#NoTaper Trade? On.

Client Talking Points

US Dollar

Down Dollar. That's what you get when your centrally planned market is trying to front-run the Fed’s next move. It's officially the third down week in a row now for your Burning Buck post Janet "Mother of All Doves" Yellen's no-taper confirmation. Meanwhile, across the pond, the Euro and Pound are strong like bull versus the USD. It's sad.

UST 10YR

Bonds Yields are continuing to confuse consensus (CFTC futures/options net short position in the long bond is at year-to-date highs). But hope for a December taper is fading fast just like the US Dollar’s purchasing power. TREND support for 10-year yield is 2.64%. Keep an eye on that level.

GOLD

Question: Gold likes what?

Answer: Down Dollar + Down Rates

Yup. Gold made another higher-low yesterday (versus the June 27th closing low of $1200.67). It's up +0.75% this morning. The next line of resistance to keep an eye on is $1285/ounce. If you haven't watched it already, here's my video on Gold from yesterday.

Asset Allocation

CASH 42% US EQUITIES 8%
INTL EQUITIES 8% COMMODITIES 8%
FIXED INCOME 8% INTL CURRENCIES 26%

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

That's the problem with academics, they think they know it all and really don't want to learn. @Wesbury

QUOTE OF THE DAY

"I have no special talents. I am only passionately curious." - Albert Einstein

STAT OF THE DAY

According to Forbes, the 400 wealthiest Americans have more wealth than the bottom 150 million Americans combined.


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