CLIENT TALKING POINTS
JAPAN
They’re really out on the central banking #BeliefSystem in Japan – on the heels of reiterating 80T (T = Trillion Yen), the Yen ramped +1.7% (vs USD) to yet another YTD high, and the Nikkei continued to crash, -3.1% overnight (-7.2% on the week) and -26.1% from last year’s cycle peak in Global Equities (July).
GOLD
Oh the love - Gold is a currency and it’s got more momentum now than any currency in the world, charging to new YTD highs (+1.2% this morning to +23.1% YTD) of $1307/oz as German 10s drop back to negative this morning and U.S. 10s tick below Spanish 10s for the 1st time at 1.55% vs. 1.60%, respectively (Gold doesn’t have a yield, but it doesn’t have a negative one either).
S&P 500
In at 2,068 and out at 2,083? Yep. Not only does that beat the return you’d have had buying the S&P 500 1yearr ago today (it’s -1.18% vs. June 16, 2015 as #TheCycle was peaking), do you think we really trusted being net long after seeing another #Recession print on U.S. Industrial Production of -1.4% year-over-year yesterday? Do you think we trust the Fed’s #BeliefSystem?
TOP LONG IDEAS
TLT
No matter what side of the reflation/deflation trade you’re on, the growth in global demand continues to decelerate on a trending basis. The debate is no longer whether or not growth is slowing. The real debate centers on the policy response and the market reaction to that policy response. While that question presents us with “open the envelope” risk, #GrowthSlowing will continue to be the bull catalyst for U.S. Treasuries whatever the policy response as the slow march to zero yields globally goes on.
GLD
To sum things up, stay away from the guessing game and stick to what is empirically evident. A stronger USD over the longer term is a probable scenario in our book. We expect the Fed, and all central banks for that matter, will try to combat deflation. That said, global currencies all burning at the same time makes a compelling case for GLD, as gold knows no currency. You can sell it in local currency all over the world. Scary but true.
MCD
There have been rumblings in the news that McDonald's (MCD) 2Q comps have slowed due to the temporary replacement of the 2 for $5 value platform for Monopoly. This has clearly been reflected in the stock as of late, as MCD has underperformed the S&P 500 over the last month.
Despite this near term headwind, we still strongly believe in the long-term story for MCD and remain confident that once they get their value platform right nationally, they will be just fine. In the short to intermediate term, as we wait for a solidified value platform, this recent underperformance represents a great buying opportunity. We remain LONG MCD.
Asset Allocation
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 6/15/16 | 64% | 6% | 0% | 6% | 18% | 6% |
| 6/16/16 | 66% | 2% | 0% | 8% | 20% | 4% |
Asset Allocation as a % of Max Preferred Exposure
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 6/15/16 | 64% | 18% | 0% | 18% | 55% | 18% |
| 6/16/16 | 66% | 6% | 0% | 24% | 61% | 12% |
THREE FOR THE ROAD
TWEET OF THE DAY
VIDEO (3mins) My Response To Yesterday’s Fed Statement (I'm out) https://app.hedgeye.com/insights/51712-mccullough-my-response-to-today-s-fed-statement … via @hedgeye
QUOTE OF THE DAY
Know thyself means this, that you get acquainted with what you know, and what you can do.
Menander
STAT OF THE DAY
According to a new poll from Bloomberg Politics, 63% of women said they could never vote for Donald Trump.
