Client Talking Points
The Yen is signaling oversold versus the US Dollar as the Nikkei signals immediate-term TRADE overbought. The Nikkei is up 1.5% to +52.6% year-to-date. #Boom. With CFTC futures/options net short position hitting new highs of -110,309 contracts, buy/cover Yen versus the US Dollar.
Germany is straight up +0.9% to register fresh new highs this morning. It's also signaling immediate-term TRADE overbought within its bullish TREND. See our Q413 #EuroBulls Global Macro Theme. Ping email@example.com if you need access.
Gold is down 1% to immediate-term TRADE oversold. We will be making the buy/cover call on that this morning with Gold down -27% year-to-date and gold bulls capitulating alongside John Paulson with net long position crashing another -20% last week (futures/options).
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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
Ignorant people are more likely to doubt the truth of facts that contradict their beliefs. @UberFacts
QUOTE OF THE DAY
"Anytime you play a contest that you keep score in, there should be a winner and a loser" - Mike Ditka on tie games
STAT OF THE DAY
U.S. Stocks hit all-time highs last week with the S&P 500 up +26.5% and the Russell 2000 +32.4% year-to-date. Meanwhile, US Equity Volatility (VIX) made a higher-low, closing +0.6% on the week at 12.26 (down -32% YTD).