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Client Talking Points

POUND

$1.71 vs USD this morning (signaling immediate-term TRADE overbought within a bullish TREND) after another excellent economic data point (UK Construction PMI 62.6 for June vs 60.0 in May), which is unlike the U.S. data (which isn’t showing much as the USD declined in June). #StrongPound is winning.  

UST 10YR

UST 10YR yield of 2.55% didn’t particularly care for the SPX short squeeze (in fact, day over day, it hasn’t moved) = in line with the sequential slowing in both the June PMI and another bad U.S. Home Price report (June Core Logic Home Prices down to +7.7%year-over-yeary vs +10% in April); buy bonds.

RUSSELL 2000

We sent out the cover signal on June 12th and the sell signal again yesterday at 1208; that’s my line, for now (it’s the all-time closing high from March 4th); from a style factor perspective, much prefer being long inflation and slow-growth #YieldChasing to US domestic consumption growth.

Asset Allocation

CASH 16% US EQUITIES 6%
INTL EQUITIES 15% COMMODITIES 22%
FIXED INCOME 26% INTL CURRENCIES 15%

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.

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.

Three for the Road

TWEET OF THE DAY

Update to maternity model pointing to acceleration.  $MD $HCA

@HedgeyeHC

QUOTE OF THE DAY

"Concentration is the secret of strengths in politics, in war, in trade, in short in all management of human affairs."

- Ralph Waldo Emerson

STAT OF THE DAY

19, the age of Australia’s Nick Kyrgios who was victorious against Rafael Nadal yesterday in the fourth round of Wimbledon. Kyrgios became the first player in 22 years ranked outside the top 100 to beat the number one player in the world.