CLIENT TALKING POINTS
USD
Draghi rang that #cowbell and macro markets absolutely ripped – gotta love that, even though people will realize it’ll perpetuate as opposed to arrest #deflation (see our research note from last night); here’s a visual on USD during #GrowthSlowing data vs. Euro QE.
Oil
Showing no follow through on the QE “buy everything” hopes this morning and that makes sense to me – Nat Gas -1.3% to $2.36 and I think it’s time to sell some (or all) of the net long position we’ve been advocating in Commodities (Gold specifically) as of late.
US 10 YR
Up Dollar, Down Rates à not a growth signal, and we’ll stay with the USA Long Bond position as German 10yr Bund Yield breaks down to 0.50% and Swiss 10yr deflates to -0.33%
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 | 70% | US EQUITIES | 0% | |
| INTL EQUITIES | 0% | COMMODITIES | 0% | |
| FIXED INCOME | 30% | INTL CURRENCIES | 0% |
THREE FOR THE ROAD
TWEET OF THE DAY
Most interesting macro signal today is the Bond Market doesn't give a damn about US stocks "up"
@KeithMcCullough
QUOTE OF THE DAY
"To be the man, you gotta beat the man!"
-Ric Flair
STAT OF THE DAY
Even though the Seahawks defeated the 49ers last night 20-3, Russell Wilson only put up 13.40 fantasy points.
