CLIENT TALKING POINTS
RATES
We got slammed staying long Treasuries last week as both the Global Yield move (German 10YR Yield doubled in 3 days) and the U.S. jobs report (NFP growth +2.21% year-over-year vs. its cycle peak of 2.34% year-over-year in FEB) and that puts the U.S. 10YR right @Hedgeye TREND resistance of 2.40% - if growth (global and local) wasn’t slowing, we’d reverse the call.
GOLD
No follow through this morning on either the U.S. rates or USD move (up) from Friday – that has Gold up +0.2% off a pretty good zone of $1150-1170 support (which is a higher-low vs. both the NOV and MAR Gold lows). Fortunately we’re just getting bullish on Gold now and didn’t wear it the whole way (3 years) down.
EMERGING MARKETS
Emerging everything (ex-China +2.2% Shanghai Composite to +22% in the last month!) didn’t like the #StrongDollar move on Friday either – stocks in Turkey are down -5.7% this morning and after dropping -3.2% last week, India’s BSE Sensex is down another -1% this morning; Emerging Market stocks get more interesting now into the Fed meeting (June 17th).
TOP LONG IDEAS
PENN
Penn National Gaming is a true growth story in regional gaming, finally, ripe with catalysts, same store and new unit growth, and accelerating cash flow. 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. 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
The takeaway on Purchase Activity was mixed as demand declined -3.0% sequentially but accelerated from +13.1% to +13.9% on a year-over-year basis. More broadly, and inclusive of the latest week, purchase demand in 2Q continues to reflect both sequential and year-over-year improvement with demand growth for the quarter currently tracking +13.6% QoQ and +12.8% YoY. No major callouts in the latest week as the larger trend towards ongoing improvement in purchase activity in 2Q remains intact. CLICK HERE to watch Housing Sector Head Josh Steiner give a brief update on our call on ITB.
TLT
Considering we are already well passed an above average length expansion, and moving into the second half of 2015 growth and inflation comps (i.e. the base effects) become very difficult, growth is likely to continue to slow. We put the likelihood of a rate hike in 2015 as highly unlikely and continue to expect rates to move to make a series of lower-highs through the balance the year (bullish for EDV, TLT, and VNQ. When forward looking growth expectations are downwardly revised and the Fed kicks the can on rate hike expectations, rates and the dollar move lower. Gold has historically performed well in an environment of falling rates and a declining U.S. dollar and we don’t expect anything different this time around. Supporting our view, both gold (GLD) and treasuries (TLT, EDV) remain BULLISH on an intermediate-term TREND duration (3-months or more).
Asset Allocation
| CASH | 43% | US EQUITIES | 5% | |
| INTL EQUITIES | 10% | COMMODITIES | 12% | |
| FIXED INCOME | 28% | INTL CURRENCIES | 2% |
THREE FOR THE ROAD
TWEET OF THE DAY
NEW | Two-Hitter: Ben Axler Brings One Long Idea & One Short to Hedgeye TV https://app.hedgeye.com/insights/44526-two-hitter-ben-axler-brings-one-long-idea-one-short-to-hedgeye-tv… via @sprucepointcap + @HedgeyeIndstrls
@Hedgeye
QUOTE OF THE DAY
Destiny is not a matter of chance, but of choice. Not something to wish for, but to attain.
William Jennings Bryan
STAT OF THE DAY
Ralph Lauren in 75 years old, he is the seventh oldest CEO in the S&P and has 81.5% of the voting power at RL.
The Macro Show - CLICK HERE to watch today's edition at 8:30am ET.