U.S. Dollar Driven #Deflation Risk

Client Talking Points

OIL

WTIC is down another -0.8% (post last week's -6.3% decline) and they're really going after the levered names again (our Energy analyst Kevin Kaiser had another good SELL note on KMI recently). Russian Stocks lead losers this morning down -1.9% and Natural Gas is crashing down another -3% to $2.00.

SPAIN

Spain had their centrally-planned V-bottom, but failed @Hedgeye TAIL risk resistance of 10692 on the IBEX. The IBEX is down -0.6% this morning as Spain still needs to report their economic slowing data, unfortunately - QE hope won't change that.

RUSSELL 2000

The Russell 2000 failed at both TRADE (1175) and TREND (1199) resistance and remains in draw-down mode -10.5% from its year-to-date (and bubble) peak - one of the best pure play ways to play a #LateCycle slowdown in the USA is via Russell's domestic revenues. 

 

**Tune into The Macro Show with Hedgeye CEO Keith McCullough at 9:00AM ET - CLICK HERE

 

Asset Allocation

CASH 68% US EQUITIES 0%
INTL EQUITIES 0% COMMODITIES 0%
FIXED INCOME 32% INTL CURRENCIES 0%

Top Long Ideas

Company Ticker Sector Duration
MCD

What week it was for MCD shareholders! Shares finished the week up 7.3%. We have been saying all along that the third quarter of 2015 would be the inflection point for the McDonald’s (MCD) turnaround. After this print, it appears that the heartache is finally over at McDonald’s, as this quarter marks the first good quarter the company has had in two years.

 

From here, the upside in the stock price lies with the growth of All Day Breakfast, additional G&A cuts, national value offering implementation, reimaging of restaurants, commodity deflation, especially in beef and increased operational efficiencies, among others. In addition, the REIT is a potential driver of incremental value but not crucial to the long-term success of this call. With Steve Easterbrook at the helm we are confident this company will be better managed than it has been in a long time.

RH

RH unveiled a full floor of Modern product in their New York Flatiron store this week. The new concept sits on the first floor of the 21k sq. ft. store and marks the 3rd property in RH’s fleet (along with Denver and Atlanta) to carry the new product line.

 

Fundamentally and financially, we’re about to see growth at RH go on a multi-year tear. We think this stock is headed to $300 over the next 2-3 years. We’ve been patient for the catalyst calendar to begin, and the waiting is finally over.

TLT

As devaluation and global currency war jockeying from central bankers around the world continues, the acknowledgement of growth slowing continues to push yields lower. The long-bond was up on Thursday, after the ECB meeting, despite an easing-fueled rip in equities. The bond market doesn’t believe in the growth storytelling and we expect it to continue.

 

Remember that Down Euro Devaluation is a global TIGHTENING event because the world’s biggest asset price #deflation risk is that the world’s inflation expectations (commodities, debt, etc.) are DENOMINATED IN DOLLARS. That has implications for gold (risk to being long), but we want to get through the Fed meeting and GDP data next week before we pivot on a gold view. Stay tuned.

Three for the Road

TWEET OF THE DAY

UPDATE: Hedgeye Energy Analyst Kevin Kaiser Reiterates His Short Case on Kinder Morgan | $KMI https://app.hedgeye.com/insights/47127-update-hedgeye-energy-analyst-kevin-kaiser-reiterates-his-short-case… via @hedgeye

@KeithMcCullough

QUOTE OF THE DAY

Failures to heroic minds are the stepping stones to success.

Thomas Chandler Haliburton

STAT OF THE DAY

A biscuit which had been aboard a lifeboat on the Titanic has sold at auction for £15,000. The auction was at Henry Aldridge & Son in Devizes, Wiltshire, UK.


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