CLIENT TALKING POINTS
USD
Good #StrongDollar morning to you! +0.6% USD Index move to +5% year-to-date is good for plenty of commodity based inverse correlation moves (#deflation); WTI Oil -1.2% (after a -5.3% week), Gold -0.7% (after a -1.8% week) – Copper still looks like death.
JAPAN
Japanese Nikkei all jacked up on weak Yen (vs USD) to 15 year highs at +5.8% year-to-date – and this is after plenty of headline news that Japanese Corporates (70% of them) see “no need for more easing” – we can’t imagine why… it’s only been 18 years.
EUROPE
Forget a +2.5% year-to-date return in SPX, European Equities is where the real fundamental asset price inflation is at! After a +3% week, Italian stocks are up another +0.4% to +15.4% year-to-date. Gotta love that. DAX still looks good, but only +13.1% year-to-date.
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
Hologic (HOLX), at this stage in their product cycle and in the current stage of the economic cycle, has some very impactful tailwinds emerging to their revenue growth and the implied growth in the future. A stock generally will perform really well when doubt about future growth turns to optimism while the most recent data confirms the optimism. So far, we have a little bit of both; recent positive data like the December 2014 quarter upside and consensus estimates and ratings starting to move off of multi-year lows. A less-worse trend in Pap testing and rising patient volume can combine to get us close to flat for HOX’s Cytology (Pap) business. As the growth in Cytology improves and is less of a drag, the 3D Mammography growth can flow through. We think the outlook is bright, and with a few more data points, we think a lot more investors will agree with us.
Asset Allocation
| CASH | 39% | US EQUITIES | 9% | |
| INTL EQUITIES | 8% | COMMODITIES | 0% | |
| FIXED INCOME | 30% | INTL CURRENCIES | 14% |
THREE FOR THE ROAD
TWEET OF THE DAY
Busy wk for the Bond market w/ Yellen speaking, and both CPI and GDP slowing reports
@KeithMcCullough
QUOTE OF THE DAY
Much good work is lost for the lack of a little more.
-Edward H. Harriman
STAT OF THE DAY
U.S. Healthcare Stocks (XLV) were up +2.1% last week to +5.6% year-to-date.