CLIENT TALKING POINTS
YEN
The Yen is up another +0.8% this morning versus the US Dollar to +2.0% year-to-date. This is after being up +0.7% last week with the USD Index down -0.2%. Consensus is not as short Yen as it was, but the net short position (CTFC futures/options) of -130,749 contracts is still enormous.
UST 10YR
The 10-year Treasury yield got smoked for a -14 basis point loss last week, and isn’t moving this morning either. Meanwhile, Gold can get interesting on the long side again if the 10-year yield starts making lower highs versus 2.99%. Gold is finally signaling a higher-low of $1195 support.
#EuroBulls
The Top-3 stock markets in the world year-to-date? They are all European (Greece, Portugal, and Austria). We expect that to continue provided that the US Dollar doesn’t breakout versus the Euro. Take a look at our #GrowthDivergencesMacro Theme for Q1. (Ping sales@hedgeye.com for access.) Yes - we also remain long of Germany. Incidentally, the SPX risk range this morning is 1.
TOP LONG IDEAS
GHL
Hedgeye's detailed and constructive view on the improving fundamentals in the M&A market with a longer term perspective is a contrarian idea at odds with the rest of the Street which is overly focused on short-term results. From an intermediate term perspective, M&A is poised to break out in 2014. We are witnessing record amounts of cash on corporate balance sheets, continued low borrowing costs and the first positive fund raising round for Private Equity in four years. Moreover, a VIX in secular decline (this has historically benefited M&A), recent incrementally positive data points from leading M&A firms that dialogue has improved, and an improving deal tally from Greenhill & Company (GHL) themselves coming out of the summer all bode favorably for GHL. So is a budding European economic recovery that would assist a global M&A market that has been range bound over the past three years. GHL stands out as a leading beneficiary of these developments.
FXB
We remain bullish on the British Pound versus the US Dollar, a position supported over the intermediate term TREND by prudent management of interest rate policy from Mark Carney at the BOE (oriented towards hiking rather than cutting as conditions improve) and the Bank maintaining its existing asset purchase program (QE). UK high frequency data continues to offer evidence of emergent strength in the economy, and in many cases the data is outperforming that of its western European peers, which should provide further strength to the currency. In short, we believe a strengthening UK economy coupled with the comparative hawkishness of the BOE (vs. Yellen et al.) will further perpetuate #StrongPound over the intermediate term.
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.
Asset Allocation
| CASH | 36% | US EQUITIES | 15% | |
| INTL EQUITIES | 16% | COMMODITIES | 6% | |
| FIXED INCOME | 0% | INTL CURRENCIES | 27% |
THREE FOR THE ROAD
TWEET OF THE DAY
Fun watching guys use macro indicators that went stale 1/2 a decade ago #BalticDry @KeithMcCullough
QUOTE OF THE DAY
"Your life does not get better by chance, it gets better by change."
-Jim Rohn
STAT OF THE DAY
Got #GrowthDivergences? European Stocks beat US and Asian Stocks last week with Spain +5.0% and Austria +4.9% leading. Boom.
