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Capital Brief: Hillary Clinton Bailed Out ... & A Must-Win For Trump

Takeaway: You've Got Bail; Tar Heel Takedown; Guns, Ryan and Dems;

Editor's Note: Below is a brief excerpt from Hedgeye Potomac Chief Political Strategist JT Taylor's Capital Brief sent to institutional clients each morning. For more information on how you can access our institutional research please email sales@hedgeye.com.

 

Capital Brief: Hillary Clinton Bailed Out ... & A Must-Win For Trump - JT   Potomac under 1 mb

 

“I not only use all the brains that I have, but all that I can borrow.”

-Woodrow Wilson

YOU’VE GOT BAIL

Hillary Clinton and her team dodged a bullet (more like a nuclear bomb) after FBI Director James Comey concluded that the agency will not recommend criminal charges against Clinton or any of her aides over the use of a private email server during her tenure as Secretary of State. Comey’s slap on the wrist had a stern sting to it though - as he further characterized her practices as “extremely careless” but lacking clear evidence of an intent to violate the law.

 

The release comes just in the nick of time as speculation about Clinton’s meeting with the FBI over the weekend, along with the stir created by the ill-conceived appearance of her husband and Attorney General Lynch were reaching new heights. Clinton now hopes that the remnants of the controversy fade quickly, so she can refocus on rebuilding her image - we think the Republicans won’t give her that chance.

TAR HEEL TAKEDOWN

Clinton hit the trail with President Obama to tackle the Tar Heel state while Donald Trump and Senator Bob Corker (TN) tried their own hand just hours away. Clinton and Obama touted their friendship, focusing on why she’s the right leader for the job, while hitting on Trump’s obsession with Twitter. Trump bashed Clinton for her email controversy, and rigging the system (of course).

 

Trump rallies on the idea that if Clinton is elected, it will be a continuation of Obama’s presidency - maybe so, but Clinton believes that with the help of the president, she can rouse voters and build her own legacy. Top aides believe NC - which Mitt Romney won in 2012 - is the biggest must-win for Trump - and will be on everybody’s mind until November 8.

GUNS, RYAN AND DEMS

Though House Democrats put a lot of work into forcing a vote on guns in the coming week, the actual thrust of the legislation remains a sticking point. Democrats believe the Republican proposal does not take sufficiently strong enough action to thwart terrorism, warning that renewed protests are possible later this week. Remember, we have just eight legislative days until a very loooong summer recess. Better get moving.


#BeliefSystem Breakdown | Negative Rates: "There's No Doubt It Was Poison"

 #BeliefSystem Breakdown | Negative Rates: "There's No Doubt It Was Poison" - central bank kool aid 06.09.2016

 

"I don't think it was wrong to adopt negative rates," said Masahiko Shibayama, aide to Japanese prime minister Shinzo Abe, discussing the BOJ's negative interest rate policy. "But looking at what has been happening, there's no doubt it was poison," he said, referring to the public's dissatisfaction with the policy.

 

Can you believe it?

 

We can. We've been saying for a while now that the central planning #BeliefSystem is breaking down. With the disillusioned Japanese public railing against the BOJ's policies, it's no surprise that the Nikkei continues to crash as the Yen strengthens. Here's analysis from Hedgeye CEO Keith McCullough in a note sent to subscribers earlier today: 

 

"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%."

 

 

Outside of Japanese equities, Yen strength wasn't what the BOJ had in mind either. But that's what they got. The USDJPY cross is down -18% in the past year alone.

 

#BeliefSystem Breakdown | Negative Rates: "There's No Doubt It Was Poison" - usdjpy 7 6

 

As the BOJ failures mount, the central-planning justifications are getting truly bizzare.

 

Consider this argument from Kazuo Momma, a former top BOJ bureaucrat, via Reuters:

 

"One positive from three years of aggressive money printing was a recognition among the public that monetary policy alone cannot cure all ills. 'In the past, everything bad about the economy was blamed on the BOJ. Now, there are people saying that structural reforms are equally important,' Momma told Reuters. 'There's no quick fix. The most sustainable and definite way to boost Japan's potential and heighten people's confidence is to patiently pursue structural reform, even if that takes time.'

 

After decades of failure, what makes Mr. Momma so sure central planning can fix Japan's ills? 


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:

 


Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.43%
  • SHORT SIGNALS 78.37%

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.

 


Shall we blame China, Brexit, or Miss Piggy?

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”.

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%
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

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.

Three for the Road

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).


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.

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