CLIENT TALKING POINTS
CRASH
Not an inappropriate word to use given that on the 3-month duration alone, Oil (-37%), China (-31%) Emerging Markets (-26%), and Long-term Sovereign Bond Yields have crashed. This is a literal crashing of both U.S. and Global growth expectations – we’re still at ½ of consensus forecasts.
HIKE?
Oh definitely – they should hike. “It’s just 25 basis points, Keith” – yep. Have at it. Let’s see what happens. This risk of being too tight during both the cyclical and secular slowdown was only obvious to those who had the bearish growth and inflation views. Jackson Hole = Thursday.
VIX
The main challenge with modeling accurate risk management levels right now is that volatility is undergoing a major Phase Transition across durations – hard to explain in 140 characters or less but very easy to see the series of higher-highs going back 2 years.
**Tune into The Macro Show with Hedgeye CEO Keith McCullough at 9:00AM ET - CLICK HERE.
TOP LONG IDEAS
MCD
One of the ways that McDonald's is going to take market share back is through one of the most popular items on its menu—the Egg McMuffin. "I honestly believe that if there is a silver bullet, it’s all day breakfast for McDonald’s," says Restaurants Sector Head Howard Penney. "And I do believe they’re going down that road and they will do it."
Penney adds that we’ll probably know more about that at the November analyst meeting and what the breakfast potential will be. There’s obviously a lot of things that go around MCD doing breakfast (e.g. shrinking other parts of the menu, etc).
PENN
"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," writes Hedgeye Gaming, Lodging & Leisure Sector Head Todd Jordan.
TLT
It was a very good week for those sitting behind the long-bond coming out of the FOMC minutes release on Wednesday. During a tumultuous 5-day stretch in which the S&P 500 fell over -5%, subscribers who followed our recommendation on TLT were sheltered from the market storm and gained almost +2%. Moreover, during the past month, TLT has gained +5.7% versus a -6.8% loss for the S&P 500 (a 1,200 basis point difference). In other words, it has paid handsomely to buck the consensus tide.
Asset Allocation
| CASH | 70% | US EQUITIES | 2% | |
| INTL EQUITIES | 0% | COMMODITIES | 0% | |
| FIXED INCOME | 28% | INTL CURRENCIES | 0% |
THREE FOR THE ROAD
TWEET OF THE DAY
RUSSIA: down another -4.7% this morning - clearly a sign of Global Growth ramping
@KeithMcCullough
QUOTE OF THE DAY
Destiny is not a matter of chance, but of choice. Not something to wish for, but to attain.
William Jennings Bryan
STAT OF THE DAY
The Russian ruble plunged 2.3% Monday hitting a seven-month low.
