CLIENT TALKING POINTS
YEN
The Yen was smashed on the “negative yield” panic by the Japanese on Friday. Good for a 2-day Nikkei lift to lower-highs, but what’s next with the Nikkei down -7% year-to-date? All Japanese, European, and Chinese FX panic means is more #Deflation, in Dollars.
COMMODITIES
Dare we say layup short selling opportunities in things we don’t like (Oil and Copper specifically) on last week’s bounce – both are down -1.2-1.8% this morning. Gold (which we’re long in RTA, currently) is up +0.4% as #Deflation Risk = On.
YIELDS
Yields around the world crushed by Japan doing more of what hasn’t worked for decades – JGB 10YR = 0.04%! German 10YR = 0.31%, Swiss 10YR -0.31%. The U.S. Long Bond (TLT) remains our favorite Macro long idea alongside USD and Utilities (XLU).
*Tune into The Macro Show with Hedgeye CEO Keith McCullough live in the studio at 9:00AM ET - CLICK HERE.
TOP LONG IDEAS
XLU
After a busy week of domestic data, you probably don’t need us to tell you that growth continues to slow. Despite the short-covering squeeze in energy stocks, Utilities (XLU) closed out January as the only sector in positive territory (+5%), other than Consumer Staples which eeked out a +0.5% gain. It was an awful start to the year for the S&P 500 (-5%). Don’t expect +10% of relative outperformance every month, but if you stuck with us on this trade, you’re in much better shape than most.
GIS
GIS remains one of our top Long ideas in the consumer staples space. As we have continued to say it boasts style factors that are ideal in turbulent times; high market cap, low beta and liquidity.
Recently, General Mills has been attacked by Chobani commercials, claiming that Yoplait yogurt contains the same ingredients used in pesticide. GIS filed a false advertising lawsuit against Chobani demanding that they stop showing that commercial because it could be detrimental to sales. GIS just got word that a federal judge has barred Chobani from continuing the ad campaign. This is a win for GIS, but it is unclear right now if there was any damage done to the brand. At this time we do not believe it had any serious impact on the company. We will keep you informed of any material information regarding this lawsuit as it moves forward.
TLT
Long-Term Treasuries (TLT) continues to preserve capital against the slow-moving trainwreck in Junk Bonds (JNK). Week-over-week, 10-year bond yields crashed 13 basis points to 1.92%. That helped lift the best play on U.S. growth slowing (TLT) by 0.85% on the week as credit spreads continued to widen (JNK gained +0.76% on the week, underperforming TLT marginally on a relative basis).
Asset Allocation
CASH | 60% | US EQUITIES | 0% | |
INTL EQUITIES | 0% | COMMODITIES | 2% | |
FIXED INCOME | 25% | INTL CURRENCIES | 13% |
THREE FOR THE ROAD
TWEET OF THE DAY
NEW VIDEO | From #Washington To Wall Street: What To Watch w/JT Taylor https://app.hedgeye.com/insights/48857-from-washington-to-wall-street-what-to-watch-with-jt-taylor … cc @KeithMcCullough
@Hedgeye
QUOTE OF THE DAY
What would life be if we had no courage to attempt anything?
Vincent van Gogh
STAT OF THE DAY
Only 17 states require high school students to take a course in personal finance.