CLIENT TALKING POINTS
CHINA
Shanghai Composite was down for 4 straight days (-5.4% correction to -2.8% year-to-date) as Chinese growth slows. Shanghai Composite is actually underperforming the U.S. stock market. China has very bad economic fundamentals, and just to reiterate, no we don’t think growth is accelerating in China.
USD
The U.S. Dollar is signaling that consensus was wrong on GDP, the actual number is closer to 2%. GDP is much more reflective of what the bond market has been telling you. Yen wasn’t going down anymore (in U.S. Dollars) pre the GDP print at $117.66. The immediate-term risk range for the U.S. Dollar is USD 92.63-96.11.
UST 10YR
Breaking: inline with Hedgeye's forecast, 2014 U.S. GDP was closer to 2% than 5%. Bond Yields are crashing and have been reflecting the rate of change in U.S. growth. The rate of change of U.S. growth got you paid on TLT, with the long bond (TLT) up +7.9% year-to-date vs. -1.83% for the SPX.
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 | 3% | |
| INTL EQUITIES | 3% | COMMODITIES | 3% | |
| FIXED INCOME | 32% | INTL CURRENCIES | 6% |
THREE FOR THE ROAD
TWEET OF THE DAY
How are things working out for Japanese QE?
1. Household spending -3.4% y/y
2. Housing starts -14.7% y/y
@KeithMcCullough
QUOTE OF THE DAY
No one can whistle a symphony. It takes a whole orchestra to play it.
-H.E. Luccock
STAT OF THE DAY
Ticket prices for Super Bowl XLIX have skyrocketed, from an average of $2,799 the day of the AFC Championship to $4,594 (Wednesday) an increase of 64%.