CLIENT TALKING POINTS
CHINA
When in doubt, devalue! Yep, we taught them that (after Japan, Argentina, Zimbabwe, etc. tried the same for the sake of “exports”) – biggest devaluation move in 20 years begs the basic question – how made-up is the 7.0 GDP story in China with exports -9%?
USD
Cross-asset class volatility and foreign currency correlation risks should ramp on China trying to centrally-plan markets, but this is coming off a relatively big down day for USD after Fed’s Fischer acknowledged economic gravity. The EUR/USD 1.10 is at the top end of our 1.08-1.10 range.
VIX
Inasmuch as UST 2YR resistance of 0.75% has held all year long, so has 11.34 @Hedgeye TREND support for front-month VIX – total U.S. Equity market volume (including dark pool) was -24% vs. its 1 year average on yesterday’s no volume “reflation” day.
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TOP LONG IDEAS
HOLX
In an analysis of the demographics of the newly insured, Pap testing, HPV, and mammography were at the top of the list of products that would be positively impacted by the ACA. As we reach the #ACATaper stage, will HOLX take a hit to their Diagnostic segment? It is possible, in our view, but so far a minor risk. As we learned last week from a lab operator, Qiagen is likely to continue to cede their 14% HPV testing share to HOLX. So while the #ACATaper appears to be finally here, there are offsets. On a disappointing note, our 3D Tomo Tracker update for July came in at 24 facilities. Down sequentially from June, and down from a peak of 54 in May. Our forecast algorithm, which is based on these updates, remains unchanged. While 20 is low, it is probably a blip in the longer term adoption cycle.
PENN
PENN has emerged as the first domestic gaming growth story in 10 years with a new casino in Massachusetts this year and one in San Diego next year. Meanwhile, regional gaming trends have stabilized, providing near term earnings visibility and upside. Upcoming catalysts include the monthly release of State gaming revenues for July, including Massachusetts, and positive earnings revisions.
TLT
Sometimes the macro rotation and allocation playbook is relatively straightforward. As growth slows and "reflation" deflates, you want to be buying A) Long-term Bonds and B) stocks that look like bonds. Bond proxies and defensive yield consistently outperform alongside the dual deceleration in demand and prices and Utilities and REITS remain the go-to sectors for growth slowing, defensive yield exposure.
Asset Allocation
| CASH | 60% | US EQUITIES | 4% | |
| INTL EQUITIES | 5% | COMMODITIES | 0% | |
| FIXED INCOME | 24% | INTL CURRENCIES | 7% |
THREE FOR THE ROAD
TWEET OF THE DAY
Van Sciver: Fade Caterpillar's "Barron’s Bounce" | $CAT https://app.hedgeye.com/insights/45748-van-sciver-fade-caterpillar-s-barron-s-bounce-cat… @HedgeyeIndstrls
@KeithMcCullough
QUOTE OF THE DAY
Talent is cheaper than table salt. What separates the talented individual from the successful one is a lot of hard work.
Stephen King
STAT OF THE DAY
57% of teens say they have met a friend on the Internet and more than 50% of that group say they’ve done it more than five times.
