CLIENT TALKING POINTS
YIELDS
German 10YR Bund Yields just ramped +20%, in a day – yes, from 0.49% to 0.59% is “from low levels”, but that’s not the point – rate of change matters most in macro and this move moved the entire FICC complex, dropping SPX futures fast too. We highly doubt ECB President Mario Draghi lets this manifest into a breakout in Yields at the ECB meeting tomorrow; fade it.
OIL
Yields Up, Euro Up, Dollar Down = Oil Up. WTI is up +1.3% this morning re-testing $61 – we still like Oil and Gold on the long side ahead of what could be a bad U.S. jobs report Friday (which could also drop 10YR UST back towards 1.99%).
INDIA
India cut rates by 25 basis points to 7.25% and the BSE Sensex drops -1.6% on that! How do you like us now central planning fans? Australia down -1.7% is having a tough time convincing people that rate cuts and easing are the path to economic prosperity too. India continues to signal bearish TREND @Hedgeye with Global #GrowthSlowing.
TOP LONG IDEAS
PENN
We see stability in regional gaming revenues over the next several months providing some much needed earnings visibility. PENN maintains the best new unit growth story in domestic gaming with the opening of the Plainridge casino in Massachusetts in June and the Jamul casino in Q2 2016. Both properties should well exceed current Street estimates for win per slot and EBITDA. PENN has a proven track record as the best regional casino operator and recently proved its prowess at successfully opening racinos (casinos at racetracks) with estimate beating Dayton and Mahoning commencing slot operations last year.
ITB
Housing went 3 for 3 as the Trinity of Fundamental Data Points released in the latest week continued to reflect accelerating rates of improvement across both the New and Existing markets. New Home Sales in April rose +6.8% month-over-month to +517K. More notably, sales were up a remarkable 26% on a year-over-year basis as NHS re-converged back to the trend in New Home construction. Pending Home Sales rose +3.4% sequentially in April, accelerating to +14% year-over-year with the Index making a new 101-month high. Pending Home Sales represent signed contract activity and are a historically strong lead indicator of Existing Home Sales. The MBA’s weekly Mortgage Purchase Application Index re-captured the 200-level, rising +1.2% week-over-week and accelerating +250bps sequentially to +13.1% year-over-year.
TLT
We believe the U.S. economy is past peak in rate-of-change terms and sliding down the slope to an eventual cliff (i.e. recession). That’s our call and we’re sticking to it. Friday’s negative revision takes our full-year estimate for real GDP growth down to +2% (from +2.3% prior). Both the Fed and Street are up at +2.5%, both of which continue to careen down from perpetual expectations of rainbows-and-puppy dogs (i.e. 3-plus percent growth) earlier this year. We reiterate our call to be long of long-duration in its many forms: TLT, VNQ, EDV, and GLD (gold has historically performed well in down-dollar and down-interest rate environments and we think the June 17th FOMC statement has a high probability of being dovish and dollar-bearish).
Asset Allocation
| CASH | 47% | US EQUITIES | 4% | |
| INTL EQUITIES | 10% | COMMODITIES | 13% | |
| FIXED INCOME | 23% | INTL CURRENCIES | 3% |
THREE FOR THE ROAD
TWEET OF THE DAY
NEW VIDEO McCullough: Front-Run the Sell-Side Herd and Get Paid https://app.hedgeye.com/insights/44401-mccullough-front-run-the-sell-side-herd-and-get-paid … via @KeithMcCullough
@Hedgeye
QUOTE OF THE DAY
Don't watch the clock; do what it does. Keep going.
Sam Levenson
STAT OF THE DAY
The Chinese Shanghai Composite Index continues, up +1.7% overnight to up +6.4% in 2 days, +52.1% year-to-date.
