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Client Talking Points

FED

After consensus was calling for a “rate hike”, the latest bull case for U.S. stocks is that the Fed doesn’t hike – got it? Roger that. After New homes, Durable Goods, and Consumer Confidence all slowing this week, UST 10YR Yield = 2.03%.

OIL

Oil was slammed by ECB President Mario Draghi’s Devaluation, closing down another -1.8% yesterday (WTI), taking it to -5.2% in the last week alone. Oil is still very much in crash/deflation mode down -47% year-over-year; carnage in Oil & Gas stocks (XOP) -2.9% yesterday too.

CHINA

Apple is slowing in China, but Chinese GDP is 6.9% right? Right. The Shanghai Composite failed (like most things EM have in the last week) @Hedgeye TREND resistance and closed -1.7% overnight (#Deflation = bear market in EM).

 

***Keith McCullough will host a LIVE + INTERACTIVE online event today at 2:10pm ET offering immediate market reaction and commentary to the Fed. CLICK HERE to watch.

 

 

Asset Allocation

CASH 69% US EQUITIES 3%
INTL EQUITIES 0% COMMODITIES 0%
FIXED INCOME 28% 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

SPECIAL EDITION: McCullough Answers 4 Macro Questions From Elmo https://app.hedgeye.com/insights/47160-special-edition-mccullough-answers-4-macro-questions-from-elmo… via @KeithMcCullough

@Hedgeye

QUOTE OF THE DAY

Everyone has a fair turn to be as great as he pleases.

Jeremy Collier

STAT OF THE DAY

The Durable Goods headline number for September was down -1.2% and the August figure was revised from -2% to -3%.  Notably, down -3.0% year-over-year with year-over-year growth negative for the 8th consecutive month and in 10 of the last 11 months.