Counter-TREND Macro Moves

Client Talking Points

EUROPE

Greek stocks were +11.3% last week, but giving up 5% in a hurry, whereas German stocks tapped immediate-term TRADE overbought into the weekend and are down -1.3% this morning. The DAX remains bullish TREND with a risk range of 10572-11031.

OIL

WTI was up +1.9% last week to +8.9% for FEB, and up another +0.5% this morning to $53.05, but closing in on the top-end of its immediate-term risk range = $48.01-53.90. It won’t take much of a USD up move to shake both Oil and the CRB Index.

UST 10YR

The UST 10YR Yield was up +8 basis points last week to 2.04%, and -2 basis points to start the week at 2.02% (started the year at 2.17%). The U.S. PPI data tomorrow will bring back the #deflation theme, then you get CPI next week and plenty of yield expectations into the FEB jobs report after that.

Asset Allocation

CASH 45% US EQUITIES 9%
INTL EQUITIES 7% COMMODITIES 0%
FIXED INCOME 31% 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

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

Merrill’s FEB Fund Manager Survey: allocations to European equities are the highest since 2007 (2nd highest since survey inception)

@KeithMcCullough

QUOTE OF THE DAY

To talk goodness is not good. Only to do it is.

-Chinese Proverb

STAT OF THE DAY

The CRB Commodities Index currently has a -0.97 correlation to the USD on a 90-day duration, it is up +1.9% on the week.