CLIENT TALKING POINTS
Japan
How about blaming the #BeliefSystem (that central market planners can arrest gravity) breaking down as growth slows? That is Japan. Yen up another +1.2% vs. USD and Nikkei smoked for another -1.9% loss overnight, taking it’s crash from the Global Equity #Bubble peak (2015) to -26.4%.
Oil
USD Up, Supply Up (trumping Miss Piggy), takes WTI down another -0.7% to $46ish this morning – that’s down almost 4.5% in the last month as #StrongDollar emerges, once again, and correlation risk still matters (our Long Gold position is +10.5% in the last month to +29.2% YTD at $1370/oz this AM).
Sectors
Our Q3 Macro Themes Call is tomorrow and I’m staying long “expensive” (Utes, XLU +22.1% YTD) vs. short “cheap” (using the wrong bond yields, spreads, etc.) Financials (XLF -6% YTD); interesting immediate-term TRADE break-down signal in Basic Materials (XLB) yesterday – we’ll see if there’s follow through on deflating the “reflation”.
TOP LONG IDEAS
TLT
Since equity markets peaked last summer, TLT has been a resilient and less volatile source of absolute alpha, and the good news is that spotting the opportunity requires a daily data grind and a wrestling with reality more than a sky-high IQ:
- S&P 500: +0.1% Y/Y
- TLT: +22.0% Y/Y
Brexit, Frexit, Yuan devaluation – whatever the story, investors are paying higher premiums for the safety and appreciation potential of the long bond, a source of long-standing outperformance in this #GrowthSlowing environment. Moving into 2015, net futures and options positioning shows that traders had the largest net short position in the 10-year Treasury of the entire cycle, as most were positioned for rate hikes and a “lift-off economy."
GLD
It was another week of all-time lows in long-term Treasury yields and YTD highs in Gold (GLD), Treasury Inflation-Protected Securities (TIP), and Long Bonds (TLT is at a new all-time high!) as the rotation out of volatile equity markets continues.
TIP
See above update on TLT/GLD.
Asset Allocation
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 7/5/16 | 60% | 0% | 0% | 10% | 26% | 4% |
| 7/6/16 | 60% | 0% | 0% | 10% | 26% | 4% |
Asset Allocation as a % of Max Preferred Exposure
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 7/5/16 | 60% | 0% | 0% | 30% | 79% | 12% |
| 7/6/16 | 60% | 0% | 0% | 30% | 79% | 12% |
THREE FOR THE ROAD
TWEET OF THE DAY
Cartoon of the Day: Pounded app.hedgeye.com/insights/52145… cc @KeithMcCullough #Pound #FX pic.twitter.com/h9QhFK4f3N
QUOTE OF THE DAY
“Don’t go around saying the world owes you a living. The world owes you nothing. It was here first.”
-Mark Twain
STAT OF THE DAY
John McEnroe won Wimbeldon 3 times (1981, 1983, 1984).
