Bonds, Oil and Russia

Client Talking Points

UST 10YR

U.S. employment tends to look good at the end of economic cycle. The Bond market will vote on the strength of this jobs report. The UST 10YR yield continues to signal lower-highs within its formation #crash. The immediate risk range for today is 1.89-2.11.

OIL

Oil bounced, and then failed. Remember when they said that higher lows could be good for oil? Well, that’s gone now. The firings in Energy states will happen during January to March. Stay tuned. The immediate risk range for WTI Oil today is 46.43-51.86.

RUSSIA

Don’t forget that most bounces were led by counter-trends: oil, Russia and junk. That’s low value bouncing. Russian equities (RTSI) getting tagged and bagged for another -5.3% loss, so much for the bounce, and that has everything to do with deflation.

Asset Allocation

CASH 54% US EQUITIES 7%
INTL EQUITIES 3% COMMODITIES 0%
FIXED INCOME 28% INTL CURRENCIES 8%

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

VIDEO: Gabelli Unplugged: Finding Hidden Value, Secrets to Long-Term Success and Why the Knicks Will Win https://app.hedgeye.com/insights/41631-gabelli-unplugged-finding-hidden-value-secrets-to-long-term-success … @hedgeye

@KeithMcCullough

QUOTE OF THE DAY

If I had asked people what they wanted, they would have said faster horses.

-Henry Ford

STAT OF THE DAY

The percent of 18-34 year-olds living at home averaged 27.6% from 1983-2007, from 2008-2014 it averaged 30.5%.


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Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

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