Do up your chin straps!

Client Talking Points

YEN

Post “negative yields” and the infinity-QE comments, the Yen has ramped and yields have crashed – this is the opposite of what central planners want (Down FX, Down Rates = Inflating Stocks) – Up Currency + Down Rates = #Deflation

Equities

Globally, crashing now – and in Europe the Up Euro + Down Rates example of #Deflation looks very obvious – DAX is down the least this am, -2.7% taking its crash to -29% from the 2015 top – Italy continues to implode, down another -4.5%.

10 Year

Our favorite liquid long idea remains the Long Bond – 10 year tagging 1.62% in the US this morning (our call is for lower-all-time lows on the long-end of the curve) - Yield Spread (10s/2s) crushed to new lows at 98bps wide – reiterating our fav Equity Sector Short (US Financials) on that.

Asset Allocation

CASH 66% US EQUITIES 0%
INTL EQUITIES 0% COMMODITIES 0%
FIXED INCOME 21% INTL CURRENCIES 13%

Top Long Ideas

Company Ticker Sector Duration
XLU

The bond market understands #GrowthSlowing. So do Utilities (XLU), which is why XLU is leading S&P sub-sector performance in 2016. XLU is up +7.6% versus down -8.0% for the S&P 500. Stick with it on the long side.  

GIS

GIS remains one of analyst Howard Penney's top Long ideas in the Consumer Staples space. As we have continued to say, it boasts style factors ideal in turbulent times; high market cap, low beta and liquidity. While GIS is down year-to-date, it's held up very well against the broader stock market. GIS is down -4% versus down -8% for the S&P 500 in 2016.

TLT

Down go growth expectations and down goes the yield curve. That's the latest from Macro markets last week and it plays right into our long Long-Term Treasuries (TLT) and short Junk Bonds (JNK) Investing Ideas.

 

The UST 10YR Yield declined another -9 basis points last week which helped boost TLT +1.1% on the week. In a healthy environment, bonds as an asset class go up in tandem, but JNK lost -0.9% on the week despite a falling yield curve. That’s because we’re NOT in an “all is good” environment. Credit spreads widen in turbulent times. This widening is the alpha-generating opportunity in long TLT, short JNK.

Three for the Road

TWEET OF THE DAY

World-Renowned Demographer Neil Howe Joins Hedgeye app.hedgeye.com/insights/49035… @HoweGeneration @KeithMcCullough

QUOTE OF THE DAY

"To be THE MAN, you gotta beat THE MAN! Woooooooooo!

-Ric "Nature Boy" Flair

STAT OF THE DAY

Ric "Nature Boy" Flair has won 16 world championships


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7 Tweets Summing Up What You Need to Know About Today's GDP Report

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In the past six months, U.S. stock indices are up between +12% and +18%.

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We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

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People's Bank of China Spins China’s Bad-Loan Data

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Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

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An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

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