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Client Talking Points

JAPAN

Surprisingly the Japanese central planners at the BOJ didn’t impress markets with enough cowbell last night – Yen +0.8% and Nikkei -0.5% as Bank of Japan Governor Haruhiko Kuroda told ½ the truth (that there’s no way he gets his monetary (inflation) math in 2015) but that he’ll eventually get what the Japanese haven’t been able to achieve since 1997.

#DEFLATION

As the central planning attempts by the Japanese and Europeans get more desperate, the world gets a stronger dollar and that’s hammering inflation expectations. The CRB Index (19 commodities) hit a fresh new low of 219 yesterday, that’s a 30% crash since June. Copper down another -1.7% this morning.

SWISS

The Swiss stock market got smoked, then bounced, and is getting hit again this morning, leading European equity index losers at -1.9% (-10.7% year-to-date) with no support on the Swiss Market Index to 7680.

Asset Allocation

CASH 56% US EQUITIES 5%
INTL EQUITIES 2% COMMODITIES 0%
FIXED INCOME 31% INTL CURRENCIES 6%

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

Boom! We're going LIVE at 8:30am ET. @KeithMcCullough hosting morning macro markets call w/@HedgeyeDDale It's free. https://www.youtube.com/watch?v=oWAwgpx27yA …

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QUOTE OF THE DAY

Wisdom begins in wonder.

-Socrates

STAT OF THE DAY

The top 1% of income earners in the U.S. get over a 1/3 of that income from capital gains.