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THERE’S ALWAYS A BULL MARKET SOMEWHERE

Client Talking Points

EUROPE

The bounce isn’t bouncing. Greece is down  -0.7%, Portugal is down  -0.4%, Russia is down  -0.4% (-13.5% year-to-date) this morning as almost every major European equity index remains below @Hedgeye TREND risk resistance.

UST 10YR

The UST 10YR Yield is back down to 2.47% this morning and the Yield Spread (10yr minus 2yr) is compressing to a fresh year-to-date low of +193bps (that’s -20bps since July 7th when the Russell topped). Regional Banks (KRE) were down  -1.1% yesterday. #Q3Slowing sinks in.

 

GOLD

There’s always a bull market somewhere. Gold loves U.S. economic stagflation, and has once again held immediate-term TRADE support, moving back up to $1308 (big breakout line = $1323) and we might get that this week if A) GDP misses again and B) Janet freaks out about growth slowing, housing, etc.

Asset Allocation

CASH 28% US EQUITIES 4%
INTL EQUITIES 14% COMMODITIES 18%
FIXED INCOME 24% INTL CURRENCIES 12%

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

$DRI Darden announces Clarence Otis to step down; chairman and CEO roles to be separated

@HedgeyeHWP

QUOTE OF THE DAY

We cannot change the cards we are dealt, just how we play the hand.

-Randy Pausch

STAT OF THE DAY

McDonald's operates almost 36,000 restaurants worldwide, serving nearly 70 million people in more than 100 countries each day.