Client Talking Points
Smoked by Macy’s CEO talking about that darn #ConsumerCycle slowing theme we’ve been hammering on since July – XRT (our preferred way to be short U.S. Retailers in size) is down -11.2% since the July 15th consumption cycle top and down -7.2% year-to-date.
After suggesting #Deflation wasn’t a risk and European growth was “encouraging”, our man Mario (ECB President Mario Draghi) pivots to “downside risks are now clearly visible … and inflation dynamics have weakened.” Finally, some #truth – don’t forget that Down Euro = #Deflation via Strong USD.
Just an awful November for whoever bought into the “reflation” thing that our competition has been pitching since July. The CRB Index was down another -0.6% yesterday, testing the lows as Copper blows through the lows to $2.18 and levered Energy stocks move down -4% on the day.
**Tune into The Macro Show with Macro analysts Christian Drake and Ben Ryan 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
Shhh! Macys CEO Just Hinted At Recession | $M
https://app.hedgeye.com/insights/47486-shhh-macy-s-ceo-just-hinted-at-recession… via @HedgeyeRetail @KeithMcCullough #Macys … via @KeithMcCullough #markets $SPY #earnings
QUOTE OF THE DAY
You cannot plough a field by turning it over in your mind.
STAT OF THE DAY
Wal-Mart is projecting that its earnings may fall by as much as 12% during the next fiscal year.