CLIENT TALKING POINTS
EURO
The Euro stops going down at the low end of our $1.15-1.19 immediate-term risk range as the entire world preps for (and in some cases begs for) Mario Draghi to deliver the central planning drugs. Since European equity markets are mostly at the top-end of our risk ranges, we’ll say the risk there is once again to the downside on a continued EUR/USD bounce.
GOLD
If there’s one thing that Gold loves its Dollar Down, Rates Down (and you’re getting both this morning with the UST 10YR -4 basis points to 1.80% and EUR/USD basing); so after a big +5% week, Gold rips another +1.3% putting it back into bullish TREND position @Hedgeye ahead of ECB Thursday.
S&P 500
U.S. equity beta down for 3 straight weeks (-3.5% correction from the no-volume all-time DEC year end highs) and is sitting right on our TREND signal line of 2019 right now with an immediate-term risk range of 1. Great macro markets to be trading, both ways right now.
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 | 53% | US EQUITIES | 6% | |
| INTL EQUITIES | 3% | COMMODITIES | 0% | |
| FIXED INCOME | 31% | INTL CURRENCIES | 7% |
THREE FOR THE ROAD
TWEET OF THE DAY
TREASURIES: nice start to the wk for Long Bond Bulls, 10yr = 1.80% = -37bps YTD (thats already -12%) $TLT
@KeithMcCullough
QUOTE OF THE DAY
When change is necessary, not to change is destructive.
-A. R. Bernard
STAT OF THE DAY
S&P 500 (Index + Emini) = +110,971 net LONG position (-59,269 last week but up big vs. the 1 year average of -11,681). S&P 500 (SPX) had its highest net LONG position since 2007 only 2 weeks ago at +170,240.