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Client Talking Points

FED

The side by side statement (OCT vs. SEP) removed the Global Macro Risk that is #Deflation and, in doing so, perpetuated that risk via a hawkish move in the USD. The Fed also added the domestic risk that is labor #Slowing, so now rate hawks are going to get completely whipped around if we’re right on a GDP bomb this morning.

#DEFLATION

U.S. stocks rally on rates up, Financials up? Great. Australia and Indonesia (levered the wrong way to #Strong Dollar Deflation) closed down -1.3% and -3.0% overnight; Russia leads losers in Europe -2%, and Oil failed @TREND resistance backing off -1.2% to $45.

FINANCIALS

If we’re still right on #LateCycle GDP Slowing, easiest move to make this morning is to short the Financials (XLF, KRE, JPM) and buy Utilities and Treasuries (XLU, TLT, etc.) – this is the 8th or 9th time in 2015 they’ve “rallied” the 2yr to 0.75% and failed, FYI.

 

**Tune into The Macro Show at 9:00AM ET - CLICK HERE

Asset Allocation

CASH 66% US EQUITIES 4%
INTL EQUITIES 0% COMMODITIES 0%
FIXED INCOME 30% 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

REPLAY: "Fed Day Live" with Keith McCullough https://app.hedgeye.com/insights/47167-replay-fed-day-live-with-keith-mccullough… via @hedgeye

@KeithMcCullough

QUOTE OF THE DAY

The happiness of your life depends upon the quality of your thoughts; therefore guard accordingly.

Marcus Aurelius

STAT OF THE DAY

U.S. venture capital firms raised $4.4 billion for 53 funds during the third quarter of 2015, a decrease of 34% compared to the number of funds raised during the second quarter of 2015, and a 59% decrease by dollar commitments, according to the Fundraising Report by Thomson Reuters and the National Venture Capital Association (NVCA).