CLIENT TALKING POINTS
USD
To get things like Oil prices and PPI (producer prices) up year-over-year, what the Fed actually needs to do is devalue the Dollar and start talking up no-rate-hike. In other words, the bull case for stocks, commodities, and bonds is #SlowerForLonger. The U.S. Dollar Index was down -1.4% last week (down -4.5% in the last 3 months), the immediate-term risk range is 94.01-95.98.
COMMODITIES
The CRB index is up +0.4% week-over-week (+4.1% in the last 3 months). We generally regard changes in commodity prices on the margin as having meaningful consumption implications. WTI Oil was up +1.4% week-over-week (+14.7% in the last 3 months) and Gold was up +1.0% week-over-week (+2.2% in the last 3 months).
RESTAURANT SALES
Same-restaurant sales retracted to +1.1% and same-restaurant traffic decreased -2.3% both down 80 basis points sequentially. Traditionally, strong employment trends would suggest a healthy sales environment for restaurant operators. There continues to be a clear divergence between improvement in the employment data and same-store sales and traffic trends for the industry.
TOP LONG IDEAS
PENN
Penn National Gaming will likely tee off on the bears with a strong Q2, upward 2015/2016 EPS revisions, and the start of a 2 year growth period. PENN’s stock has climbed 27% this year on stabilizing regional gaming revenues, transaction-fueled optimism (real estate) surrounding the regional gaming companies and proximity to the opening of the new Plainridge racino on June 24. So what will drive even more upside? More and better. We think regional gaming trends are even better than anticipated by the Street and Q2 earnings should be a solid beat even before Plainridge contributes.
ITB
Housing outperformed in the latest week alongside choppy price action in equities and further, extraordinary volatility in sovereign bond markets. Fundamental data was light with weekly purchase applications data from the MBA the lone release of import for the industry. The first, high-frequency update on purchase demand in June, however, was positive. Purchase demand rose +9.7% sequentially, taking the index to its strongest level in 2 years at reading of 214.3. On a year-over-year basis, growth accelerated for a 4th consecutive week to +14.6%. Inclusive of last weeks gain, demand in 2Q is tracking +14.3% QoQ and +13.4% YoY.
TLT
The market has been jockeying for positioning in front of next week’s policy statement from Janet Yellen. We believe Yellen signaling that she remains “data dependent” (i.e. repeats what she said at the March 18thmeeting) is the most probable outcome. To be clear, we remain the long-bond bulls (TLT, EDV, MUB). With that being said we aren’t claiming to be able to predict the outcome of next week’s meeting (sure we do have biases). What we do know is that Hedgeye estimates for growth and inflation shake out much lower against both consensus and central bank forecasts for the full year 2015 (remember that this is after their forecasts have already been downwardly revised).
Asset Allocation
| CASH | 43% | US EQUITIES | 6% | |
| INTL EQUITIES | 12% | COMMODITIES | 10% | |
| FIXED INCOME | 27% | INTL CURRENCIES | 2% |
THREE FOR THE ROAD
TWEET OF THE DAY
Top Private Investor Buddy Carter Talks Process, Market Volatility and Ranges with Keith McCullough https://app.hedgeye.com/insights/44663-keith-mccullough-and-top-private-investor-buddy-carter-talk-process-m… via @hedgeye
@KeithMcCullough
QUOTE OF THE DAY
Vision without execution is hallucination.
Thomas Edison
STAT OF THE DAY
According to a study published in the journal BMC Public Health, the average American is 33 pounds heavier than the average Frenchman, 40 pounds heavier than the average Japanese citizen, and 70 pounds heavier than the average citizen of Bangladesh.