Client Talking Points
The European Central Bank (ECB) bureaucrats have to be miffed. In spite of the rate cut, and French and Italian jawboning, the EURO just won’t go down. Why? It's primarily because the US DOLLAR won’t go up! Meanwhile, Janet Yellen is the more incremental dove here. The ECB’s balance sheet doesn’t look like the Fed.
"Putin Power" (or lack thereof) is turning into an interesting story yet again as the price of Oil makes a series of lower-highs and Ukrainians go after the pro-Russia central planning thing. The Russian stock market leads the losers this morning down -0.8%. Old Putin's market is down over -3% year-to-date. Live by oil, die by oil...
The 10-year yield is down 4 basis points to 2.72% in the last 24 hours. Gold goes up $20/ounce on that. Getting #RatesRising right had you get Gold (down) right. The question now is does Gold stabilize as yields make lower-highs?More to be revealed.
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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
I have never seen so many market geniuses be bearish on a market they can't time @KeithMcCullough
QUOTE OF THE DAY
"To think is easy. To act is hard. But the hardest thing in the world is to act in accordance with your thinking." - Johann von Goethe
STAT OF THE DAY
About 1 in 6 unemployed workers are addicted to alcohol or drugs -- almost twice the rate for full-time workers, according to the government's National Survey on Drug Use and Health. The survey shows that 17% of unemployed workers had a substance abuse disorder last year, whereas 9% of full-time workers did so. The numbers are self-reported, and therefore, could be even higher in reality.