CLIENT TALKING POINTS
UK
With most US beta chasers talking “SP500” today, let’s stay focused on the bigger macro picture which is highly correlated to what USD is doing in the FX War; UK 10yr Yield dives to 0.71% this am and the Pound’s crash are to lower-lows -0.7% at $1.28.
FX
Yen slammed -1.6% vs. USD (our Yen SELL signal went out late last week – let’s see if its more than a trade) and this gets interesting now with USD UP year-over-year and everyone racing the British to the bottom; EUR/USD was a big focus of my Q3 Macro Themes Call and looks as precarious as it has in a year at $1.10.
Oil
They say #StrongDollar wouldn’t matter for Oil or Reflation – we say that’s poppycock – USD Index +3% now in the last month and WTI is down -14% (inclusive of this morning’s decline) with the CRB Index -5% in the same period. Oil’s @Hedgeye TREND = $47.53/barrel, so that’s broken (for now); still much prefer long Gold
TOP LONG IDEAS
TLT
On Thursday, we introduced our Q3 Macro Themes: #ProfitCycle, #ConsumerCredit, #EuropeImploding. The gist of themes #1 and #2 emphasize that the economic cycle continues to roll over as evidenced by declining corporate profitability and the pending deceleration in consumer credit growth which is more of a “when” rather than an “if” scenario.
Consumer credit growth has a direct effect on consumption. Employment and consumption peaked on a Y/Y rate of change basis in Q1 2015 right after corporate profits peaked in the second half of 2014.
GLD
We want to be long of continued growth decelerating and inflation picking up from a GIP modeling perspective into the back half of 2016. TIPS are a great way to play both of these views along with our GLD (reflation) and TLT (growth slowing) positions.
TIP
See update on TLT/GLD.
Asset Allocation
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 7/10/16 | 58% | 0% | 0% | 10% | 27% | 5% |
| 7/11/16 | 56% | 0% | 0% | 12% | 25% | 7% |
Asset Allocation as a % of Max Preferred Exposure
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 7/10/16 | 58% | 0% | 0% | 30% | 82% | 15% |
| 7/11/16 | 56% | 0% | 0% | 36% | 76% | 21% |
THREE FOR THE ROAD
TWEET OF THE DAY
This week in @Hedgeye cartoons. Get our daily cartoon emailed for free: hedgeye.com/cartoon/email cc @KeithMcCullough pic.twitter.com/ECIYNZVmjJ
@Hedgeye
QUOTE OF THE DAY
“Ability is what you’re capable of doing. Motivation determines what you do. Attitude determines how well you do it.”
-Lou Holtz
STAT OF THE DAY
Andy Murray won his second Wimbeldon title over the weekend.
