CLIENT TALKING POINTS
JAPAN
Abenobics did not work. Japanese JAN retail sales are down -2% year-over-year, JAN household spending is down -5.1% year-over-year, and JAN housing starts are down -13% year-over-year. But if you bought the Nikkei on that you crushed it, the Nikkei is up 7.8%.
UST 10YR
The UST 10YR is oscillating between the current risk range of 1.84-2.08%, into the GDP missing which we have been calling for. On a quarter-over-quarter basis it was revised lower by -0.4 to 2.2%, slowing vs the 5.0% print for 3Q14. On a year-over-year basis it was revised lower by -0.10 to 2.4%, slowing vs. the 2.7% print for 3Q14. If you get the rate of change of U.S. growth right you tend to get bond yields right.
USD
The USD had a huge move to the upside yesterday, it will be interesting to see what happens today. The trend is your friend in the USD, as you know we like the USD. The USD going up and rates going down = deflation. We are going to have more and more deflation going into May and June, you are going to continue to see slower global growth and we will continue to reiterate the long bond call as a result of that.
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 | 42% | US EQUITIES | 9% | |
| INTL EQUITIES | 8% | COMMODITIES | 0% | |
| FIXED INCOME | 31% | INTL CURRENCIES | 10% |
THREE FOR THE ROAD
TWEET OF THE DAY
Central Bankers Have Lost Control, Setting Stage For Market Crash https://www.youtube.com/watch?v=ZkTDUqaD7QU&feature=youtu.be via @YouTube
@KeithMcCullough
QUOTE OF THE DAY
Freedom lies in being bold.
-Robert Frost
STAT OF THE DAY
Since 2008 the correlation between housing equities and the year-over-year rate of change in HPI (House Price Index) has been 0.90.