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Quick Take: A Good Spot To Buy Gold | $GLD

Takeaway: Gold is up 19% year-to-date. Buy gold between $1250-$1265.

Quick Take: A Good Spot To Buy Gold | $GLD - gold bar

 

What do you do with yesterday's pullback in Gold prices?

 

Here's analysis via Hedgeye CEO Keith McCullough in a note sent to subscribers this morning:

 

"GOLD – especially if you haven’t been long it yet, good spot to buy some down here in the $1250-1265 range with immediate-term upside to $1305-1310; short Copper on the other side of it around $2.10-2.15 with downside to the YTD lows; great way to stay with the reality that global growth hasn’t 'bottomed.'"

 


Daily Market Data Dump: Wednesday

Takeaway: A closer look at global macro market developments.

Editor's Note: Below are complimentary charts highlighting global equity market developments, S&P 500 sector performance, volume on U.S. stock exchanges, and rates and bond spreads. It's on the house. For more information on how Hedgeye can help you better understand the markets and economy (and stay ahead of consensus) check out our array of investing products

 

CLICK TO ENLARGE

 

Daily Market Data Dump: Wednesday - equity markets 6 22

 

Daily Market Data Dump: Wednesday - sector performance 6 22

 

Daily Market Data Dump: Wednesday - volume 6 22

 

Daily Market Data Dump: Wednesday - rates and spreads 6 22

 

Daily Market Data Dump: Wednesday - currencies 6 22


European Equities Still Stumbling, Brexit Or No Brexit

Takeaway: Italian equities are down -28% from last year's high despite the ECB's best efforts to arrest economic gravity.

European Equities Still Stumbling, Brexit Or No Brexit - Europe Japan cartoon 04.04.2016

 

"Unfortunately, post the Brexit vote, the world is going to have to keep reporting economic and profit cycle data," Hedgeye CEO Keith McCullough writes in a note sent to subscribers this morning. And unfortunately for Bulls that data has been continually poor.

 

Here's additional analysis from McCullough:

 

"EUROPE – seeing the weakest countries in European Equity markets get a jumpstart on selling this am with Italy leading losers -0.8%, taking its stock market crash to -28% from last year’s cycle high (Portugal -0.6%, Spain -0.4% both remain in crash mode too w/ European #GrowthSlowing no matter what the vote)"

 

Take a look at Italian stocks...

 

Italian equity markets continue to price-in reality, namely that the ECB's best efforts can't stanch the bleeding in Europe.

 


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

Brexit Vote

Client Talking Points

Europe

Seeing the weakest countries in European Equity markets get a jumpstart on selling this am with Italy leading losers -0.8%, taking its stock market crash to -28% from last year’s cycle high (Portugal -0.6%, Spain -0.4% both remain in crash mode too with European #GrowthSlowing no matter what the vote).

GOLD

Especially if you haven’t been long it yet, good spot to buy some down here in the $1250-1265 range with immediate-term upside to $1305-1310; short Copper on the other side of it around $2.10-2.15 with downside to the YTD lows; great way to stay with the reality that global growth hasn’t “bottomed”.

10 YR

Day 2 for Yellen where she’ll talk about “considerable uncertainty” in her forecasting process – wow did she look wobbly yesterday; Brexit vote providing us yet another buying opportunity in what’s +15.1% from this day last year (TLT) vs. SPY -1.6%; immediate-term downside in UST 10yr to 1.54%

Asset Allocation

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
6/21/16 62% 4% 0% 10% 20% 4%
6/22/16 61% 3% 0% 12% 21% 3%

Asset Allocation as a % of Max Preferred Exposure

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
6/21/16 62% 12% 0% 30% 61% 12%
6/22/16 61% 9% 0% 36% 64% 9%
The maximum preferred exposure for cash is 100%. The maximum preferred exposure for each of the other assets classes is 33%.

Top Long Ideas

Company Ticker Sector Duration
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.

Three for the Road

QUOTE OF THE DAY

"We cannot change the cards we are dealt, just how we play the hand."

-Randy Pausch

STAT OF THE DAY

The Florida Gators became the 3rd team in the College World Series history to fail to win a game in Omaha.


CHART OF THE DAY: What Unelected Fed Bureaucrats Continually Miss

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye CEO Keith McCullough. Click here to learn more.

 

"... When it comes to establishment economists, they don’t think in rate of change terms – they think about levels.

 

And that, for those of us who have evolved in this profession, is a damn shame. It’s not like 2nd derivatives (high-school math) are new. It’s not that people winning Nobel Prizes in Behavioral Economics should be epiphanies to these central-market planners either. What’s super sad about all of this is that no leader in either our established government or media holds these unelected people to account."

 

CHART OF THE DAY: What Unelected Fed Bureaucrats Continually Miss - 06.22.16 Chart


Behavioral Revolution

“Maybe something as dramatic as a scientific revolution is in store for us.”

-Robert Shiller

 

I know. Sometimes I sound a little bearish (on growth). But that’s a good thing (in alpha space). After all, the year-over-year rate of return from this day in June of 2015 in #GrowthSlowing (TLT) is +15.1% vs. the beloved US equity beta of the SP500 (-1.6%).

 

Maybe I should have started a 2 & 20 operation on that.

 

Kidding. What I signed up for when I went down this path to start Hedgeye was to sit on the front lines of what my favorite professor in New Haven (Shiller) told me could be in store – a revolution. A Behavorial Revolution in the study of economics, that is.

 

Back to the Global Macro Grind

 

By the time I got to Yale in the 1990s, the revolution was well underway. “The debate between behavioral finance researchers and defenders of the efficient market hypothesis was just beginning.” (Misbehaving, pg 168)

 

Little did I know what I didn’t know back then. That said, almost 20 years later, I don’t think the head of the Federal Reserve knows how to apply basic behavioral economics to her decision making process now either.

 

Behavioral Revolution - Yellen cart 06.07.2016

 

In what seemed like an exasperating moment for the Fed Chair yesterday, when Senator Pat Toomey (PA) asked Janet Yellen if she’d yet considered that 0% rates might be a bad thing in the years 2017 and beyond… she answered “no.”

 

Wow.

 

Upon further questioning by another gentleman on the Senate Banking Committee (sorry, these aren’t leaders in my life – I don’t know them all by name), when he asked Yellen why she didn’t consider her favorite labor market indicator bearish (now that her Change in Labor Market Conditions Index has been negative on an absolute basis for 5 months in a row), she muddled an answer about “levels.”

 

You see, when it comes to establishment economists, they don’t think in rate of change terms – they think about levels.

 

And that, for those of us who have evolved in this profession, is a damn shame. It’s not like 2nd derivatives (high-school math) are new. It’s not that people winning Nobel Prizes in Behavioral Economics should be epiphanies to these central-market planners either. What’s super sad about all of this is that no leader in either our established government or media holds these un-elected people to account.

 

We’re probably going to need a crisis to change that.

 

How else do you think this scary movie of abysmal forecasting (and monetary policy based on those forecasts) is going to play out? Will it get so bad that they just give up on it? Or are we about to enter the next frontier of OMG market operations?

 

Senator Reed (RI) gave us a looksy into that yesterday.

 

Yep. If Hillary wins, you know that Larry Summers is the front-runner to take over for Janet Yellen, right? If you didn’t know, now you know. He’s going to try to combine FISCAL policy with MONETARY!

 

Oh yeah, baby. We’re talking maybe a 50-year Treasury Bond issuance to finance building “bridges and roads” … and heck, anything someone in Big Government Spending land has ever dreamed of. Didn’t you hear, there’s supposed to be a “multiplier” on that!

 

Maybe that will make non-behavorial-linear-economic forecasting great again.

 

The way that math works is that you take The People’s taxes to securitize and finance the G (Government) in GDP = C + I + G (Consumption + Investment + Government Spending) equation … and voila, you’ll have a better forecast for GDP!

 

Don’t worry about the debt side of that equation. As Summers taught us with the Harvard Endowment’s, that stuff is for the birds.

 

After 8-9 years of printing and easing, Janet Yellen said that “considerable uncertainty about the economic outlook remains.” And per Senator Reed, that’s only “because you have one hand tied behind your back.”

 

Imagine what the next government can do with both hands in your pockets? Maybe Shiller was right. Maybe something dramatic is in store for us. But is that going to be a good thing? Or will that finally expedite the revolution?

 

Our immediate-term risk ranges (with intermediate-term TREND research view in brackets) are now as follows:

 

UST 10yr Yield 1.54-1.72% (bearish)

SPX 2055-2095 (bearish)
RUT 1125-1175 (bearish)

NASDAQ 4 (bearish)

Nikkei 150 (bearish)

DAX 99 (bearish)

VIX 16.26-22.67 (bullish)
USD 93.52-95.28 (bullish)
EUR/USD 1.11-1.14 (bearish)
YEN 103.09-105.95 (bullish)
Oil (WTI) 46.14-51.06 (bullish)

Nat Gas 2.41-2.79 (bullish)

Gold 1 (bullish)
Copper 2.00-2.14 (bearish)

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Behavioral Revolution - 06.22.16 Chart


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