CLIENT TALKING POINTS
VIX
Nothing crushes returns like bullish breakouts in volatility – OVX (Oil Volatility) has ramped from 38 to 51 since early NOV (38 is an epic level of volatility to begin with) and now front-month U.S. Equity VIX has an immediate-term risk range of 15-22; that’s why “up days” in DEC have been fleeting.
NATURAL GAS
Natural gas us crashing to new lows, -1.2% through $2.00 this morning – that’s a lower-low and while last year they blamed the “cold winter” for slowing Q1 GDP, now they can blame the warm one for slowing Q4 GDP – you just can’t have cold or warm weather.
RUSSELL 2000
The Russell 2000 continues to lag the Dow and S&P 500 and is mentioned the least by the mainstream as a result. It is down -5% for the year-to-date and down -11.3% from the all-time #Bubble high in July, the deterioration under “the market’s” surface is very obvious at this point.
*Tune into The Macro Show with Hedgeye CEO Keith McCullough in the studio at 9:00AM ET - CLICK HERE.
TOP LONG IDEAS
MCD
Restaurants Sector Head Howard Penney had no material update on McDonald's (MCD) this week. However, here is what Penney wrote around when we added MCD to Investing Ideas. It's worth reiterating our high conviction in the stock:
"We continue to get more bullish every time we talk to the company, franchisees and/or customers which we have polled via conducting surveys. We are going to be looking at a much different company 1-3 years from now."
"Urgency has been instilled from the top down by new CEO Steve Easterbrook," according to Penney. "This ship is in gear and headed north. 2015 will be the last time this stock is below $100."
RH
This RH quarter is going to draw a Mason Dixon line between the Bulls and the Bears. The key factors that the Bulls (including us) need to see were profoundly present – giving us confidence that revenue will double, that we’ll see a 16% operating margin, and $11 in earnings power. In addition, RH beat the quarter, delivered 33% EPS growth in what should be the slowest growth quarter of the year, and it took up 4Q revenue guidance based on what it’s seeing so far this quarter (to 20%+).
TLT
On went the game of slowing last week with a little central planning un-secretive sauce. Despite the ECB’s move to cut the deposit rate to -0.30%, Draghi didn’t ring the cowbell loud enough. Meanwhile, Friday’s jobs report might have been just enough for Janet to hike rates into a late cycle slowdown. The consensus long USD crowd was crushed on the ECB news. The dollar lost over 2% on Thursday and rates were pushed higher.
If growth is going to continue to slow, with a rate hike on the horizon, a relative fixed income spread play (long TLT, short JNK) is exactly what you want on.
Asset Allocation
| CASH | 75% | US EQUITIES | 0% | |
| INTL EQUITIES | 5% | COMMODITIES | 0% | |
| FIXED INCOME | 15% | INTL CURRENCIES | 5% |
THREE FOR THE ROAD
TWEET OF THE DAY
Peak M&A Is A Classic Late Cycle Indicator | $DD $DOW https://app.hedgeye.com/insights/48015-peak-m-a-is-a-classic-late-cycle-indicator-dd-dow @MariaBartiromo
@KeithMcCullough
QUOTE OF THE DAY
If you don't know where you are going, you'll end up someplace else.
Yogi Berra
STAT OF THE DAY
It's estimated that 70-80 million dogs and 74-96 million cats are owned in the United States. Approximately 37-47% of all households in the United States have a dog, and 30-37% have a cat (APPA).
