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Client Talking Points

OIL

#1 read-through from the Mario Draghi move was more, not less, #deflation – there are a lot of ways to play this, but obviously pressing the short side of WTI Oil is one of them, -1.6% this morning (after a -7.2% down week) to $44.95 and no support to lower-lows – there’s still a massive net LONG position of +324,642 futures/options contracts in crude.

#DEFLATION

Reported, big time, in Spain this morning with a -3.7% year-over-year PPI (vs. -1.5% last) and Finland -1.8% year-over-year – remember that A) Mario Draghi is not going to be able to arrest this, B) it’s bad for many corporate top-lines tied to pricing and C) will freak out the Fed (see Hilsenrath article this morning which comes my way on pushing out the dots) – BUY TLT.

 

FINANCIALS

On last week’s beta bounce, the first sector we signaled SELL on (Real Time Alerts) wasn’t Energy, it was the Financials – consensus is dead wrong on both rates and the yield spread compression born out of being wrong on rates – 10s/2s Yield Spread hitting fresh 12 month lows today at 128 basis points – SELL KRE and XLF.

 

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Asset Allocation

CASH 53% US EQUITIES 4%
INTL EQUITIES 3% COMMODITIES 0%
FIXED INCOME 32% 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

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.

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

RUSSIA: leads #deflation's losers this am, down -4.5% (UAE -3.6%, Norway -0.7%) #NoWorries

@KeithMcCullough

QUOTE OF THE DAY

Practice isn't the thing you do once you're good. It's the thing you do that makes you good.

-Malcolm Gladwell

STAT OF THE DAY

The Euro is getting burnt to a crisp, -3.1% week-over-week, to -7.4% year-to-date, while the U.S. Dollar is  up +2.7% on the week to +5.2% year-to-date.