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Client Talking Points

YEN

The Yen is looking more bullish versus Janet Yellen’s Burning Buck by the day. It's up another +0.5% versus the US Dollar and is now a bullish TRADE and TREND signal developing @Hedgeye with USD/YEN resistance at $102.98. A stronger yen is bad news for the Nikkei which is down -1.8% to -10.8% year-to-date.

COMMODITIES

With the S&P 500 flat yesterday, the CRB Index powered forward again for another +0.5% gain to +4.3% year-to-date. A breakout in commodity inflation is easily the biggest risk to the US consumer. That's where most of our short ideas are right now.

BONDS

Pretty simple one here. The Yellen Fed has 0% credibility on fighting inflation. Bonds trade with growth expectations, so we buy bonds as long as we see US #GrowthSlowing and 10-year yield TREND resistance of 2.80% still intact.

Asset Allocation

CASH 49% US EQUITIES 0%
INTL EQUITIES 6% COMMODITIES 15%
FIXED INCOME 15% INTL CURRENCIES 15%

Top Long Ideas

Company Ticker Sector Duration
fxb

We remain bullish on the British Pound versus the US Dollar, a position supported over the intermediate term TREND by prudent management of interest rate policy from Mark Carney at the BOE (oriented towards hiking rather than cutting as conditions improve) and the Bank maintaining its existing asset purchase program (QE). UK high frequency data continues to offer evidence of emergent strength in the economy, and in many cases the data is outperforming that of its western European peers, which should provide further strength to the currency. In short, we believe a strengthening UK economy coupled with the comparative hawkishness of the BOE (vs. Yellen et al.) will further perpetuate #StrongPound over the intermediate term.

dri

Darden is the world’s largest full service restaurant company. The company operates +2000 restaurants in the U.S. and Canada, including Olive Garden, Red Lobster, LongHorn and Capital Grille. Management has been under a firestorm of criticism for poor performance. Hedgeye's Howard Penney has been at the forefront of this activist movement since early 2013, when he first identified the potential for unleashing significant value creation for Darden shareholders. Less than a year later, it looks like Penney’s plan is coming to fruition. Penney (who thinks DRI is grossly mismanaged and in need of a major overhaul) believes activists will drive material change at Darden. This would obviously be extremely bullish for shareholders and could happen fairly soon driving shares materially higher.

Three for the Road

TWEET OF THE DAY

COMMODITIES: continue to inflate, outperforming US stocks by a widening margin (CRB Index +4.3% YTD) @KeithMcCullough

QUOTE OF THE DAY

Failure happens all the time. It happens every day in practice. What makes you better is how you react to it. -Mia Hamm

STAT OF THE DAY

Comcast agreed to acquire Time Warner Cable for $45.2 billion in stock, a surprise deal that combines the two largest U.S. cable companies and creates a bulwark against competition from phone and satellite providers.