CLIENT TALKING POINTS
USD
USD on the lows here with EUR/USD signaling immediate-term overbought (as are most of the reflation trades) at $1.13; like the June drop in USD, this one is ripping one heck of a reflation trade to lower-highs with the big move behind us now.
REFLATION
For the MONTH to-date, Energy stocks (XLE) which remain in long-term TAIL risk crash mode are +13.4% and Basic Materials (XLB) are +10.7% (vs. Healthcare +2.9%). Since most of the big $$ couldn’t have been positioned to miss the #Deflation and capture all the #Reflation, this makes this trade as emotional as they get – it has nothing to do with demand.
GOLD
Fortuitously, we expressed our bearish Employment cycle view in long Commodities/Gold terms (we didn’t have it in us to signal buy on Energy stocks) but now that trade is signaling immediate-term TRADE overbought inasmuch as the stocks keying off them are. We’d book some Gold gains and short Oil here on USD oversold.
**Tune into The Macro Show with Hedgeye CEO Keith McCullough and Director of Research Daryl Jones at 9:00AM ET - CLICK HERE.
TOP LONG IDEAS
GIS
Our Consumer Staples team remains positive on General Mills coming out of the 2Q15 earnings call. We have been LONG GIS for the last six months and continue to have a favorable view of the company due to the following reasons:
- Sequential improvement in cereal
- Growth in Natural & Organic categories
- Snacking
- Cost cutting initiatives
- M&A activity
PENN
Many of the regional gaming states will release September revenues next week and as we’ve written about, they should look a lot better than August. Overall same store revenue declined 5% in August (we had predicted –2%) but most of the decline was due to the calendar and a difficult comparison. For September we are projecting an increase of 2% YoY
Our Missouri tracker is forecasting September gaming revenues to be up 3.6% YoY. This is a 6% sequential improvement from August's YoY change of -2.5%. Meanwhile, Pennsylvania slot revenues were up 4% in September. Our thesis for a sequential rebound in September remains intact. We like PENN on the long side from these levels.
TLT
It was an important couple of weeks for those who were still wrestling with our lower-for-longer views. The brevity of the macro moves post-report Friday proves just how non-consensus that call remains in a year where the S&P 500 is down -8%. The scary thing with regard to Janet’s credibility is that bad news is now being priced in as bad news. Moreover, we believe this late-cycle weakness is likely to remain ongoing.
Asset Allocation
| CASH | 65% | US EQUITIES | 0% | |
| INTL EQUITIES | 0% | COMMODITIES | 5% | |
| FIXED INCOME | 30% | INTL CURRENCIES | 0% |
THREE FOR THE ROAD
TWEET OF THE DAY
The @hedgeye global GDP growth estimate is half of consensus. Yes, friends, winter is coming.
@HedgeyeDJ
QUOTE OF THE DAY
I never decide whether it's time to retire during training camp.
Bob Christian
STAT OF THE DAY
The National Retail Federation forecasts Holiday Sales to increase 3.7%, vs. +4.1% last year.