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What Could Be Bullish?

Client Talking Points

JAPAN

What is breaking really bad is the Japanese assumption that they can print to infinity and beyond and get stock market inflation. The Nikkei is down for the 4th straight session, -1.3% overnight, and testing crash mode (again) at -19.3% since July.

EPS

308 of 500 S&P Companies have reported and it’s not pretty. On a year-over-year basis, SALES -4.7%, EPS -6.4% and only 3 of 10 SECTORs have year-over-year profit growth. *Reminder: 2 consecutive negative year-over-year profit quarters has always = 20% draw-down in the S&P 500.

UST 10YR

The UST 10YR Yield is down at 1.85% getting ahead of the jobs report implies that buy-side expectations are for another rate of change slow-down in NFP. Don’t forget that no matter what the absolutists have to say about this print, NFP growth peaked at 2.34% in FEB of 2015 – add to Long Bond positions on all short-sighted rallies in yields.

 

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

Asset Allocation

CASH 63% US EQUITIES 0%
INTL EQUITIES 0% COMMODITIES 0%
FIXED INCOME 23% 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

NEW | Under 60 Seconds: Ralph Lauren's Earnings Report

Watch it: https://app.hedgeye.com/insights/48971-under-60-seconds-rl-s-earnings-report

@KeithMcCullough $RL

@Hedgeye

QUOTE OF THE DAY

It’s not what you look at that matters, it’s what you see.

Henry David Thoreau                                    

STAT OF THE DAY

Tough times in Brazil are impacting Carnival, Petroleo Brasileiro SA, the state oil giant known as Petrobras, says it has cut its Carnival budget by 80%.


The Price of Oil: A Closer Look At Saudi Arabia’s True Intentions


In this Hedgeye TV video excerpt, Potomac Research Group Senior Energy analyst Joseph McMonigle weighs in on why Saudi Arabia wants lower oil prices, whether OPEC will call an emergency meeting, and provides an update on how the lifting of Iranian sanctions is affecting the price of oil.


Under 60 Seconds: RL’s Earnings Report

 

Hedgeye highlights three key points from Ralph Lauren's (unimpressive) quarter courtesy of our veteran Retail analyst Brain McGough.


the macro show

what smart investors watch to win

Hosted by Hedgeye CEO Keith McCullough at 9:00am ET, this special online broadcast offers smart investors and traders of all stripes the sharpest insights and clearest market analysis available on Wall Street.

Cartoon of the Day: Recession Risk Rising

Cartoon of the Day: Recession Risk Rising - recession cartoon 02.04.2016

 

While a U.S. #Recession is not a certainty, the daily economic data coming in continues to bolster our Macro team's call.


JT Taylor: The Vulnerables Take Aim At Rubio ... Paul Ryan Channels William Wallace

Takeaway: Paul Ryan channels his inner William Wallace and Republicans take aim at Marco Rubio.

Editor's Note: Below is a brief excerpt from Potomac Research Group Senior Analyst JT Taylor's Morning Bullets sent to institutional clients each morning. 

CHANNELING HIS INNER WILLIAM WALLACE

JT Taylor: The Vulnerables Take Aim At Rubio ...  Paul Ryan Channels William Wallace  - braveheart

 

House Speaker Paul Ryan reiterated his vision for a 'Confident America' yesterday, exhorting Republicans to "Unite the clans!" a la Braveheart. He aims to channel the spirit of his mentor Jack Kemp and move the party towards a bold, aspirational, and above all positive image for the future of the country. He denounced the anger and disillusionment that has been a campaign staple, and is providing a striking counter-narrative. It's what gave Reagan his mandate, Ryan said, and we think that maybe Rubio has picked up on the message, with his recent shift away from the "doom and gloom."

BULLSEYE ON MARCO  

JT Taylor: The Vulnerables Take Aim At Rubio ...  Paul Ryan Channels William Wallace  - republican take aim

 

Marco Rubio has lacked boots on the ground, but it's Governors Bush, Kasich, and Christie who are all at risk of being trampled in NH. Combined, the three governors have held more than 460 events in the state, all outstripping Rubio who has only held 76 events. Historically, NH has rewarded candidates who have put in more time on the ground; the governors have opened a new line of attack on Rubio -- that he hasn't made the effort and is trying to parachute in at the last minute.  

 

New polls out this morning have Rubio surging to second place or a close third behind Cruz. Third place won't be good enough for Rubio -- he has to show continued progress and run the table on the three governors who have all placed big bets here. The nervous party establishment is looking to pick its candidate quickly, and there's lots of chatter about donors and endorsements on hold until after Rubio demonstrates a clear lead.  He's got to win big enough to undercut the rationale behind his rivals' campaigns; and the sooner he can make this a three-way race, the better his chances. 


Does It Make Sense Being Long Gold Now?

 

In this brief excerpt from The Macro Show this morning, Hedgeye CEO Keith McCullough responds to a subscriber’s question on whether it makes sense being long gold right now. In particular, whether what’s been a good “trade” recently, will ultimately manifest into a longer term “trend.”

 

Subscribe to The Macro Show today for access to this and all other episodes. 

 

Subscribe to Hedgeye on YouTube for all of our free video content.


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