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Client Talking Points

YEN

The Burning Yen is making a fresh year-to-date low of 104.33. Naturally, the Nikkei is making a fresh 6-year closing high on that at 15,589. Nikkei is up over 55% year-to-date. Bottom line is get USD/YEN right, you get Japanese stocks right. What's that? The US Dollar is up another +20 basis points this morning? Exactly. 

10YR UST

It's a fresh 3-month high for #RatesRising up to 2.94%. We are testing the top-end of my immediate-term 2.88-2.95% risk range. Bond outflows (equity inflows) are going to be real tough to fight in January. We are short Pimco’s BOND.

SPY

With the S&P 500 up +401 points year-to-date, it’s a Merry Christmas Eve! Higher-lows and higher-all-time-highs are bullish, until they are not. While buying-the-damn-bubble #BTDB may not sound polite, it is what has been working. A stronger US Dollar and #RatesRising can very much perpetuate that further. SPX risk range is 1796-1835.

Asset Allocation

CASH 45% US EQUITIES 15%
INTL EQUITIES 15% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 25%

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

GOLD: pathetic bear mkt bounce of +0.1%, -28.3% YTD @KeithMcCullough

QUOTE OF THE DAY

You really have to love yourself to get anything done in this world. -Lucille Ball

STAT OF THE DAY

Nine-in-ten Americans say they celebrate Christmas, and three-quarters say they believe in the virgin birth of Jesus. But only about half see Christmas mostly as a religious holiday, while one-third view it as more of a cultural holiday. Virtually all Christians (96%) celebrate Christmas, and two-thirds see it as a religious holiday. In addition, fully eight-in-ten non-Christians in America also celebrate Christmas, but most view it as a cultural holiday rather than a religious occasion. (Pew)