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Client Talking Points


Consensus bullishness on the Nikkei and bearishness on the Yen continues to be one of the worst macro positions of the year. The Bank of Japan didn’t deliver the drugs overnight (60-70 TRILLION Yens still not enough!) so the Yen is breaking out to fresh year-to-date highs versus the US Dollar and the Nikkei was down for the fifth day in the last six to -13.1% YTD (Fed mins should be dovish next).


Got #StrongCurrency = Strong People (Consumption)? With the #StrongPound testing year-to-date highs in Q2 versus the US Dollar, UK Retail Sales for April were a barn burner of +6.9% year-over-year – that’s a 10 year high, reminding the Keynesians that they have the whole FX burning for 1920’s “export demand” completely wrong. It’s 2014.


Our breakout signals for both Brent and WTIC have been confirmed in the last two weeks as WTIC inflates another +0.8% this morning to $103.21 – one more #InflationAccelerating tax on American Consumers for Memorial Day weekend (unless, of course, you roll with Bernanke using car service for non-inflationary $400,000 Fed whispering sessions).

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

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.


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.


Legg Mason reported its month ending asset-under-management for April at the beginning of the week with a very positive result in its fixed income segment. The firm cited “significant” bond inflows for the month which we calculated to be over $2.3 billion. To contextualize this inflow amount we note that the entire U.S. mutual fund industry had total bond fund inflows of just $8.4 billion in April according to the Investment Company Institute, which provides an indication of the strong win rate for Legg alone last month. We also point out on a forward looking basis that the emerging trends in the mutual fund marketplace are starting to favor fixed income which should translate into accelerating positive trends at leading bond fund managers. Fixed income inflow is outpacing equities thus far in the second quarter of 2014 for the first time in 9 months which reflects the emerging defensive nature of global markets which is a good environment for leading fixed income houses including Legg Mason. 

Three for the Road


COMMODITIES: US growth stocks -1.7% yesterday vs Commodities up #InflationAccelerating @KeithMcCullough


"It's how you deal with failure that determines how you achieve success." - David Feherty


During his eight years as steward of the world’s largest economy, Ben Bernanke’s salary was about $200,000 a year. Now he makes that in just a few hours speaking to bankers, hedge fund billionaires and leaders of industry. This year alone, he is poised to make millions of dollars from speaking engagements. (New York Times)