Client Talking Points
Relentless USD strength as my Berkeley boy Williams (San Fran Fed) hits USA Today with the “recent data supports a rate hike” – apparently he missed all the industrial/cyclical, ISM, and GDP data. But raising rates into #LateCycle slow-down is mucho deflationary for many asset prices – DEC 4th U.S. Jobs Report up next.
Oil continues to get smoked on the biggest risk that remains (the Fed’s forecast for an economic acceleration), with WTI down -1.1% to $43.69 with an important level of immediate-term support at $43.02. One interesting idea (developing, timing matters) is buying Oil if that DEC 4th jobs report is more in line with the slowing labor TREND.
Strong Dollar Debt #Deflation is public enemy #1 to the world’s most levered countries and companies. Greek stocks continue to diverge negatively vs. DAX this morning, down -1% and the Greek 10YR Yield is up +14 basis points day-over-day.
**Tune into The Macro Show with Hedgeye CEO Keith McCullough at 9:00AM ET - CLICK HERE.
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Top Long Ideas
Post earnings, the next catalyst for McDonald’s (MCD) is going to be next week's November 10th analyst meeting. The meeting will be an opportunity for management to shed more light on the progress of all day breakfast, additional G&A cuts and the potential of doing a REIT.
Our Restaurants team remains bullish on the name, and they look forward to giving you some material updates after the meeting.
Restoration Hardware (RH) hit all-time highs this week, but this story is far from over. We think RH will earn close to $11 per share in 3 years, which compares to the consensus estimate of just over $6. We estimate that the stock is worth $300.
The square footage component is well known, but we think people are missing…
Current policy makers remain fixated on the jobs market, and this Friday’s report was good on the surface. Here’s the rundown:
So, again, on the surface it was a positive report. However, as we’ve emphasized, consumption and labor market strength are staples of an economy that is late cycle.
Growth continues to slow, and a rate hike has the potential to pull-forward a recession and flatten the yield curve. In the event this happens, you’ll be happy you held onto your long-bond position. If you haven’t bought into the #slower-for-longer view, the market is giving you the chance to buy bonds at another lower high… For the 5th time this year.
Three for the Road
TWEET OF THE DAY
**NEW VIDEO (2 mins)
McCullough: It’s Looking A Lot Like November 2007 https://app.hedgeye.com/insights/47457-mccullough-it-s-looking-a-lot-like-november-2007… via @KeithMcCullough #markets $SPY #earnings
QUOTE OF THE DAY
The best way out is always through.
STAT OF THE DAY
The Dallas Fed’s Manufacturing Outlook has dropped for 10 months in a row.