Client Talking Points
What an epic week – the storytelling on why yields ripped higher is as fascinating as the move itself… we’ve gone from “oh, it’s because inflation and growth in Europe are back” to… “uh oh, this is a liquidity event” – those are 2 very different things; one much scarier than the other.
One competitor said something about “global growth and PMIs accelerating”, which is patently false (see our Early Look from yesterday with that data), but also look at 1-month stock market moves: Dow Transports -3.6%, Hang Seng -3.5%, KOSPI -4.6%, Poland -5.7% and Brazil -5.9% #GlobalSlowing.
We like it more than we have in maybe 3 years, and maybe that’s wrong right now, but heading into what we think will be a series of slowing #LateCycle U.S. jobs reports, we think U.S rates can move a lot lower from here; need to see Gold hold $1155-1175 zone.
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Top Long Ideas
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.
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.
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).
Three for the Road
TWEET OF THE DAY
This Is The Biggest Risk Facing U.S. Stocks Over The Next Decade https://app.hedgeye.com/insights/44498-steiner-this-is-the-single-biggest-risk-facing-u-s-stocks-over-the-n?type=video… via @HedgeyeFIG cc @KeithMcCullough
QUOTE OF THE DAY
A leader has the vision and conviction that a dream can be achieved. He inspires the power and energy to get it done.
STAT OF THE DAY
Amazon will now ship items that weigh 8 ounces or less to you for free.
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