CLIENT TALKING POINTS
VIX
+60% in less than 2 weeks and front-month has resistance at 19.94 – if we’ve said this 100x this year, we’ve said it 1000x – do not buy equity beta when the VIX is < 12; the inverse of that 19.94 resistance level in the SPX cash = 2027 support – if these levels don’t hold up, we’ll start to recommend prayer.
STOCKS
Globally, have been correcting now for 3-6 months; navel gazing at the S&P 500 proved to be as shortsighted as it was at both the 2000 and 2007 cycle tops; drawdown in the Russell 2000 is now -9.5% and most major global equity markets are down -7-15%, in a month = #oversold.
ASIAN CONTAGION
So China devalues and everything comes unglued, eh? Japan’s Nikkei closed down 3%, the Hang Seng closed down 1.5%, the KOSPI closed down 2%, but, of course, China’s remained the pace horse, dropping another -4.3% overnight to closed down -11.5% on the week. The dour read-throughs for regional and global growth are obvious, but what’s not so obvious is where do we go from here. Specifically, we need to study Japan on the bounce next week to decide whether or not to book the gain on the long side.
TOP LONG IDEAS
MCD
"We are very bullish on McDonald’s," says Restaurants Sector Head Howard Penney. "We like where this company is going. We like the new CEO and the changes they’re making."
Penney notes that there are a lot of things going on inside the company which we can’t see that are extremely meaningful to where this company will be in 12-18 months.
"I’ve said this a dozen times recently, but 2015 will be the last year McDonald’s trades at an average price below $100," he says.
PENN
"As we predicted, regional gaming revenues surged in July which gives us confidence in our Q3 EPS estimate of $0.23, which is $0.04 above the Street," writes Hedgeye Gaming, Lodging & Leisure Sector Head Todd Jordan. "We continue to like Penn National Gaming here due to stable regional gaming trends, better than expected quarterly and annual earnings, and the Plainridge and Jamul contribution to PENN’s two-year growth story."
TLT
The set-up for the September FOMC meeting is as follows:
- The Fed runs the risk of tightening into a late-cycle slowdown which could ultimately flatten the yield curve (BULLISH for TLT, EDV, VNQ).
- Slower growth and deflationary headwinds are acknowledged and the can is kicked on a rate hike which should also be good for bonds. Until growth inflects positively, you’ll see TLT in our investment conclusions as the yield curve is the best proxy for forward looking growth expectations.
Asset Allocation
| CASH | 62% | US EQUITIES | 4% | |
| INTL EQUITIES | 4% | COMMODITIES | 0% | |
| FIXED INCOME | 26% | INTL CURRENCIES | 4% |
THREE FOR THE ROAD
TWEET OF THE DAY
VIDEO (1min) Do You Own The Hillary Clinton Portfolio? https://app.hedgeye.com/insights/45929-do-you-own-the-hillary-clinton-portfolio
… @MariaBartiromo
QUOTE OF THE DAY
Nothing grows well without space and air.
Patricia Monaghan
STAT OF THE DAY
The United Arab Emirates has the biggest gender imbalance in the world, with 274 men for every 100 women.
