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Client Talking Points

USD

The U.S. Dollar was smoked on that bad Retail Sales report (last Wednesday) and proceeded to close the week on its lows (-1.8% week-over-week and -5.3% in the last month). We are staying with the counter-TREND call (Down Dollar, Up Commodities) until we get through what should be a dovish June 17th FOMC meeting.

GOLD

Gold had a big move last Wednesday on big volume showing some follow through here this morning (something Gold hasn’t been able to show for 8-10 months); $1228 last after a +3.1% week (+3.4% year-to-date vs SPX +3.0%); Down Dollar, Down Rates is what Gold wants most. 

EUROPE

Europe doesn’t like any of the aforementioned because that implies Up Euro. The EUR/USD is up another +2.3% last week, so the DAX was -2.2% on that, lagging all major equity markets; Euro fades -0.4% this morning, DAX rallies +0.9% - correlations continue to matter.

Asset Allocation

CASH 57% US EQUITIES 3%
INTL EQUITIES 6% COMMODITIES 6%
FIXED INCOME 26% INTL CURRENCIES 2%

Top Long Ideas

Company Ticker Sector Duration
VNQ

One way to invest in Lower-For-Longer, from an equity perspective, is being long U.S. REITS (VNQ). The reality is that we are in a #LateCycle slowdown and the jockeying around each incremental data point will continue to get more and more intense as the Fed’s only ammo for suspending the cycle that has unfolded many times over is to push out the dots on a rate hike. #LowerForLonger.

ITB

The ITB turned in modest positive absolute and relative performance in the latest week as the advance in interest rates ebbed and the high frequency mortgage purchase application data continued to reflect improving housing demand trends. Purchase activity was flat week-over-week but held at 23-month highs with demand growing +11.7% on a year-over-year basis.  As it stands, 2Q15 is currently running +14.5 QoQ, +13.7% YoY, and on track for its best quarter in two years. The Mortgage Bankers Association also released its Mortgage Credit Availability Index (MCAI) for April on Tuesday.  The MCAI made a new cycle high, increasing +0.5% month-over-month with the Government and Jumbo indices leading the gains.  

TLT

We are constructively dissatisfied with how last week went for Global Macro markets. Constructive because we think we made the right research pivot on Dollar Down, Commodities Up. Dissatisfied because devaluing the Dollar isn’t the answer for America’s stagnating economy. On Friday, the Down Dollar, Down Rates move looked a lot like 2011 all over again. Remember that? Markets did. Financials (XLF) -0.4% on the day vs. Utilities (XLU) +1.3%. It’s the Fed is going to stay Lower-For-Longer move that Hilsenrath confirmed in the WSJ this morning.

Three for the Road

TWEET OF THE DAY

In today's Early Look "Constructively Dissatisfied", I remind you what 2011 looked like - Down Dollar, Down Rates, Up Gold #Stagflation

@KeithMcCullough

QUOTE OF THE DAY

Compound interest is the greatest mathematical discovery of all time.

-Albert Einstein

STAT OF THE DAY

Over the course of six quarters (to establish its international business), HAIN bought 4 international businesses for a total of $600 million.