Extend, Pretend and Devalue

Client Talking Points

EURO

The Euro is down hard this morning (-1% vs USD) after tapping the top-end of our 1.11-1.14 risk range and the Greeks having 48 hours to put on their best dress – the Euro is worth less as the Eurozone continues to socialize leverage and bad behavior.

 

YIELDS

Another day, another big rip in Global Yields as Italian and Spanish Yields come off last week’s freak-out highs. The German 10YR is up +13 basis points from 0.78% to 0.91% pressuring both U.S. and JGB yields to the upside again.

VOLATILITY

The ole “buy everything” call worked, somehow – but this one wasn’t that hard to get right if you had A) a more dovish Fed and B) another Greek bailout right. It’s sad, but front-running predictable central planning behavior works; VIX still range bound 12.29-15.46.

 

**The Macro Show - CLICK HERE to watch today's edition at 8:30AM ET, with Macro Analyst Darius Dale and Macro & Housing Analyst Christian Drake.

Asset Allocation

CASH 34% US EQUITIES 9%
INTL EQUITIES 15% COMMODITIES 14%
FIXED INCOME 25% INTL CURRENCIES 3%

Top Long Ideas

Company Ticker Sector Duration
PENN

Shares of Penn National Gaming are up approximately 9% since it was added to Investing Ideas on May 26. Our Gaming, Lodging & Leisure team reiterates their high conviction on the stock and notes that Ohio and Kansas have both been super-strong revenue generators in the month of May. This positive development has has led our analysts to raise their estimates even higher (and we're already the highest on the street...).

ITB

It was a busy week across the housing space with a host of fundamental releases, builder earnings and notable regulatory updates.   Net-net-net....the past week offered another positive update on the state of the residential real estate market with housing turned in a second week of strong, positive absolute and relative performance. The NAHB HMI (Builder Confidence Index) for June surged across all categories and in all regions, posting its best reading in almost 10 years. Total Starts declined -11% MoM to +1.036 MM units with SF and MF starts declining -5.4% and -20.2% month-over-month, respectively.  Permits, meanwhile, rose to an 8-year high advancing +11.8% sequentially and +25% year-over-year.   The strength in permits augurs forward strength in Starts and suggest residential construction spending will be (increasingly) supportive of GDP growth over the next couple quarters.

TLT

Bottom line right now remains that Lower-For-Longer is firmly intact as long as US #GrowthSlowing is. As Keith pointed out on Friday, Consensus Macro is still stubbornly sticking to the tired idea that rates have to go higher - they just have to... because, they haven't? All told, it was a great week sticking with the process on the long side of bonds. Here we feature an in-depth discussion from Senior Macro Analyst Darius Dale which does a thorough job outlining where our macro team currently stands with respect to the Fed, interest rates, markets and economy. The prescient discussion occured just hours before release of the FOMC statement.

Three for the Road

TWEET OF THE DAY

We reiterate our bullish bias on Japanese equities. Nikkei 225 up +19.2% YTD vs. a measly +3.1% return for the SPX. 

@HedgeyeDDale

QUOTE OF THE DAY

Great is the human who has not lost his childlike heart.

Mencius, 4th century BCE

STAT OF THE DAY

Jordan Spieth won the U.S. Open, his victory marks the first time a player has won the first two majors of the year since Tiger in 2002 and the youngest to win the US Open since Bobby Jones 1923.

 

 


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