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Client Talking Points

ASIA

It was an ugly session for Asian stocks which kicked off 2014 with Thailand down -5.2%; KOSPI in South Korea down -2.2% (it broke its Hedgeye TREND); India down -1.3% and China down -0.3% (after being down almost -4% for 2013.) What's that all about? Inflation expectations rising are not good for Asian growth.

SILVER

So, Silver is up over +3% to start the year after totally crashing in 2013. It's leading the whole inflation expectations rising move this morning as Oil, Copper, etc. are all showing some follow through from what was a strong December of price performance. Thankfully, we covered our Platinum short on red.

UST 10YR

No, it's not normal for the 10-year to stay pinned up here and also have precious metals rally. But there’s no such thing as a perpetual normal in macro, so embrace it. 3.03% on the 10-year is signaling more of the same (higher-lows and higher-highs for yields)

Asset Allocation

CASH 50% US EQUITIES 10%
INTL EQUITIES 10% COMMODITIES 3%
FIXED INCOME 0% INTL CURRENCIES 27%

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

Yield Spread (10yr minus 2yr) widens out to a fat +265bps for the Financials $XLF #bullish @KeithMcCullough

QUOTE OF THE DAY

Every man should be born again on the first day of January. Start with a fresh page.” -Henry Ward Beecher

STAT OF THE DAY

The richest people on the planet got even richer in 2013, adding $524B to their collective net worth, according to the Bloomberg Billionaires Index, a daily ranking of the world’s 300 wealthiest individuals. Bill Gates was the biggest gainer. The 58-year-old tycoon’s fortune increased by $15.8B to $78.5B, according to the index, as shares of Microsoft rose 40%. (Bloomberg)