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Client Talking Points

EUROPE

Bounced to lower-highs late last week, but all of the majors failed @Hedgeye TREND resistance. DAX is down  -0.9% this morning and its TREND line = 9759; Italy’s MIB Index down -1.1% (TREND resistance = 21192).

GOLD

After correcting to higher-lows last week = +0.3% this morning to $1314 with no resistance to $1324, then $1345 – the best way to play our inflation slowing U.S. growth theme in Q3 is long Gold, TIP, and the long bond.

UST 10YR

UST 10YR yield ticks down to 2.47% this morning as our model signals a series of lower-highs. The Yield Spread (10yr – 2yr) is dipping below 200bps for the first time in 2014 today, new lows (another #Q3Slowing signal for USA).

Asset Allocation

CASH 20% US EQUITIES 6%
INTL EQUITIES 10% COMMODITIES 20%
FIXED INCOME 24% 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.

LM

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.

Three for the Road

TWEET OF THE DAY

INDIA: our favorite equity market in the East = +23% YTD

@KeithMcCullough

QUOTE OF THE DAY

Gratitude is the sign of noble souls.

-Aesop

STAT OF THE DAY

Despite dropping -0.1% last week, Food Prices (CRB Food Index) are still up +19.1% YTD.