Off The Lows?

Client Talking Points

EUROPE

They had the DAX and CAC down -5% at 2:00AM ET; now they’re down -3%. The levels obviously matter inasmuch as liquidity does – TREND levels to watch = DAX 11,375, CAC 4980, IBEX 11,199. 

YIELDS

Not “off the lows” for Greek, Italian, Spanish, etc. yields (Italy =25 basis points to 2.39% is finally > UST 10YR of 2.34%), and they’re high-grading with a big bid to UST + German Bunds too (10YR down -18 basis points on the day to 0.74%); this is the 4th time UST 2YR has failed to “breakout” > 0.75%.

S&P

Not “off the lows” for Greek, Italian, Spanish, etc. yields (Italy =25 basis points to 2.39% is finally > UST 10YR of 2.34%), and they’re high-grading with a big bid to UST + German Bunds too (10YR -18 basis points on the day to 0.74%); this is the 4th time UST 2YR has failed to “breakout” > 0.75%.

 

**The Macro Show - CLICK HERE to watch today's edition at 8:30AM ET, with special update on Greece.

Asset Allocation

CASH 44% US EQUITIES 6%
INTL EQUITIES 10% COMMODITIES 10%
FIXED INCOME 30% INTL CURRENCIES 0%

Top Long Ideas

Company Ticker Sector Duration
PENN

Not “off the lows” for Greek, Italian, Spanish, etc. yields (Italy =25 basis points to 2.39% is finally > UST 10YR of 2.34%), and they’re high-grading with a big bid to UST + German Bunds too (10YR -18 basis points on the day to 0.74%); this is the 4th time UST 2YR has failed to “breakout” > 0.75%.

ITB

Not “off the lows” for Greek, Italian, Spanish, etc. yields (Italy =25 basis points to 2.39% is finally > UST 10YR of 2.34%), and they’re high-grading with a big bid to UST + German Bunds too (10YR -18 basis points on the day to 0.74%); this is the 4th time UST 2YR has failed to “breakout” > 0.75%.

TLT

After a Fed-fueled week of strength in slow-growth, yield-chasing asset classes and long duration fixed income, both the Dollar and interest rates re-couped their losses from Fed Week. The dollar declined, rates increased, and as a result, those long of gold took some pain. Will this continue? Will a long, sustained rate liftoff ensue? We don’t think so. We continue to repeat that the chance of further downward revisions to forward looking growth estimates from the Federal Reserve and consensus macro is much more likely than not. The attempted suspension of economic gravity from policy makers weakens the currency and puts pressure on bond yields. We remain long of this set-up with gold and long-duration fixed income.

Three for the Road

TWEET OF THE DAY

Greek Drama https://app.hedgeye.com/insights/44923-greek-drama-a-hedgeye-contributor-view… via @hedgeye

@KeithMcCullough

QUOTE OF THE DAY

If you do not expect the unexpected you will not find it, for it is not to be reached by search or trail.

Heraclitus

STAT OF THE DAY

Greece has received the equivalent of 214% of its GDP in aid from the Eurozone, ten times more, relative to gross domestic product, than Germany after the Second World War.