a year for Commodities. The CRB Index hit a fresh year-to-date low yesterday down -7.8%, in spite of US Dollar weakness. After selling Gold into that Thursday Yellen bounce, my asset allocation to Commodities is back at 0%. We are short Oil too in #RealTimeAlerts.
|FIXED INCOME||4%||INTL CURRENCIES||20%|
Top Long Ideas
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 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.
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
Yellen is so scary for American Purchasing Power (USD) that even the Euro hangs in post rate cut @KeithMcCullough
QUOTE OF THE DAY
Realize that if you have time to whine and complain about something then you have time to do something about it. - Anthony D'Angelo
STAT OF THE DAY
$13,000,000,000: The Justice Department and JPMorgan Chase are nearing completion of a $13 billion settlement related to the bank's past mortgage practices. A final deal is expected as soon as today.