CLIENT TALKING POINTS
UST 10YR
The UST 10 YR Yield 1.88% now (started the year at 2.17% and Old Wall consensus still has it going to 3.06% by year end?); and the non-commercial net SHORT position in futures/options contracts (CFTC data) is as big as its been in 6 months at -250,163 (and consensus is long SPX Index and Emini contracts on the other side of that!); don’t be consensus.
GOLD
Gold is looking more interesting by the day as the drop in bond yields becomes more pervasive (USD stopped going up too, which helps). We would like to see it hold our TREND support level of $1237 to suggest you buy it back, but we’re in no rush – consensus is currently long Gold (+106,734 net LONG contracts vs. +76,449 average three months ago).
COPPER
Devastating #deflation happening in the commodities asset class year-to-date (CRB Index at 221 was -2.1% yesterday, -29% since June) as both price and supply go the wrong way in the face of global #GrowthSlowing – still bearish on the Dr. (and his cousin KOSPI).
TOP LONG IDEAS
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.
Asset Allocation
| CASH | 52% | US EQUITIES | 7% | |
| INTL EQUITIES | 3% | COMMODITIES | 0% | |
| FIXED INCOME | 29% | INTL CURRENCIES | 9% |
THREE FOR THE ROAD
TWEET OF THE DAY
TREASURIES: being long The Long Bond, in size, remains the best place to be YTD - 10yr 1.88% $TLT
@KeithMcCullough
QUOTE OF THE DAY
Hard work spotlights the character of people: some turn up their sleeves, some turn up their noses, and some don't turn up at all.
-Sam Ewing
STAT OF THE DAY
Economic optimism hit a 2-year low in Japan, the BoJ published a quarterly survey Sunday, in which more than 50% of respondents said that they felt worse off than a year ago. Only 6% of the respondents said their situation had improved last year and 7% of respondents said conditions would get better this year.
