CLIENT TALKING POINTS
VIX
Volatility (VIX) was down -12.5% last week. It's back into crash mode for 2013 (down -23.5% year-to-date) alongside Gold. Both of them hate the whole #RatesRising on growth surprising to the upside thing. More importantly, the VIX is under our 14.91 Hedgeye TREND line again. That of course is bearish for the VIX.
DAX
Germany ripped right back up to its year-to-date highs last week (EuroStoxx600 was +3.7% on the week). It's holding those gains this morning and is up +0.4%. We will stay with our Q413 #EuroBull macro theme provided that EUR/USD $1.35 TREND holds.
GOLD
Gold is down another -0.4% this morning after dropping -2.5% last week. Gold is down -29.1% year-to-date as the 10-year Treasury yield holds 2.90% (with next resistance 2.95%). The immediate-term risk range for Gold is now 1184-1229.
TOP LONG IDEAS
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.
Asset Allocation
| CASH | 45% | US EQUITIES | 15% | |
| INTL EQUITIES | 15% | COMMODITIES | 0% | |
| FIXED INCOME | 0% | INTL CURRENCIES | 25% |
THREE FOR THE ROAD
TWEET OF THE DAY
Morning... Heading to Lake Okeechobee to slay Florida largemouth bass @HedgeyeEnergy (Kevin Kaiser)
QUOTE OF THE DAY
"There is only one thing that makes a dream impossible to achieve: the fear of failure." - Paulo Coelho
STAT OF THE DAY
US stocks were up last week with the S&P 500 up +2.6% (+27.5% YTD). The Russell 2000 was up +3.6% (+35% YTD). Got Growth in your 2013 portfolio? Industrials +3% last week (+35.3% YTD) versus slow-growth Utilities +0.9% (+8.3% YTD).
