Buy 'em or Sell 'em?

Client Talking Points

US Dollar

What made the most sense to me yesterday was USD Down = Rates Down = Stocks Down. That’s called the #GrowthSlowing trade. You will have to risk manage it in the coming quarters with #InflationAccelerating (which slows consumption growth). Meanwhile, the US Dollar failed our long-term TAIL resistance of $81.19 again. The Euro and Pound are both looking stronger. We stand behind our #Eurobulls macro theme!

JAPAN

The Nikkei no likey that whole Down Dollar, Up Yen move, eh? Japan down -3.1% as the Yen signaled immediate-term TRADE overbought versus the US Dollar in our model yesterday. Yen down -0.6% now on the day should mean Nikkei up tonight. So that gives me confidence being long the S&P 500 for the first time here in 2014.  (I bought it on the bell in #RealTimeAlerts).

VIX

Another reason why I bought the S&P 500 and covered shorts into the close yesterday was VIX is under 14.91 resistance. That’s my TREND resistance line and SPX immediate-term TRADE oversold at 1817. So I'm simply sticking with the process, even though today’s Retail Sales print in the USA is likely another sequential #GrowthSlowing data point.

Asset Allocation

CASH 26% US EQUITIES 20%
INTL EQUITIES 20% COMMODITIES 6%
FIXED INCOME 0% INTL CURRENCIES 28%

Top Long Ideas

Company Ticker Sector Duration
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.

Three for the Road

TWEET OF THE DAY

$JPM - First cut: bottom line is much stronger than expected. Apples/apples vs street was actually $1.60 vs $1.24. JPM now itemizes RR. @HedgeyeFIG

QUOTE OF THE DAY

"There is real magic in enthusiasm. It spells the difference between mediocrity and accomplishment." -Norman Vincent Peale

STAT OF THE DAY

Is cable television’s heyday over? Subscribers have been declining since 2004. Roughly 54.8 million households currently pay for cable TV, down 3.3% from 2012 and down 17.6% from a decade prior, according to research firm IHS. Cable companies are expected to shed roughly 1.3 million subscribers in 2014.


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