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Client Talking Points

BONDS

Bear market in bonds just beginning... ICI just reported the worst bond market outflow since August. Fixed income mutual funds continued persistent outflows with $8.1B withdrawn from bond funds last week. At the peak of Bernanke's Bond Bubble (2012) average weekly flows were +$5.8B average inflow per week. Last week's -$8.1B outflow from bonds takes the year-to-date weekly average outflow to -$1.4B per week. Boom ... 3.01% on the 10-year this morning. What was immediate-term trade resistance of 2.91% is now support.

EUROPE

Stocks are ripping across the pond as the Euro rips a new high with #Eurobulls (Hedgeye Q4 Macro theme #1) featured front-and-center on the macro market stage this morning. #StrongEuro = #StrongGermany. The DAX? It's up +25.7% year-to-date as the Euro rips. What's that? Even Greece is joining in the party up +4.2% this morning. End of World? Currencies matter.

Asset Allocation

CASH 46% US EQUITIES 12%
INTL EQUITIES 12% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 30%

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

Fear, as blogging ad strategy, continues to crash, -31.6% VIX for 2013 YTD @KeithMcCullough

QUOTE OF THE DAY

"Self-trust is the first secret of success." - Ralph Waldo Emerson

STAT OF THE DAY

The 2013 holiday season was the best ever for Amazon, with more than 36.8 million items ordered worldwide on Cyber Monday -- a record-breaking 426 items per second. (Amazon press release)