Christmas Bear Scraps

Client Talking Points

JAPAN

If you wanted to short a major equity market for a real correction, you should have tried a whirl on the Nikkei for 48 hours. Japan was down -1.5% overnight. It's down -3.7% in 2-days after the YEN stopped going down versus the US Dollar. Global macro matters.

EURO

So in spite of that European Central Bank cut, the Eurocrats just can’t seem to keep the Euro down versus the US Dollar. Why? Because Ben Bernanke is prepping his academic turkeys for more no-taper basting. Who cares what the economic data says? That scent in the air is the smell of #BurningBucks.

UST 10YR

What's that? #RatesRisingagain? Yes.. to 2.83% (Gold down -0.8% this morning, it no likey rising rates). So, Bill Gross and the bond guys over at PIMCO and the New York Fed better intervene soon. After all, our unelected central planners at the Federal Reserve must never let economic gravity get in the way of good dogmatic storytelling. #Sad. On a related note, SPX risk range is now 1788-1815. Time to buy and cover (again).

Asset Allocation

CASH 42% US EQUITIES 10%
INTL EQUITIES 12% COMMODITIES 4%
FIXED INCOME 6% 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

Devalue The Dollar and crush seniors starving on fixed savings w/ 0% rates (and talk "income disparity") @BarackObama

QUOTE OF THE DAY

"Great minds talk about ideas, average minds talk about events, and small minds talk about people." - Eleanor Roosevelt

STAT OF THE DAY

Bond prices fell yesterday, sending the 10-year note's yield to as high as 2.852%, nearing the 3% mark touched this past summer when investors bet the Fed would retreat from buying Treasury and mortgage bonds at its September policy meeting. (WSJ)


Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

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McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

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Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

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Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

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Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

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6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

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Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

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Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

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A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

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Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

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Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

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An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

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