CLIENT TALKING POINTS
UST 10YR
UST 10YR Yield drops -11 basis points in the last 24 hours from 2.16% to 2.05% after A) the data (PPI -0.8% vs. consensus expecting a decline of 1/2 that) and B) Fed Minutes effectively suggesting that a hike in June could be “premature” (Jerome Powell, a Federal Reserve voter, cautioned on the rising expectation of dropping the word “patient” too) – expect volatility in the bond market to continue to rise.
OIL
Oil was down yesterday, then down hard this morning as the USD Down move last week shows no follow through. The risk range for WTI is now narrowing ($49.04-51.64), so we don’t expect oil volatility (OVX) to re-test its highs of $63-64 on this oil pullback.
VIX
On an absolute basis, Oil’s volatility (55) looks nothing like U.S. equity volatility (15), but they are both bullish from an intermediate term TREND perspective. VIX is testing the low-end of its immediate-term risk range and has upside to $19-21.
TOP LONG IDEAS
EDV
You want to own the Vanguard Extended Duration Treasury (EDV) in this current yield-chasing, growth slowing environment. The trend in domestic growth continues to signal growth slowing, and the counter-TREND moves we’ve seen over the last few weeks (@Hedgeye TREND is our view on a 3-Month or more duration) remain something to fade until we can see more follow-through that growth is trending more positively (second-derivative positive).
TLT
Low-volatility Long Bonds (TLT) have plenty of room to run. Late-Cycle Economic Indicators are still deteriorating on a TRENDING Basis (Manufacturing, CapEX, inflation) while consumption driven numbers have improved. Inflation readings for January are #SLOWING. We saw deceleration in CPI year-over-year at +0.8% vs. +1.3% prior and month-over-month at -0.4% vs. -0.3% prior. Growth is still #SLOWING with Real GDP growth decelerating at -20 basis points to +2.5% year-over-year for Q4 2014.The GDP deflator decelerated -40 basis points to +1.2% year-over-year.
HOLX
Low-volatility Long Bonds (TLT) have plenty of room to run. Late-Cycle Economic Indicators are still deteriorating on a TRENDING Basis (Manufacturing, CapEX, inflation) while consumption driven numbers have improved. Inflation readings for January are #SLOWING. We saw deceleration in CPI year-over-year at +0.8% vs. +1.3% prior and month-over-month at -0.4% vs. -0.3% prior. Growth is still #SLOWING with Real GDP growth decelerating at -20 basis points to +2.5% year-over-year for Q4 2014.The GDP deflator decelerated -40 basis points to +1.2% year-over-year.
Asset Allocation
| CASH | 41% | US EQUITIES | 8% | |
| INTL EQUITIES | 7% | COMMODITIES | 0% | |
| FIXED INCOME | 33% | INTL CURRENCIES | 11% |
THREE FOR THE ROAD
TWEET OF THE DAY
VIDEO | Why Oil Prices Are Set To Go Lower https://app.hedgeye.com/insights/42430-video-why-oil-prices-are-set-to-go-lower
@KeithMcCullough
QUOTE OF THE DAY
It does not matter how slowly you go as long as you do not stop.
-Confucius
STAT OF THE DAY
There are 73 startups with a valuation over $1 billion according to venture capitalists. Of the 73 companies, 23 make software, 13 work in e-commerce and 13 are consumer oriented internet services.
