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Client Talking Points

RUSSELL 2000

One of the signals that remained in #crash mode yesterday (> 20% decline from bubble peak) was the Russell. It has no immediate-term support to the low-end of the 981-1,032 risk range (sell high end of range, cover low) – both the ISM of 48.2 (4th straight month of contraction) and Fed Loan Officer Survey’s keep #Recession probability rising.

EUROPE

Too bad both the Draghi devaluation move (and the Japanese negative rates one) only gave those stock markets 2-day rallies. Straight down again for the DAX, IBEX, and MIB Index (all are in #crash mode with Spain leading the draw-down at -27.4% from its 2015 bubble peak) #EuropeSlowing.

OIL

Wow is chasing charts getting painful to watch – straight back down this week for WTI (down -6.6% yesterday and down another -2.3% this morning with no support to the low-end of the risk range at $27.62). Draghi and Kuroda Devaluation moves are Dollar #Deflation ones; UST Yield Spread (10s/2s) 113 basis points is flattest curve of the cycle.

 

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

Asset Allocation

CASH 59% US EQUITIES 0%
INTL EQUITIES 0% COMMODITIES 2%
FIXED INCOME 25% INTL CURRENCIES 14%

Top Long Ideas

Company Ticker Sector Duration
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).

Three for the Road

TWEET OF THE DAY

$HAIN core US business is in a free fall...

@HedgeyeHWP

QUOTE OF THE DAY

You will either step forward into growth, or back into safety.

Abraham Maslow                                      

STAT OF THE DAY

70% of fatal avalanches take place within four days of another avalanche.