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Yellen’s Dollar Devaluation

Client Talking Points

NASDAQ

I learn a lot more from developing bears on the bounces than I do on the drops: A) bearish TREND resistance of 4203 remains intact, B) QQQ just registered a lower-high on one of the weakest volume Wednesday’s of 2014. Neither A nor B are good

USD

Yellen’s Dollar Devaluation comments yesterday – encouraging more of what is slowing growth = inflation – keeps the US Dollar under selling pressure this morning. Four months into the year, I haven’t watched a slow-moving train wreck like this since 2011.

UST 10YR

You’d think bonds would sell off for real (if the social media bubble was going to bubble up again, for real). Nope. The 10-year yield is actually down 2 bps in the last 48 hours – a clean cut US #GrowthSlowing signal that should have legs well into the third quarter of this year.

Asset Allocation

CASH 40% US EQUITIES 0%
INTL EQUITIES 6% COMMODITIES 18%
FIXED INCOME 18% INTL CURRENCIES 18%

Top Long Ideas

Company Ticker Sector Duration
HOLX

Hologic is emerging from an extremely tough period which has left investors wary of further missteps. In our view, Hologic and its new management are set to show solid growth over the next several years. We have built two survey tools to track and forecast the two critical elements that will drive this acceleration.  The first survey tool measures 3-D Mammography placements every month.  Recently we have detected acceleration in month over month placements.  When Hologic finally receives a reimbursement code from Medicare, placements will accelerate further, perhaps even sooner.  With our survey, we'll see it real time. In addition to our mammography survey. We've been running a monthly survey of OB/GYNs asking them questions to help us forecast the rest of Hologic's businesses, some of which have been faced with significant headwinds.  Based on our survey, we think those headwinds are fading. If the Affordable Care Act actually manages to reduce the number of uninsured, Hologic is one of the best positioned companies.

OC

Construction activity remains cyclically depressed, but has likely begun the long process of recovery.  A large multi-year rebound in construction should provide a tailwind to OC shares that the market appears to be underestimating.  Both residential and nonresidential construction in the U.S. would need to roughly double to reach post-war demographic norms.  As credit returns to the market and government funded construction begins to rebound, construction markets should make steady gains in coming years, quarterly weather aside, supporting OC’s revenue and capacity utilization.

DRI

Darden is the world’s largest full service restaurant company. The company operates +2000 restaurants in the U.S. and Canada, including Olive Garden, Red Lobster, LongHorn and Capital Grille. Management has been under a firestorm of criticism for poor performance. Hedgeye's Howard Penney has been at the forefront of this activist movement since early 2013, when he first identified the potential for unleashing significant value creation for Darden shareholders. Less than a year later, it looks like Penney’s plan is coming to fruition. Penney (who thinks DRI is grossly mismanaged and in need of a major overhaul) believes activists will drive material change at Darden. This would obviously be extremely bullish for shareholders and could happen fairly soon driving shares materially higher.

Three for the Road

TWEET OF THE DAY

Russell and Nasdaq still -6.4% and -6.2% from their bubble highs @KeithMcCullough

QUOTE OF THE DAY

"To avoid criticism, do nothing, say nothing, and be nothing." - Elbert Hubbard

STAT OF THE DAY

Former COO Henrique de Castro left Yahoo with a severance package worth $58 million, according to a regulatory document filed with the SEC. The golden parachute is among the most generous in history, and especially notable given than de Castro worked at Yahoo for only 15 months. He was shown the door in January. (CNN)