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Client Talking Points

UK

#Boom. Just an awesome unemployment report for the UK. 7.4% in October versus 7.6% last. The Pound understandably loves it. Right now it's re-testing the highs versus the US Dollar as the Bank of England Keynesian Quacks whine about how a #StrongPound “threatens the recovery.” Huh? Please. It's perpetuating it!

INDIA

India's Central Bank Chief Raghuram Rajan says no more rate hikes for now. No surprise here - Indian stocks loved that. The BSE Sensex jumped +1.3% back above our signal breakout line at Hedgeye of 20,754. If Ben Bernanke Burns The Buck (again) buy India. It's good for Emerging Markets.

OIL

Brent Oil is snapping our Hedgeye TAIL risk line of $108.69 again here this morning. That’s a very good thing for consumers (it's a tax cut) because Bernanke is hell bent on reflating the commodity bubble otherwise. Speaking of Ben, stock futures are up ahead of the no-taper expectation; Ben will really throw this thing for a loop if he flips again.

Asset Allocation

CASH 44% US EQUITIES 8%
INTL EQUITIES 8% COMMODITIES 8%
FIXED INCOME 8% INTL CURRENCIES 24%

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

Newsflash: #StrongCurrency perpetuates recoveries @KeithMcCullough

QUOTE OF THE DAY

“Concentrated power is not rendered harmless by the good intentions of those who create it.” - Milton Friedman

STAT OF THE DAY

German business confidence rose to the strongest in 20 months in a signal that the pace of recovery is quickening in Europe’s largest economy.