Big League Central Planning

Client Talking Points

EURO

Forget the Italian, they brought in the French economist (Coeure) to devalue the Euro and “front-load QE” to this month and next. The EUR/USD is right back down to the low-end of our $1.10-1.14 risk range on that; correlation trades in motion (USD up, Commodities down).

10YR YIELDS

The ECB didn’t like the non-centrally-planned move in Euro Bond yields – hence the intervention this morning. The German 10YR is down to 0.64% and the UK 10YR Gilt is down 6 basis points after printing its 1st #deflation in CPI since 1960. The UST 10Y is down -5 basis points on the global move. 

CHINA

Not to be outdone by the Europeans, the Chinese were at it again overnight “easing requirements for corporate bond issuance.” The Shanghai Composite Casino loved that, up +3.1% to +36.7% year-to-date as growth there continues to slow and freak out the PBOC.

Asset Allocation

CASH 53% US EQUITIES 4%
INTL EQUITIES 8% COMMODITIES 7%
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. This is a data heavy week for housing. NAHB Builder Confidence dropped for the 4th time in 5 months, dipping -2pts sequentially in May to an Index reading of 54. Confidence currently sits +9 pts higher than May of last year and is basically right on the average reading of 55 observed over the last three expansionary periods.  At  the current reading of 54, the index remains well above the Better-Worse Mendoza line of 50, signaling builders continue to view conditions favorably.

TLT

The counter-TREND moves in the USD and commodities have been extensive and now confirmed: 1) U.S. Dollar: Down another 1.20% week-over-week to complete its BULLISH to BEARISH TREND Reversal. The dollar is now BULLISH on a TAIL duration (three years or less) and BEARISH on a TREND duration (3-Months or more) 2) CRB Index: +2.0% week-over-week and +5.5% 1-Month Change. The CRB is now BULLISH on a TREND duration and BEARISH on a TAIL duration.

Three for the Road

TWEET OF THE DAY

THIS MORNING

9:00am ET

Hedgeye CEO @KeithMcCullough joins @MariaBartiromo @FoxBusiness @OpeningBellFBN

@Hedgeye

QUOTE OF THE DAY

An obstacle is often a stepping stone.

-William Prescott

STAT OF THE DAY

Consumer prices in the UK fell 0.1% year-over-year, marking a return to deflation for the first time in at least 55 years.