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Client Talking Points

USD

After appreciating another +1.9% last week, the #StrongDollar is now +3.8% in the last month and while the EUR/USD (and entire commodity complex) doesn’t like that, European Stocks do – Mario Draghi delivered the devaluation and should stay with it. 

GOLD

Getting crushed this morning, down another -1.7% (after dropping -2.2% last week) to $1115, its lowest level since FEB 2010; this is a fairly straightforward Global #Deflation signal. The U.S. 5YR forward Break-evens are down another -7 basis points last week to 1.56%.

DAX

Up +0.9% and +6.7% month-over-month post central planning ramp; risk range is wicked wide at 10,584-11,896 and the economic data continues to slow, in rate of change terms (producer prices -1.4% year-over-year JUN vs -1.3% MAY).

Asset Allocation

CASH 55% US EQUITIES 3%
INTL EQUITIES 6% COMMODITIES 0%
FIXED INCOME 26% INTL CURRENCIES 10%

Top Long Ideas

Company Ticker Sector Duration
GIS

The General continues to make tough calls as they work to further streamline their manufacturing footprint as part of Project Century. Last week, announcing the closure of two plants, one in West Chicago, IL and the other in Joplin, MO, eliminating approximately 620 positions in the process. West Chicago produced cereal and dry dinner products for the U.S. Retail organization, while the Joplin facility was acquired as part of the Annie’s acquisition and produced snacks. Because of union negotiations management is expecting these actions to be fully executed by fiscal 2019. We view this as a big positive for the company as they go to a more nimble asset light model, which will save on capex and allow it to be allocated to higher growth product platforms.

PENN

According to Gaming, Lodging and Leisure Sector Head Todd Jordan, additional state gaming agencies have reported revenues for the month of June. The good news here is that Penn National Gaming remains on track to beat second quarter estimates this Tuesday July 23rd. In addition, PENN will be hosting an investor day on July 24th. We will be there and communicate any noteworthy color and developments. Bottom line? The company remains one of our favorite names on the long side and boasts the best new unit growth story in domestic gaming.

TLT

After an awful retail sales print on Tuesday, the confluence of growth slowing data reared its ugly head Friday with a +0.1% year-over-year headline CPI print for June and a UofMich consumer sentiment reading that declined to 93.3 from 96.1 in May. Note that a +0.1% inflation rate is a heck of a long way from the Fed’s 2% target. These two prints were successful in taking the 10-Year Treasury yield down 10 basis points from Monday’s highs to finish the week at 2.35%. We remain one of the lonely bulls on Treasury bonds (bearish on yields) via TLT, EDV, VNQ.

Three for the Road

TWEET OF THE DAY

FRANCE: the CAC was +4.5% last wk, is +1% this morning and +7.5% month-over-month

@KeithMcCullough

QUOTE OF THE DAY

It takes less time to do a thing right than to explain why you did it wrong.

Henry Wadsworth Longfellow

STAT OF THE DAY

China’s gold reserves are up +57% from June 2009 to 1658 tons at the end of June 2015.