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Client Talking Points

EURO

The Euro is hovering at $1.12 vs. USD with a wide immediate-term risk range of $1.09-1.16 as #cowbell fans await ECB President Mario Draghi’s next parting of the seas. We have no idea what he’s going to say – we can see clearly, though, what stock market-bailout fans are begging him to say.

 

STOCKS

Wacky wide risk range still very much in play, across major Global Equity markets with the U.S. range (SPX) now at 1,860-2,017 and our volatility signal suggesting 21 VIX is as probable here as 42 VIX – after covering SPY (lower) we are tee’ing up the SELL signal again.

HIKE

Oh yeah! Federal Reserve Vice Chairman Stanley Fischer woke up this morning feeling hard-core, suggesting to CNBC that he’s going to show the “market that it’s not in control” … but it is, and always is… this is the scariest comment we’ve seen yet – the Fed hasn’t tightened into a slowdown since Volcker.

 

**Watch the replay of The Macro Show with Internet & Media Sector Head Hesham Shaaban - CLICK HERE

Asset Allocation

CASH 67% US EQUITIES 0%
INTL EQUITIES 0% COMMODITIES 3%
FIXED INCOME 30% INTL CURRENCIES 0%

Top Long Ideas

Company Ticker Sector Duration
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.”

Three for the Road

TWEET OF THE DAY

$LINE bonds mauled to new all-time lows today.  every LINN issue now trading for less than 40c.  one of the biggest HY energy issuers.

@HedgeyeEnergy

QUOTE OF THE DAY

Knowledge speaks, but wisdom listens.

Jimi Hendrix

STAT OF THE DAY

16.8% of the Harvard freshman class had one or more parents who went to Harvard.