CLIENT TALKING POINTS

Japan

If you’re still looking for clues on how this grand-central-market-planning-experiment ends, it’s Yen Up, and Nikkei down for the 4th day in a row, -1.1% overnight, taking its crash in the #BeliefSystem to -27.7% since this time last year.

Commodities

What if the jobs print is “good” (albeit slowing in TRENDING rate of change terms)? Dollar Up, Commodity Reflation Down? With CRB Index and Oil -5% and -10%, respectively, in the last month I’m sure glad I didn’t chase those April-May reflation charts. To be continued… 

VIX

This 13-15 range for front-month US Beta Chasing Vol (VIX) has been a bear of a spot to be beta-shifting to levered long, so we’ll see what happens on the news this morning, but no matter what it is … I’ve been a seller of all beta chases for a year now in this VIX range and have no reason to change that Fading Beta strategy.

TOP LONG IDEAS

TLT

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

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

TIP

See above update on TLT/GLD.

Asset Allocation

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
7/7/16 58% 0% 0% 10% 27% 5%
7/8/16 58% 0% 0% 10% 27% 5%

Asset Allocation as a % of Max Preferred Exposure

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
7/7/16 58% 0% 0% 30% 82% 15%
7/8/16 58% 0% 0% 30% 82% 15%
The maximum preferred exposure for cash is 100%. The maximum preferred exposure for each of the other assets classes is 33%.

THREE FOR THE ROAD

TWEET OF THE DAY

No matter what the jobs report tells consensus, Hedgeye says short more Financials $XLF

@KeithMcCullough

QUOTE OF THE DAY

“We must take sides. Neutrality helps the oppressor, never the victim. Silence encourages the tormentor, never the tormented.”  

-Elie Wiesel 

STAT OF THE DAY

Nolar Ryan pitched 27 years in the MLB, his career ERA was 3.19