CLIENT TALKING POINTS
Consensus Positioning
The market reacted to the currency devaluation move out of Beijing this week by tagging the USD Wednesday as rate hike expectations were taken down. The dollar is actually down on the week vs. the devaluation and more of what you saw on Wednesday with XLE leading S&P sectors is a risk that will have to be tactically managed over the next few months as consensus is positioned for deflation/rate hike. Consensus is positioned long dollars, extremely short of gold, long treasuries, short-crude. We continue like treasuries on either side of the relative policy moves from the Fed.
China
To recap. an awful month of data for July which has implications for commodity trade globally, factory output slowed sequentially Y/Y, fixed asset investment growth touched a 15-year low, property investment growth slowed to the lowest level since March 2009, industrial production yesterday was a big miss, slowing to +6.0% Y/Y vs. +6.6% est. (+6.8% June), exports declined -8.6% Y/Y in July, Chinese steel output declined -4.6% Y/Y (down -1.8% Y/Y through the first 7 months of the year). Expect more of something from Beijing, whether it’s stimulus measures or more devaluation.
Eurozone
Our Top Q3 Global Macro theme of #EuropeSlowing remains intact following the release of Q2 2015 GDP this morning: the Eurozone missed expectations (+0.30% Q/Q vs +0.40%); Germany improved from the prior quarter but missed expectations (+0.40% Q/Q vs +0.50%); and France saw a huge negative divergence, recording 0.0% (exp. +0.20%) vs last quarter of +0.60%. We continue to recommend remaining short of the EUR/USD (etf FXE).
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
I'm getting ready to publish my near "Dirty Dozen" restaurant companies that should never have gone public! This is going to be a classic!
@HedgeyeHWP
QUOTE OF THE DAY
“The secret of getting ahead is getting started.”
-Mark Twain
STAT OF THE DAY
Tim Tebow accounted for 55 touchdowns during his Heisman Trophy-winning season (2007), the most ever for a player in the SEC.
