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Client Talking Points

USD

Re-testing the go-zone of $99-100 on the USD Index with the EUR/USD risk range suggesting $1.05 is next. In 2016 “forecast” terms, this remains grossly misunderstood from a foreign currency, commodity, EM, credit, etc. risk perspective.

#DEFLATION

The Canadian Dollar crashed to new lows yesterday and EM ASIA were slammed again overnight (Thailand -2.2%, Indonesia -1.9%. Russian Stocks were down -2.6% (and -12% in the last month) as the CRB Index made a fresh new year-to-date low yesterday down -26% year-to-date.

UST 10YR

2.21% = lows of the week AFTER the almighty “rate hike”- don’t forget that Industrial Production for NOV was down -1.2% year-over-year (recession) and consumer spending put in its 6 year cycle peak (alongside employment gains) in Q1 of this year too.

 

*Tune into The Macro Show with Hedgeye CEO Keith McCullough at 9:00AM ET - CLICK HERE

Asset Allocation

CASH 67% US EQUITIES 2%
INTL EQUITIES 6% COMMODITIES 0%
FIXED INCOME 15% INTL CURRENCIES 10%

Top Long Ideas

Company Ticker Sector Duration
MCD

MCD remains one of our top LONG ideas in the restaurants space. All indications are that all day breakfast is working, bringing back old customers and driving growth of new customers. Customers are pairing both breakfast and lunch items together in the lunch and dinner day, part which is helping drive additional sales.

 

McDonald’s Canada opened its first standalone McCafe this month. The much simplified concept intends to appeal to customers by offering both speed of service and low cost. They intend to be faster than their main competitor Tim Hortons and cheaper than Starbucks, carving out their own niche in the market.

RH

MCD remains one of our top LONG ideas in the restaurants space. All indications are that all day breakfast is working, bringing back old customers and driving growth of new customers. Customers are pairing both breakfast and lunch items together in the lunch and dinner day, part which is helping drive additional sales.

 

McDonald’s Canada opened its first standalone McCafe this month. The much simplified concept intends to appeal to customers by offering both speed of service and low cost. They intend to be faster than their main competitor Tim Hortons and cheaper than Starbucks, carving out their own niche in the market.

TLT

Implicit in our long TLT/short JNK bias is an expectation for high-yield spreads to continue along their recent trend of widening throughout the YTD.

 

“The U.S. economy is #LateCycle and the probability of a recession commencing by mid-2016 is extremely elevated – both in absolute terms and relative to the belief held by the overwhelming majority of investors and policymakers. Moreover, the risk of a global recession is also great in this scenario.”

 

The economic cycle doing what it always does (i.e. decelerate into a recession before bottoming and then reaccelerating) is reason enough to be bullish on the long bond and bearish on junk bonds, which are accelerating into full-blown crisis mode (the JNK ETF declined another -2% on Friday and is down -4.1% WoW, -5.8% MoM and -12.7% YTD).

Three for the Road

TWEET OF THE DAY

Real Conversations: A Paradigm Shift In Private Equity  https://app.hedgeye.com/insights/48144-real-conversations-a-paradigm-shift-in-private-equity… @LawrenceCalcano

@KeithMcCullough

QUOTE OF THE DAY

Take time: much may be gained by patience.

Latin Proverb

STAT OF THE DAY

Today in 1787, New Jersey became the 3rd state to ratify the Constitution.