#Deflation’s Dominoes

Client Talking Points

UST 10YR

The bond market either doesn’t believe Janet Yellen on the DEC hike and/or is signaling that that would flatten the curve and slow growth faster – either way, next support = 2.04% and lower-highs of resistance continue at 2.17%.

CRASHES

Oil, China and Emerging Markets! The Hang Seng is down another -3% overnight taking its crash to -28% (since April). Germany’s DAX is down -24% (since April) and the Russell hasn’t technically crashed yet down -16% from its year-to-date high, so only 4% to go there.

INDIA

India cuts by 50 basis points (instead of 25 expected) citing a “vortex of a global trade slow-down” – that’s scary language for any central bank, and at this stage of the central planning crisis central banks will scare people on reality.

 

**Tune into The Macro Show with special guest Housing & U.S. Macro analyst Christian Drake at 9:00AM ET - CLICK HERE

Asset Allocation

CASH 70% US EQUITIES 0%
INTL EQUITIES 0% COMMODITIES 7%
FIXED INCOME 23% INTL CURRENCIES 0%

Top Long Ideas

Company Ticker Sector Duration
MCD

McDonald’s clearly continues to be well-liked by our Restaurants research team and is a near perfect fit into our macro team’s current "style factor" preferences. This stock is high cap with a low-beta, coupled with a company turnaround story that is currently well underway. We believe this stock will do well through this tumultuous time in the market.

 

As previously mentioned, the company has all day breakfast starting on October 6. We anticipate this development as not only driving increased visits from existing customers, but also new customers that maybe don’t wake up early enough to get breakfast by 10:30am (or simply just people that enjoy eating breakfast items outside of the morning!)

PENN

As Sector Head Todd Jordan notes, "PENN should benefit from the release of state gaming figures over the next few weeks. Recall that August was weaker than many thought. While we predicted this particular slowdown, our model is showing a sharp September rebound.

 

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

Is the U.S. economy still showing signs of a cyclical slowdown? Yes.  If you, like us, remain skeptical on the said policy path from our omnipotent central planners, and you believe growth continues to slow, then we respectfully submit that you sit on your GLD and TLT allocations.

 

3 GDP comps are difficult. And, once the data comes out, we think expectations will be downwardly revised again. In other words, wait for yet another Fed punt on a 2015 hike.

Three for the Road

TWEET OF THE DAY

NEW VIDEO

Is 'Mobile Order & Pay' the Holy Grail for #Starbucks? | $SBUX https://app.hedgeye.com/insights/46584-is-mobile-order-pay-the-holy-grail-for-starbucks-sbux… via @HedgeyeHWP cc @KeithMcCullough

@Hedgeye

QUOTE OF THE DAY

A positive attitude may not solve all your problems, but it will annoy enough people to make it worth the effort.

Herm Albright

STAT OF THE DAY

Whole Foods is cutting 1,500 jobs (1.6% or workforce).


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