Client Talking Points
Angela Merkel joins the FX War this morning, talking down the Euro as #StrongEuro is a headwind for Spain (or something like that). The EUR/USD is down -0.6% to $1.11 (the risk range is wide ahead of Fed meeting next week at $1.08-1.15 – that’s a sign of confusion, if nothing else).
Follow the bouncing puck – Euro Down, Dollar Up, Oil Down -1.2% - so that’s back to back up days for USD and Down Oil, but it’s all within a relatively tight risk range of $57.68-61.91 WTI (we’d buy more Oil at the low-end of the range ahead of the Fed).
Oh look, the UST 10yr Yield = 2.39% and that’s right where it started the week – nothing must have happened! German Bunds are at 0.86% this morning after ramping to 1.03% only 24 hours ago and Greek Yields just ramped +17 basis points this morning to 11.02%.
**The Macro Show - CLICK HERE to watch a replay of today's show with guest analysis from Internet and Media Sector Head Hesham Shaaban. Hesham gave his updated thoughts on Twitter (TWTR) and CEO Dick Costolo stepping down.
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Top Long Ideas
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.
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 gives a brief update on our call on ITB.
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).
Three for the Road
TWEET OF THE DAY
OIL: textbook fade off the top-end of @Hedgeye_Comdty $57.68-61.91 risk range this wk
QUOTE OF THE DAY
If you are bored with life, if you don't get up every morning with a burning desire to do things—you don't have enough goals.
STAT OF THE DAY
A WBUR poll indicated that 49% of voters in Massachusetts oppose bringing the Olympics to Boston in 2024 and 39% support the effort.