CLIENT TALKING POINTS
Euro
Moving away from staring at yesterday’s news, I’ll spend time on our Themes call discussing the rising risk of #EuropeImploding from within; with all eyes on British Pound Devaluation, there’s a much bigger picture to discuss linking European #GrowthSlowing (from the 2015 cycle high) to political zeitgeist via this young currency experiment.
DAX
How many bear market bounces of greater than +1% have European Equity bulls chased since the DAX topped 2015? A: too many; DAX +1.3% this am to 9493 with a risk range of 9; remains in #crash mode (-23.4% from 2015 Global Equity #Bubble high) and a great short selling opportunity at top-end of my range.
OIL
WTI down -4% in the last month (vs. Gold +10%) and I’m still much more bullish on Gold than Oil – Oil’s volatility (OVX) backed up to 41 again yesterday and what I call my long-term TAIL support level remains 35-36; having missed the move off the 3yr low, I thought long and hard about getting long Oil/Energy for the Q3 Macro Themes call and decided no.
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 | |
|---|---|---|---|---|---|---|
| 7/6/16 | 60% | 0% | 0% | 10% | 26% | 4% |
| 7/7/16 | 58% | 0% | 0% | 10% | 27% | 5% |
Asset Allocation as a % of Max Preferred Exposure
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 7/6/16 | 60% | 0% | 0% | 30% | 79% | 12% |
| 7/7/16 | 58% | 0% | 0% | 30% | 82% | 15% |
THREE FOR THE ROAD
TWEET OF THE DAY
Too Late to Buy Gold and Treasuries? app.hedgeye.com/insights/52167… via @KeithMcCullough $GLD $TLT #gold #markets #bonds pic.twitter.com/zdHGcIY3Mz
@Hedgeye
QUOTE OF THE DAY
“Freedom means the opportunity to be what we never thought we would be.”
-Daniel Boorstin
STAT OF THE DAY
Bo Jackson played 8 seasons in the MLB, his career batting average was .250