CLIENT TALKING POINTS
Vix
Before the last five days, remember when the SP500 had two up days in 12? Trending volatility does. Friendly reminder that front-month VIX is A) bullish TREND (11.84 support) and B) coming off the most asymmetric low (10) you’ve seen since 2007.
Europe
A no-volume-v-bottom-bounce to lower-highs but also below all of my intermediate-term TREND lines (DAX, CAC, MIB, etc), so that intermediate-term context is more important than Europe starting to go down again this morning.
UST 10YR
If you’re bullish, you should be bullish on the Long Bond; it’s crushing every major US equity index YTD (Russell 2000 is down for 2014), and the 10yr has immediate term downside to 2.34% into Janet pushing out the dots at Jackson Hole
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.
BOBE
The level of activism in the restaurant industry has never been more rampant. In the past year alone, we’ve seen CBRL, DAVE, DRI, BJRI and BOBE attract largely uninvited attention from these investors. BOBE has a long history of mismanagement, evidenced by flawed strategic rationale, an excessively bloated cost structure and severe underperformance relative to peers. Fortunately, its poor operating performance presents a tremendous opportunity. We believe activist investor Sandell has identified significant, largely feasible, opportunities to enhance shareholder value. Particularly, we see tremendous upside value in selling the foods business, transitioning to an asset light model and refocusing capital allocation.
TLT
Fixed income continues to be our favorite asset class, so it should come as no surprise to see us rotate into the Shares 20+ Year Treasury Bond Fund (TLT) on the long side. In conjunction with our #Q3Slowing macro theme, we think the slope of domestic economic growth is poised to roll over here in the third quarter. In the context of what may be flat-to-decelerating reported inflation, we think the performance divergence between Treasuries, stocks and commodities may actually be set to widen over the next two to three months. This view remains counter to consensus expectations, which is additive to our already-high conviction level in this position. Fade consensus on bonds – especially as growth slows. As it’s done for multiple generations, the 10Y Treasury Yield continues to track the slope of domestic economic growth like a glove.
Asset Allocation
| CASH | 54% | US EQUITIES | 0% | |
| INTL EQUITIES | 12% | COMMODITIES | 6% | |
| FIXED INCOME | 24% | INTL CURRENCIES | 4% |
THREE FOR THE ROAD
TWEET OF THE DAY
“If you can’t contextualize macro moves on multiple factors and durations, you shouldn’t do macro.” -- @KeithMcCullough
QUOTE OF THE DAY
“One can be a crucial ingredient on a team, but one man cannot make a team.” – Kareem Abdul-Jabbar
STAT OF THE DAY
$100.53, the closing price Tuesday of one share of Apple stock, which hit an all-time (split-adjusted) high.
