CLIENT TALKING POINTS
U.S. Stocks
The latest II US Equity Bull/Bear Sentiment Survey pins Bulls at all-time highs vs. Bears. Bulls rip to fresh cycle highs of 62.2% as Bears plummet to 17.4% - +4480bps to the Bull side. That’s right – slow-growth Style Factors (at the US Equity Sector level) continue to tell the tale of the tape in 2014. Slow-growth Utilities (XLU) are up +13% vs. #ConsumerSlowing (XLY) down -1.6% YTD. Got 2014 Sector Variance?
Housing
US Housing Demand continues to crash as bond yields fall. MBA weekly US mortgage purchase applications dropped another -3.6% last week after falling -1.1% in the week prior. We call that #HousingSlowdown. Reminder: yesterday's Core Logic US Home Price read-through for May … it was the worst of 2014. In related news, the 10-year bounce to lower-highs of 2.58% registers as a buy-more-bonds signal.
Commodities
Oil +0.7% leads the #InflationAccelerating charge as socialists beg for moar printing. OIL registered another BUY signal in #RealTimeAlerts yesterday. WTI Crude upside to $104.88. In related news, the OECD has now moved toward the Hedgeye #InflationAccelerating theme, albeit on 6 month delay.
TOP LONG IDEAS
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.
LM
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.
Asset Allocation
| CASH | 15% | US EQUITIES | 0% | |
| INTL EQUITIES | 10% | COMMODITIES | 25% | |
| FIXED INCOME | 25% | INTL CURRENCIES | 25% |
THREE FOR THE ROAD
TWEET OF THE DAY
Now that the UK and Europe has deflated the inflation tax w/ stronger currencies, macro morons call it "deflation" risk @KeithMcCullough
QUOTE OF THE DAY
"A journey of a thousand miles must begin with a single step." - Lao-Tsu
STAT OF THE DAY
California residents have voted for a plan to spend $600 million to build houses for homeless veterans in the state with the highest number of ex-servicemen without a roof in the United States. (Reuters)
