CLIENT TALKING POINTS
Euro
$1.13 vs. USD into the @ECB event and the question remains whether Draghi can be incrementally more dovish than the Fed is implied being with UST 3-month yields moving back to NEGATIVE -0.01% this morning – if he doesn’t bring the cowbell, EUR/USD should hold $1.12 and Oil/Gold/Copper etc. should bounce post WTI’s -2.3% #deflation yesterday
Spain
We hosted a risk mgt call w/ Daniel Lacalle yesterday (ping me if you want the replay) and in the absence of Draghi trying to reflate European stocks, remember that Spain is as #LateCycle as the USA is at this point – the early DEC election (going left) = major catalyst as well
Russell
Less hedge funds are short it (vs. SPY) so it continues to go down faster (and more often) than SPY, closing -1.5% yesterday taking its draw-down from the YTD high to -11.7% and signaling bearish on both my TRADE and TREND durations = pure play short on US #GrowthSlowing
TOP LONG IDEAS
MCD
McDonald’s reports 3Q15 earnings Thursday, October 22nd before the market opens, with a conference call at 11:00am ET. We are expecting strong sequential improvement in performance globally. We look forward to giving you an update on the company’s performance next week, but this week we wanted to focus on the ‘Looming Crash in Beef.'
On Thursday, October 15th, we held a thought-leader call regarding the declining price of beef and how long it will continue. Prices have sky rocketed in recent years and are now standing at more than two standard deviations above the 30 year average. We believe a 50% decline down to historical averages is well within the realm of possibilities. Declining beef prices will be a major tailwind for McDonald’s as they navigate their turnaround.
RH
Restoration Hardware opened its new Full Line Design Gallery at the Cherry Creek Shopping Center in Denver this week. This is another anchor property -- using 53,000 feet of the 90,000 left vacant by Saks at Cherry Creek.
RH is taking up the size of its stores from an average of 8,000 square feet to about 40,000+ for its new stores – and productivity rates on these new assets are headed higher. In the old stores, RH could only show 10% of its assortment, while in the newer format stores, the company is showcasing better than 75%. Consumers can’t (and don’t) buy what they don’t see.
TLT
The #SlowerForLonger theme from Hedgeye Macro has been consistent and straightforward. Our pivot in advance of the most recent jobs report to get long of gold and stay out of the way short-side on commodities turned out to be a good position.
Growth expectations have been correctly revised, but there’s still a good amount of room between Hedgeye estimates and consensus. We are expecting GDP in a range of 0.1%-1.5% for Q3 and another 1-handle in Q4. If that proves accurate, flatter goes the Treasury curve (TLT, EDV), wider goes high yield spreads (bad for JNK), and down goes the USD (GLD).
Asset Allocation
| CASH | 65% | US EQUITIES | 0% | |
| INTL EQUITIES | 0% | COMMODITIES | 6% | |
| FIXED INCOME | 29% | INTL CURRENCIES | 0% |
THREE FOR THE ROAD
TWEET OF THE DAY
Congrats to everyone who took up their #GrowthSlowing exposure yesterday buying $TLT $ZROZ $MUB, etc.
@KeithMcCullough
QUOTE OF THE DAY
"What is the point of calling yourself the best if you truly don't believe that in your mind?"
-Bret "The Hitman" Hart
STAT OF THE DAY
Daniel Muphy of the NY Mets has homered in 6 straight post season games, he had 14 homeruns through 130 games during the regular season.