CLIENT TALKING POINTS
CHINA
China: slowing? Yes. But that was a good thing for stocks in DEC inasmuch as buying the dip has been bad for the last 5 days of trading (Shanghai Comp down for 5 straight days = 8% correction, breaking @Hedgeye 3223 TRADE support).
OIL
Oil had a big ramp into the bell on Friday as most thing sensitive to USD not going straight up (U.S. GDP miss stopped its climb) were up, but failed @Hedgeye immediate-term resistance of $48.34 and is -2.2% (WTI) this morning, with next support $43.61.
UST 10YR
UST 10YR Yield has already crashed -24% year-to-date (started the year at 2.17% and is 1.66% last), so we’ll take the #deflation win as everyone in this league is using the same balls! Next big data point for the bond market is jobs day Friday.
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 | 56% | US EQUITIES | 2% | |
| INTL EQUITIES | 4% | COMMODITIES | 2% | |
| FIXED INCOME | 32% | INTL CURRENCIES | 4% |
THREE FOR THE ROAD
TWEET OF THE DAY
Yield Spread (leading indicator for US growth) remains at 12 months lows
@KeithMcCullough
QUOTE OF THE DAY
Whenever Tom Brady is asked to name his favorite Super Bowl win, his reply is “the next one.”
STAT OF THE DAY
The home ownership rate is now at its lowest level since 1994, down to 63.9 percent in the final quarter of 2014.
