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Client Talking Points

#EUROPESLOWING

As we roll into our Q1 Macro Themes Call (tomorrow), a friendly reminder that #EuropeSlowing was the call we continued to make as a Q4 theme, simply because we didn’t think what Draghi’s done so far would work for either European stocks or the economy - #deflation accelerates this morning with Eurozone CPI -0.2% year-over-year DEC vs. +0.3% NOV.

UST 10YR

A tasty move for the #GrowthSlowing + #Deflation trade/investment (TLT), indeed. Big oversold signal in yield terms in the last 24 hours of trading with the UST 10YR at 1.94% this morning. The risk range is blown out to 1.87-2.14%, for now – Fed Minutes today are a lagging indicator (on lagging data, so probably hawkish); jobs slowing is the next problem (think Texas).

S&P 500

The S&P 500 (SPY) is pinned under @Hedgeye TREND line of 2018, so it gets really interesting from here (especially if they bounce them again in the am and fail again heading into the jobs report). The risk range of 1983-2046 continues to widen as implied volatility continues to heighten. Do up your chinstraps – this is going to be fun.

Asset Allocation

CASH 51% US EQUITIES 10%
INTL EQUITIES 2% COMMODITIES 0%
FIXED INCOME 28% INTL CURRENCIES 9%

Top Long Ideas

Company Ticker Sector Duration
EDV

The Vanguard Extended Duration Treasury (EDV) is an extended duration ETF (20-30yr). As our declining rates thesis proved out and picked up steam over the course of the year, we see this trend continuing into Q1.  Short of a Fed rate hike, there’s no force out there with the oomph to reverse this trend, particularly with global growth decelerating and disinflationary trends pushing capital flows into the one remaining unbreakable piggy bank, which is the U.S. Treasury debt market.

TLT

As growth and inflation expectations continue to slow, stay with low-volatility Long Bonds (TLT). We believe the TLT has plenty of room to run. We strongly believe the dynamics in the currency market are likely contribute to a “reflexive deflationary spiral” whereby continued global macro asset price deflation and reported disinflation both contribute to rising investor demand for long-term Treasuries, at the margins.

HOLX

Hologic (HOLX) is a name our Healthcare Sector Head Tom Tobin has been closing monitoring for awhile. In what Tom calls his 3D TOMO Tracker Update (Institutional Research product) of U.S. facilities currently offering 3D Tomosynthesis, month-to-date December placements signaled a break-out quarter after a sharp acceleration in October and slight correction to a still very high rate in November. We believe we are seeing a sustained acceleration in placements that will likely drive upside to Breast Health throughout FY2015. Tom’s estimates are materially ahead of the Street, but importantly this upward trend in Breast Health should lead not only to earnings upside, but also multiple expansion and a significant move in the stock price.

Three for the Road

TWEET OF THE DAY

Italy's youth unemployment rate 43.9% Nov. Who is going to produce for the 65+ population?

@Hedgeye_Comdty

QUOTE OF THE DAY

In great attempts it is glorious even to fail.

-Vince Lombardi

STAT OF THE DAY

Despite numerous bailouts (public and private) since the sovereign ‘crisis’ began in 2010, the public debt load in Greece remains a monster €317 billion (~ $386.7 billion) or about 175% of Greek GDP.