Client Talking Points
The biggest tell yesterday was volatility – i.e. no change – it remains in what we call a Bullish Formation with an immediate-term risk range of 22.17-28.98. #Deflation’s Dominoes end with massive volatility and a breakout in credit spreads.
China was hammered another -3.6% overnight in Shanghai after Trump reminded the world he wants to eviscerate Chinese trade – that would have to be super bullish for macro markets, no? #GOPDebate .
After every high profile pundit tries to call the bottom, Oil takes another leg down – this is #Deflation and it is not “transitory.” Oil is crashing again this morning down -5.2%, this ensures Producer Prices in America are in a #Recession.
*Tune into The Macro Show with Hedgeye CEO Keith McCullough live in the studio at 9:00AM ET - CLICK HERE.
|FIXED INCOME||21%||INTL CURRENCIES||12%|
Top Long Ideas
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.
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.
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
VIDEO | Here's what we really think about the #Fed and QE
https://app.hedgeye.com/insights/47754-what-qe-actually-did-was-pay-the-few-and-crush-the-many?type=video… cc @KeithMcCullough @HedgeyeDDale
QUOTE OF THE DAY
Impatience never commanded success.
Edwin H. Chapin
STAT OF THE DAY
According to an analysis by Bloomberg Intelligence, Apple Inc. could owe more than $8 billion in back taxes as a result of a European Commission investigation into its tax policies.