CLIENT TALKING POINTS
USD
Mario Draghi did the double-whatever-it-takes yesterday and the Euro dove to the low-end of my immediate-term $1.08-1.11 risk range; that finally puts USD Index immediate-term TRADE overbought in what continues to look like a #deflationary redo for certain asset prices, earnings, etc.
#DEFLATION
Most obviously you can see this in both commodities themselves this week and their equity market links – Copper and Russia (stocks) both down -0.5-1% again this morning and a lot of these things are close to 3 month lows with USD at 3 month highs.
EQUITIES
European and Chinese halts worked (Greece is still halted) and the U.S. Equity ramp came right after S&P 500 (Index + Emini) net SHORT position (CFTC futures/options contracts) peaked at -162,467 at the July U.S. equity market low! Risk ranges are now as wide as they’ve been all year.
**The Macro Show - CLICK HERE to watch Hedgeye CEO Keith McCullough and Macro Analyst Christian Drake.
TOP LONG IDEAS
GIS
General Mills remains on the Hedgeye Consumer Staples Best Ideas list as a LONG. GIS has a lot of things going for it and they are going to show it in the top and bottom line this year. Over the last couple of months, the company has announced the removal of artificial colors and flavors from their cereals. More recently, they have committed to using only cage-free eggs. Many of these small actions that management is taking are going to have a snowball effect as they go throughout FY16. Below is a list of some of the biggest things that we are looking forward to this year:
- Yoplait in China
- Gluten-Free Cheerios
- No artificial colors or flavors in the cereal
- Granola innovation / Muesli
- Greek Plenti / Whips
- Original yogurt sugar reduction
- Renovation on Grain Snacks
- Strong push on Natural & Organic products
- Delivering Value to consumer on brands like Totino’s and Hamburger Helper
- Bringing U.S. innovation International
PENN
Gaming, Lodging and Leisure Sector Head Todd Jordan reiterates his team's bullish high-conviction thesis on Penn National Gaming. The company remains one of our favorite names on the long side and boasts the best new unit growth story in domestic gaming. Jordan further notes that with more states releasing their June gaming revenues this past week, we feel more confident in our higher than consensus Revenue, EBITDA, and EPS estimates.
TLT
Long-term Treasury rates remain the best proxy for forward-looking growth expectations. We outline three components of secular stagnation below to explain the SAVINGS/INVESTMENT GLUT that is at the heart of the academic argument for current policy measures:
- Negative demographic trends globally (decline in population growth and aging population)
- Reduced capital intensity in leading industries (think of the capital and labor required to start Facebook over U.S. Steel)
- Falling relative prices of capital goods
Asset Allocation
| CASH | 56% | US EQUITIES | 2% | |
| INTL EQUITIES | 5% | COMMODITIES | 0% | |
| FIXED INCOME | 27% | INTL CURRENCIES | 10% |
THREE FOR THE ROAD
TWEET OF THE DAY
Greece keeping the stock market (and banks) closed until next wk - should be interesting when they open...
@KeithMcCullough
QUOTE OF THE DAY
A great man is always willing to be little.
Ralph Waldo Emerson
STAT OF THE DAY
Since peaking on June 12th the Shanghai and Shenzhen Composite indices have lost -26% and -33%, respectively. That equates to a combined loss of over $3.2 trillion.