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Dovish Fed

Client Talking Points

DAX

The Fed’s Dollar Devaluation (EUR/USD +2.5% month-over-month) thing isn’t appreciated by either the DAX or ECB President Mario Draghi (he testifies to European Parliament Wednesday). The DAX is down another -0.6% and keeping the crash (-20.4% since APR) in play, but signals immediate-term oversold here, for a trade.

OIL

Gold and Oil were +3.2% and +0.7%, respectively last week (vs. SPX -0.2%) and WTI is up another +1.5% to $45.34 this morning taking it to +5.7% in the last month (vs. SPX -6.6%) – is the new perma bull U.S. stock market catalyst “higher gas prices”?

YEN

Signaled immediate-term TRADE overbought on Friday as the USD was signaling oversold (and Gold immediate-term overbought); the risk ranges in all of these big FICC trades (USD, Rates, Oil) are narrowing now (leading indicator for lower highs in volatility).

 

**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

McDonald’s remains one of our Restaurant teams Best Ideas on the LONG side.  We continue to believe that 3Q15 will be the inflection point for the company’s turnaround and that we are going to be looking at a much different company 1-3 years from now.

 

Urgency has been instilled from the top down by new CEO Steve Easterbrook. He wants more speed and is encouraging people to get things done faster. The food and experience provided to the customer will greatly improve over the coming months as “Experience the Future” is implemented across the system. It won’t be instantaneous though, as MCD has a lot of work to do around changing the perception to bring back customers it may have lost.

PENN

Penn National Gaming continues to be our favorite Regional Gaming stock.

 

Regional numbers for August have come in soft, but we predicted the August weakness. September revenues should rebound and serve as a catalyst for the stock going into Q3 earnings. On the research side we have not altered our views of PENN’s long term growth story. We continue to see more upside from current price levels. 

TLT

Slower (and Lower) For Longer remains our non-consensus call. It's nice to see that the Fed is finally starting to see what the #GrowthSlowing late-cycle data does.

  1. GROWTH: is #LateCycle and will be slower (again) in Q3 than it was in Q2
  2. INFLATION: misreported, yes – in the area code of the Fed’s 2% “target”, no

Our estimate for Y/Y% GDP for Q3 is a range of 0.1% to 1.5%. Even the Q/Q SAAR # that consensus hangs on will be comping against a 3.7% Q/Q SAAR GDP print (second revision). Good luck positioning for a rate hike. Prepare for the fade…. AGAIN.

 

Three for the Road

TWEET OF THE DAY

VIDEO (2mins) Kaiser: Why Chesapeake May Be Headed to $0 | $CHK  https://app.hedgeye.com/insights/46425-kaiser-why-chesapeake-may-be-headed-to-0-chk… @HedgeyeEnergy

@KeithMcCullough

QUOTE OF THE DAY

What people say, what people do, and what they say they do are entirely different things.

Margaret Meade

STAT OF THE DAY

Total U.S. Equity Market Volume (including dark pool) was up +24% and +26% vs. its 1-month and 1-year averages, respectively.