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Why Investors Should Stay Long "Expensive" Utilities & Short "Cheap" Financials | $XLU $XLF

Takeaway: Utilities are up +22.1% year-to-date vs. Financials down -6%.

Why Investors Should Stay Long "Expensive" Utilities & Short "Cheap" Financials | $XLU $XLF - Cheap cartoon 05.16.2016

 

We're sticking with what's worked all year.

 

As Hedgeye CEO Keith McCullough writes in a note sent to subscribers earlier this morning:

 

"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.”

 

Why Investors Should Stay Long "Expensive" Utilities & Short "Cheap" Financials | $XLU $XLF - sector performance 7 6

 

In the video below, Hedgeye CEO Keith McCullough explains why we like "expensive" Utilities:

 


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 7 6

 

Daily Market Data Dump: Wednesday - sector performance 7 6

 

Daily Market Data Dump: Wednesday - volume 7 6

 

Daily Market Data Dump: Wednesday - rates and spreads 7 6

 

Daily Market Data Dump: Wednesday - currencies 7 6


About Everything | Live Q&A with Neil Howe: The Global Economy Gears Down

 

In this complimentary edition of About Everything, Hedgeye Demography Sector Head Neil Howe discusses lackluster global growth and the IMF's continually downgraded GDP forecasts. 


Click here to read Howe’s associated About Everything piece.

 

Click here to access the associated About Everything slides.

 


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CHART OF THE DAY: Here's Why You Hide Out In Cash & Gold

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.

 

"... Now how about us crazy Canucks who have a 60% Cash position in USD (and 10% in Gold)?

  1. US DOLLAR has not only held @Hedgeye TREND support but continues to rise as the Pound (and Euro) are devalued
  2. USD has developed an immediate-term POSITIVE correlation of +0.8 with GOLD
  3. GOLD continues to hold an intermediate-term INVERSE correlation of +0.9 with 10YR Yields" 

 

CHART OF THE DAY: Here's Why You Hide Out In Cash & Gold - 07.06.16 Chart


Cartoon of the Day: Pounded

Cartoon of the Day: Pounded - Pound cartoon 07.05.2016

 

The British pound hit a 31-year-low against the dollar today as the Bank of England warned that "the current outlook for UK financial stability is challenging."


The Latest Nonsense From SF Fed's Williams: Brexit Isn't A Big Deal For U.S.

Takeaway: San Francisco Fed head John Williams is full of baloney.

The Latest Nonsense From SF Fed's Williams: Brexit Isn't A Big Deal For U.S. - marketwatch story

 

According to San Francisco Fed head John Williams, Brexit isn't "a big deal for the U.S. economic outlook."

 

Reminder: This is the same guy who, in January, said the Fed should raise rates as many as five times in 2016 because the U.S. economy was "in very good shape."

 

Question: What happened between January and today to make the Fed significantly dial back rate hike expectations? 

 

Answer: The U.S. economy continued to slow...

 

In other words, why should we listen to Fed forecasters who are so continually on the wrong side of their own predictions? Well, we shouldn't.

 

Here's the key Brexit excerpt from the wider interview via MarketWatch and other delusional statements:

 

  • Williams on Brexit: "And so even though I think [Brexit] is a significant event, I am not trying to downplay Brexit, I’m just saying that with a little bit of time, people have kind of gotten more reasonable and kind of sharpened their pencils and said 'ok what does this really mean for Britain, Europe and the global economy' and when you do that, it doesn’t seem quite a big deal for the U.S. economic outlook."
  • Williams on the May Jobs Report bomb: "... A good chunk of the May weakness was either partly due to the Verizon strike effect but also due to some unusually good weather earlier in the year and this was payback for that. So when you take out the effects of the strike, and you adjust for the fact of the unusual weather pattern, you basically see a pattern that job growth has continued to be very good, above trend, through the six months of this year."
  • Williams on Fed-induced financial market imbalances: "... If asset prices, real estate prices, continue to go further and further away from longer-term fundamentals I think that creates risk for the economy, I think it creates risks eventually for the financial system. I don’t think these are risks that are really powerful today. These are not things that worry me, “oh are we going to have a big crash next week or something,” it is just as these imbalances in the economy continue to grow slowly over time I think we will just be facing more difficult challenges in our economic and policy environment in a few years."

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