The Euro, Oil and Sentiment

Client Talking Points

EURO

The Euro bounced fast from $1.11 to $1.13 (on spec that the Fed is more dovish today), but now has to decide whether Greek fires (banks -10-15% this morning, stock market -7%, UST 10YR Yield up almost 100 basis points to 10.46%) are going to be put out by The Draghi again – should he come out with a weekly central planning podcast?

OIL

Same #deflation fire drill – WTI down a full 2% this morning after failing @Hedgeye $46.81 resistance – and has no immediate-term support to $44.02. If the Fed is dovish today (Down Dollar, Up Euro), they could try to bounce Oil again. We would much prefer to be long Gold on that idea right now – Gold has immediate-term upside to $1325.

SENTIMENT

It took 1 up week for U.S. Equity beta to bring the bulls back (there’s only been 1 up week by the way); today’s II Bull/Bear Survey shows the spread between Bulls and Bears widening +16.5% week-over-week to +3680 basis points to the Bull side. Consensus Macro has been wacky long SPY futures/options all year (and short the Long Bond) – we still say do the opposite, until sentiment resets.

 

*TODAY JANUARY 28TH

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Asset Allocation

CASH 54% US EQUITIES 4%
INTL EQUITIES 3% COMMODITIES 2%
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

Our interactive Market Marathon just hours away. Don't miss out! Get in: http://live.hedgeye.com/market-marathon/ … cc @KeithMcCullough

@Hedgeye

QUOTE OF THE DAY

We are only as strong as we are united, as weak as we are divided.

-J.K. Rowling

STAT OF THE DAY

The Athens Stock market is -6.9% this morning to -11.6% year-to-date.


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