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Client Talking Points

SWISS

There’s CTRL+Print, then there’s panic – and this is rightly A) freaking people out and B) equating to a massive margin call on levered FX trades – Swiss cut by 50 basis points (to negative -0.75%!) and cut the wire loose on their exchange rate? (Richemont -11.2%, Swatch -8.5%, UBS -7.2%, Adecco -7.9%, Credit Suiss -8.2%, Julius Baer -7.5%, ABB -7.4%) #nice. 

OIL

Follow the #Deflation Dominos – Yens, Euros, Francs panic/burn --> Up Dollar --> Crashing Oil --> Spreads blow out in High Yield Energy --> Energy States lose moneys and jobs --> Financials and Industrials follow (late-cycle rolls) --> Fed doesn’t hike … this was the call we made in our Macro Themes Deck for Q1, reiterating it this morning.

FINANCIALS

Yesterday’s drop in JPM was its biggest since 2011. Volume was huge. Remember 2011? Financials worst performance #divergence vs. Utilities, ever. XLF already -5% for the year-to-date and the Regional Banks are in the midst of a 10% draw-down since that no-volume all-time SPX high on December 29th (2090).

Asset Allocation

CASH 54% US EQUITIES 4%
INTL EQUITIES 2% COMMODITIES 0%
FIXED INCOME 31% 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

VIDEO: My Uber-Bull Case For Gold $GLD https://app.hedgeye.com/insights/41742-mccullough-this-is-the-uber-bull-case-for-gold

@KeithMcCullough

QUOTE OF THE DAY

I ride the storm - cheering wildly. I gather strength from the storm.

-Jonathan Lockwood Huie

 

STAT OF THE DAY

The average American consumer will pay nearly $280,000 in interest over their lifetime, this figure varies dramatically from state to state based on credit scores and mortgage size.