Client Talking Points
They better re-halt – the Shanghai Composite Index was down -8.5% overnight (the biggest drop since the 2008 crash in global asset prices). They can halt and print, but they can’t print demand/growth (Industrial Profits move to negative -0.3% year-over-year in June – how is GDP +7.0%?).
As speculation rises that the Fed can’t raise rates into this slowdown (5YR UST breakevens are down -29 basis points in the last month as #deflation risk mounts), we should get an immediate-term oversold signal in the USD Index today (EUR/USD overbought at $1.10).
We can’t count how many people told us the UST 10YR was going to “2.75%” (when it was at 2.50%); now it’s back down to 2.25%, German 10YR Bund yields 0.69% and Swiss 10s are back to negative -0.09% = Global growth and inflation slowing.
**The Macro Show - CLICK HERE to watch today's edition at 8:30AM ET.
|FIXED INCOME||24%||INTL CURRENCIES||12%|
Top Long Ideas
General Mills (GIS) remains on the Hedgeye Consumer Staples Best Ideas list as a LONG. Key segments across the company are turning the corner and improving performance. Specifically GIS has figured out the yogurt category, after 3 years of struggling with Greek and losing on the core business, management has turned the Yogurt division into a growth segment. Cereal has obviously been a struggle for all companies participating. Although still down, the trend is looking better, in FY16 we hope to see the switch to Gluten Free Cheerios and other improvement, turn performance around.
Penn National Gaming reported Q2 profit of $16.9 million on Thursday. The company's profit of 19 cents per share beat analysts' expectations. PENN posted revenue of $701 million in the period, which also beat forecasts. Shares have climbed 40% since the beginning of the year and 58% over the last 12 months, obviously much higher than the S&P 500. Gaming, Lodging and Leisure Sector Head Todd Jordan was at Penn National Gaming's investor day on July 24th. He will provide a detailed update this week.
Those long of #LowerforLonger enjoyed another solid week of 2%+ gains for TLT and EDV. VNQ followed up last week’s gains with a pullback of equal size, but we received a positive sloth of data this week that confirms our long housing theme. A positive housing outlook within a bearish rate environment should be positive for VNQ.
Three for the Road
TWEET OF THE DAY
Tom Tobin is reviewing his SELL call on Zimmer $ZBH @HedgeyeHC this morning
QUOTE OF THE DAY
The future belongs to those who see possibilities before they become obvious.
STAT OF THE DAY
Tourism in Cuba has jumped, up 15% in the first 5 months of this year.