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Client Talking Points

RUSSIA

Our #Deflation call might be 18 months old, but the daily returns continue to be impressive if positioned for it. With Oil’s crash continuing this morning (down -1.5% WTI post a down -10.5% week), Russian Stocks are down -3.7% and down -10.6% in the last month.

COPPER

After deflating another -5.3% last week, copper drops another -2.0% this morning to $1.98/lb. The Doctor and 10YR Yields have been better economists than pretty much anyone you could have followed in the last 6-18 months.

JPM

Earnings season starts this week and JPM reports Thursday. There’s no irony that the Financials (XLF)down  -7.3% were one of the worst S&P Sector exposures last week; with both #Deflation and a #Recession in Industrial/Cyclical terms, long-term yields fall, no matter what the Fed thinks it can do.

 

*Tune into The Macro Show with Hedgeye Internet & Media analyst Hesham Shaaban live at 9:00AM ET - CLICK HERE

Asset Allocation

CASH 67% US EQUITIES 3%
INTL EQUITIES 0% COMMODITIES 0%
FIXED INCOME 18% INTL CURRENCIES 12%

Top Long Ideas

Company Ticker Sector Duration
MCD

McDonald's boasts style factors that are best in class for turbulent times in the market, big cap and low beta and it has handily been outperforming the market and its competitors as of late. One of the biggest aspects of competing in their space is value offering.

 

McDonald’s has ceded share in the value category primarily to Burger King over the last two years. Now that they are launching a national value platform with a full slate of media support, MCD will recover the value customer.

GIS

General Mills' business seems to be starting to pick up steam, as the company is working to improve merchandising and advertising on core business.

 

In addition they have executed a few small, but meaningful M&A deals showcasing the change in managements thinking. The divestiture of Green Giant to B&G Foods, for instance, although a profitable business, was a good move for them given their lack of focus/investment in the brand (they have more opportunities like this throughout their portfolio, in addition to SKU rationalization).

 

GIS continues to look for more sizeable acquisitions in emerging markets, but the string of pearls approach may remain most effective domestically.

TLT

After the worst start to a year literally EVER for U.S. equity markets, TLT caught a bid in the first week of trading as the centrally-planned Chinese stock markets traded limit down earlier in the week. It was the largest central bank liquidity injection from Beijing since Chinese markets crashed in September.

 

TLT remains one of our strongest long idea calls heading into 2016 as junk bond markets begin to crack.   

Three for the Road

TWEET OF THE DAY

No private buyer that knows the apparel sector would buy $KSS here. The company could lose 1/2 its sales, and the Consumer wouldn't care.

@HedgeyeRetail

QUOTE OF THE DAY

This is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.

Winston Churchill

STAT OF THE DAY

MCD has committed to sourcing 100% of all fiber-based packaging from recycled or certified sources by 2020.