Bonds Don’t Care About Facebook

Client Talking Points

JAPAN

Maybe they should split the Nikkei 7 for 1, because this sick puppy can’t even find a bid on Nasdaq futures ripping. Nikkei is down another -1% overnight as the US Dollar Devaluation versus the Yen remains the FX correlation position to keep on. 

OIL

Putin Power, yep. He gets paid in Petro Dollars — don’t forget that. After holding my TREND line of support yesterday, WTI crude is up to $101.70 this morning and has no resistance to $105.03. This is a big time #ConsumerSlowing catalyst for the United States.

UST 10YR

The bond market really couldn’t care less about Facebook or the Apple iSplit.  The 10-year yield is DOWN on the week to 2.70% and the Yield Spread continues to compress. More classic US #GrowthSlowing signals.

Asset Allocation

CASH 30% US EQUITIES 0%
INTL EQUITIES 10% COMMODITIES 18%
FIXED INCOME 22% INTL CURRENCIES 20%

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

Gold $1277 is just too high - can someone #iSplit that for the retail brokers too? @KeithMcCullough

QUOTE OF THE DAY

"For every minute you are angry you lose sixty seconds of happiness." - Ralph Waldo Emerson

STAT OF THE DAY

GE is in discussions to buy French industrial firm Alstom SA, according to Bloomberg. The deal may be worth more than $13 billion, or roughly 25% above Alstom's current market value. The company also makes power plant equipment. A deal could be announced as early as next week. (Bloomberg)