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Client Talking Points

CHINA

We put up a thorough update on China last night – don’t forget a big percent of the Chinese equity bubble was built on incessant expectations for incremental #cowbell – post the -3.5% drop in the Shanghai Composite overnight, the Chinese stock market is right back to its lows as growth continues to slow.

SPAIN

Getting uglier, one day at a time, with the IBEX flashing another negative divergence this morning -0.6% and down -11.4% in the last month vs. DAX -8% month-over-month (ZEW cut in ½ in SEP to 12.1 vs. 25 in AUG on “EM Demand”). Reminder that we signaled Spain as the 1st major European equity market to make lower-lows as 10YR Spanish Yields rise, +11 basis points month-over-month.

OIL

Got Dovish Fed expectations? Jon Hilsenrath (Wall Street Journal) was all about the hikes 3-6 months ago – now the articles are about anything but hikes and why the Fed is boxed in. Down Dollar again this morning and rates down small – still a big question mark if the Fed eases and provides realistic economic commentary on why, but Oil should like that +1% after holding $43.

 

**Tune into The Macro Show with Hedgeye CEO Keith McCullough at 9:00AM ET - CLICK HERE

Asset Allocation

CASH 70% US EQUITIES 0%
INTL EQUITIES 0% COMMODITIES 6%
FIXED INCOME 24% INTL CURRENCIES 0%

Top Long Ideas

Company Ticker Sector Duration
MCD

MCD is one of Sector Head Howard Penney's favorite names. He thinks McDonald's is finally emerging from the doldrums and is doing everything they need to do to fix the company domestically.

 

Penney believes there is not only a huge inflection point coming for the profitability of the company, but also for their sales. He thinks this means Wendy’s, Jack In the Box, Sonic will suffer a bit as MCD begins to take its market share back.

PENN

Bottom Line here? September regional gaming revenue growth should accelerate meaningfully from August and provide a catalyst for the stock. Our bull thesis on PENN appears very much intact.

  

TLT

In a higher volatility, growth-slowing environment, you want low-beta exposure (stocks that move less than the market) and a larger allocation to long-term Treasuries.

 

In the recent Macro Overlay video series exclusively for Investing Ideas subscribers, Keith rank-orders our top investing ideas positions from a fundamental macro and style factor perspective (low-beta, big cap liquidity, slower growth):

 

  1. Treasuries (TLT)
  2.  “Something that looks like Treasuries” (EDV)
  3. Gold (GLD)
  4. Low-Beta, Big-Cap liquidity: McDonalds
  5. Low-Beta, Big Cap Liquidity: General Mills

Three for the Road

TWEET OF THE DAY

FX: if you ask the Yen (+0.5% vs USD this am), the Fed is going to be dovish on Thursday

@KeithMcCullough

 

QUOTE OF THE DAY

What use could the company make of an electric toy?

Western Union, when it turned down rights to the telephone in 1878

STAT OF THE DAY

Advertising spending on print magazines is forecasted to drop 1.8% this year to $17.4 billion.