CLIENT TALKING POINTS

VOLUME

We had a lot of questions on U.S. equity volume yesterday (there was none) – versus the 1 and 3 month average Total Equity Market Volume, it was down -16% and -19%, respectively – volume comes back on the down days, not the up ones #asymmetry.

UST 10YR

2.46% puts the UST 10yr at fresh new lows for Q3 and that fits the complexion of our U.S. economic slowing call much more so than no-volume U.S. equity market squeezes; regional bank stocks (KRE) saw this in yield spread compression yesterday #weak.

ITALY

We learn a lot more from bounces within bearish TRENDs than the selloffs; Italy’s MIB Index was the 1st major European Equity market to fail at 21,138 TREND resistance this morning and go red #watching.

TOP LONG IDEAS

HOLX

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

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

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 26% US EQUITIES 4%
INTL EQUITIES 12% COMMODITIES 18%
FIXED INCOME 24% INTL CURRENCIES 16%

THREE FOR THE ROAD

TWEET OF THE DAY

2 downgrades on $MCD today... #Fascinating

@HedgeyeHWP

QUOTE OF THE DAY

If you must play, decide upon three things at the start: the rules of the game, the stakes, and the quitting time. 

-Chinese Proverb

STAT OF THE DAY

49.3%, is the amount Lean Hogs are up year-to-date, up +2% yesterday.