CLIENT TALKING POINTS
EURO
As the central planning panic moves into its scary stage, we expect ECB President Mario Draghi to try to devalue again tomorrow at the ECB meeting; if he does, don’t forget that Down Euro (Up Dollar) = Down Oil – lots of beta in that trade.
OIL
WTI was down -10% yesterday and down another -2% this morning – that shouldn’t surprise anyone who thinks Draghi has cowbell coming. There is no support for WTI in our risk range model to $35.84.
UST 10YR
Tons of questions on why the UST 10YR wasn’t “down more” yesterday, and not one focused on the move higher in Global Yields! Plenty of conspiracy theories out there from Bond Bears, but Spanish 10YR is as close to UST as its been – is this a sovereign credit trade developing as our #EuropeSlowing Macro Theme plays out? Eurozone #deflation of -2.1% PPI this morning.
**Tune into The Macro Show with Hedgeye CEO Keith McCullough at 9:00AM ET - CLICK HERE.
TOP LONG IDEAS
MCD
We recently tried out the "Create Your Taste" experience at the newly remodeled McDonald’s location in Midtown East on the corner of 58th street and 3rd Ave. Walking into the newly remodeled MCD, we were greeted by the brand new self-order kiosks with attentive staff there to assist you. Customers were very interested in using the kiosks, and everyone using them seemed to be having an easy time with it.
For it being only two weeks into the process we were very impressed by the efficiency and mastery the staff is already displaying. We plan to head back to the same McDonalds location and check on their progress.
PENN
Our Gaming, Lodging & Leisure team is going to furnish a new update following their recent meeting with Penn National Gaming's management. They note that the stock has held up quite well despite increased market volatility. The bullish thesis on shares of PENN remains intact. Regional revenues remain strong in addition to the 2-year growth story, etc. Stay tuned.
TLT
As we outlined through various channels, we expect that high levels of volatility are here to stay for the foreseeable future. The biggest shift last week that we’ll call out is a bullish to more neutral intermediate-term view on the U.S. dollar which is why we added GLD to investing ideas in replace of UUP. To be clear, if growth continues to slow we want to be long of bonds (that view hasn’t changed in a year and a half).
From an asset allocation perspective here is the set-up:
- Growth slowing: Long bonds and low-beta yield chasing sectors (TLT, EDV, XLU)
- Shift to more dovish policy: long of GOLD as the shift weakens the value of the USD
We re-iterate the same view we’ve had since the beginning of 2014: Growth is slowing, and deflation remains a real risk (central bankers can’t solve this by talking down the currency). The fed will continue to push out the dots on “policy normalization.”
Asset Allocation
| CASH | 65% | US EQUITIES | 0% | |
| INTL EQUITIES | 0% | COMMODITIES | 3% | |
| FIXED INCOME | 32% | INTL CURRENCIES | 0% |
THREE FOR THE ROAD
TWEET OF THE DAY
VIDEO (3mins): I Am Unnerved https://www.youtube.com/watch?v=fhezt8uqpjw&feature=youtu.be via @YouTube
@KeithMcCullough
QUOTE OF THE DAY
The best way to have a good idea is to have a lot of ideas.
Dr. Linus Pauling
STAT OF THE DAY
Total retail sales are 15% higher than they were in mid 2008, yet furniture store sales are 10% below their mid 2006 peak.