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Client Talking Points

EUROPE

The latest central plan was the only news that mattered last week with the EuroStoxx600 up +1.6% on the week as the EUR/USD was torched -1.4% to 1.30 and ticking down to 1.29 again this morning. The DAX is holding 9648 TREND support.

OIL

Brent Oil is breaking $100 as both it and WTIC remain bearish TREND signals @Hedgeye. If there’s one thing U.S. growth bulls bring up in every conversation with us right now its falling oil prices – we don’t think it’s incremental enough.

UST 10YR

UST 10YR Yield dropping 3 basis points this morning back to 2.43% with no immediate-term support to 2.32%. A weak employment report probably gives Janet Yellen what she needs to be dovish (again) at the September Fed meeting – buy the long bond.

Asset Allocation

CASH 52% US EQUITIES 0%
INTL EQUITIES 16% COMMODITIES 2%
FIXED INCOME 28% INTL CURRENCIES 2%

Top Long Ideas

Company Ticker Sector Duration
EDV

The Vanguard Extended Duration Treasury (EDV) is an extended duration ETF (20-30yr). Now that we have our first set of late-cycle economic indicators slowing in rate of change terms (ADP numbers and the NFP number), it's time to really think through the upcoming moves of this bond market. We are doubling down on our biggest macro call of 2014 - that U.S. growth would slow and bond yields fall in kind.

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.

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.

Three for the Road

TWEET OF THE DAY

FX: Pound hammered -1.2% vs USD on Scottish Independence fear

@KeithMcCullough

QUOTE OF THE DAY

Progress always involves risk; you can’t steal second base and keep your foot on first.

-Fredrick Wilcox

STAT OF THE DAY

Argentina stock market up another +6.1% last week to +93.2% year-to-date.