CLIENT TALKING POINTS
VIX
While being right on all of our macro longs in 2016 (and having covered SPY in FEB, then coming back to the short side too early here in March SPY short -3.65% against us currently), we are as committed to the bear side of SPX and Russell as we have been every time VIX has been in this 12-14 range since JUL (when we initially went bearish on SPY).
COMMODITIES
Massive ramp in everything reflation post Janet Yellen going Dovish, but now that both the SPX and CRB Index are “flat” year-to-date (i.e the new bull is flat), but now USD is signaling immediate-term TRADE oversold inasmuch as CRB overbought.
JAPAN
Being bearish on the big 3 global Equity indexes (Nikkei, DAX, and S&P 500) continues to pay off in long/short space (vs. Long TLT, XLU, GLD). This will not be highlighted by the bulls but the Nikkei closed down for the 4th straight session overnight, now down -12.1% year-to-date (vs. DAX -8% YTD) and teetering on going back into #crash mode (-20% from July highs).
*Tune into The Macro Show with Hedgeye CEO Keith McCullough live in the studio at 9:00AM ET - CLICK HERE.
TOP LONG IDEAS
XLU
Utilities (XLU) remains the alpha generating trades in equities, year-to-date XLU is up 11.3% versus -1.1% for the S&P 500. Factor exposure is very important to us, especially when volatility is in a bullish TREND set-up and small cap, illiquid stocks continue to underperform. Here's another way to look at it:
Volatility
+ Illiquidity
+ Too many hedge funds chasing performance...
= #Pain
We continue to expect utilities to outperform the broader market given this current environment.
GIS
This stock is not likely going to go up 20% in the next year, but we do believe it will fare better than most in the consumer staples sector, especially as we head into an economic slowdown. That's why GIS is up 5.5% year-to-date versus down -1.4% for the S&P 500.
In the past few newsletters we've noted the effect Walmart is having on GIS, how its Yogurt business is faring against competitors, and how the company is broadening the distribution of its top 450 SKUs. On the M&A front, barring any screaming deals in the market place we don’t see General Mills (GIS) buying anything over roughly $1 billion in sales, just given the added complexity it would cause. So they will most likely continue the string of pearls approach in the Natural & Organic/Snacking categories. This does not rule out the possibility of GIS being bought, 3G & Kraft Heinz could be getting back in the mix as well, although it seems too soon for another deal this big.
TLT
Growth and inflation continue to decelerate in the Eurozone and globally. In other words, there is very little central planners can do to stop the cycle and the inevitable deleveraging that must take place in credit Long-Term Treasuries (TLT) remains the alpha generating trade in fixed income this year.
Asset Allocation
CASH | 63% | US EQUITIES | 0% | |
INTL EQUITIES | 0% | COMMODITIES | 7% | |
FIXED INCOME | 26% | INTL CURRENCIES | 4% |
THREE FOR THE ROAD
TWEET OF THE DAY
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QUOTE OF THE DAY
If you want to have a better performance than the crowd, you must do things differently from the crowd.
Sir John Templeton
STAT OF THE DAY
Since 2001, Earth has experienced 15 out of the 16 hottest years on record and 2015 was the warmest year ever recorded.