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Client Talking Points

COMMODITIES

Commodities are down another -1.3% yesterday to 215 is a fresh new multi-year closing low for the 19 component CRB Index. Oil is already -16.5% year-to-date and Copper (down another -1.6% this morning) isn’t far behind at -13.4% - this has been a clean cut phase transition to #deflation expectations that will be very difficult for any central planner to reverse.

UST 10YR

But don’t confuse Draghi’s move with results where it matters; inflation expectations are falling faster now (Down Euro = Up Dollar à #Deflation Risk) with the CRB Index dropping -1.3% yesterday to multi-year lows. Copper is getting smoked to -10.2% year-to-date this morning, and Oil signaling a lower-low of support down at $44.82.

S&P 500

The SPY broke our intermediate-term TREND line of 2022 again yesterday. This is the 3rd time it has snapped that line since the mid-DEC lows. With massive Euro QE old news now… and no more year-end markups, what is the catalyst to get this puppy back to those nosebleed DEC 29th all-time closing highs of 2090? It’s definitely not earnings.

Asset Allocation

CASH 52% US EQUITIES 4%
INTL EQUITIES 3% COMMODITIES 2%
FIXED INCOME 32% INTL CURRENCIES 7%

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

Memo to $MCD CEO Mr Easterbrook: Your turnaround plans should resemble a store remodel, but this is one is a major "scrap and rebuild"

@HedgeyeHWP

QUOTE OF THE DAY

The quality of an individual is reflected in the standards they set for themselves.

-Ray Kroc

STAT OF THE DAY

Apple has now sold over a billion iOS devices, ringing in 74.5 million iPhone sales in its most recent quarter.