CLIENT TALKING POINTS
UK
The central market plan for the UK remains A) burn the currency to B) protect asset prices in said currency – and Carney is seeing “success” with that (Pound -1.2% last week and down another -0.1% vs. USD this am = FTSE +0.3% this am and +4% in the last month); meanwhile the UK Yield Spread continues to get hammered (10s minus 2s down to 38bps wide).
Oil
Nice big bear market bounce of +6.4% last week sees modest follow through this am of +0.3% to $44.61 with Russian headlines dominating a quiet Monday morning – risk range for WTI is now quite wide (because oil volatility is still quite high at 37 OVX) = $39.28-44.98; good spot to sell some Oil against Long Gold (or Platinum) which pulled back small last week.
UST 10YR
Another “scare” of “rising 10yr yields” met with another ramp in long-term bonds last week; we’re up to $13.4T in negative yielding bonds globally now (vs. 13.1T last wk) as global growth continues to look like Yield Spreads (slowing); UST 10yr down another beep to 1.50% this morning and the USA Yield Spread testing YTD lows at 80bps (short Banks #reiterated).
TOP LONG IDEAS
GLD
See update on TLT below.
TLT
Eurozone GDP, reported Friday, signaled more of the same, stagnation. With that being said there were small but marginal Euro tailwinds against a U.S. retail sales report and PPI release that was likely dovish on the margin (USD -~20bps on Friday and -~60bps on the week).
In line with our #EuropeSlowing theme, Q2 preliminary GDP slowed across the Eurozone to +0.3% vs. +0.6% in the prior quarter and +1.6% Y/Y for Q2 which was flat on a rate of change basis from Q1.
Looking at specific country results:
- German (0.4% vs 0.7% sequentially) GDP accelerated to +1.8% Y/Y from +1.6% which was probably a minor Euro FX tailwind
- Italian GDP came in at +0.7% Y/Y which was a deceleration from +1.0% in Q1
- Greece GDP accelerated to contraction again, printing a measly -0.1% Y/Y from -1.3% in Q1
- The Southern Eurozone states continue to implode
UUP
Recall that a strong retail sales report for June, driven by a positive trend in goods consumption, was a large contributor to our GDP revision for Q2. The headline number, for June, was up +0.6% sequentially with the sequential acceleration in the control group accelerating +7.2% (annualized).
Friday’s retail sales report was a different story, and probably a dovish data point for the USD on the margin :
- The control group printed flat sequentially, +0.0%
- Retail sales ex. auto and gas printed -0.3% sequentially
Next to retail sales, July headline producer prices decelerated -0.4% vs. +0.5% in June sequentially and -0.2% Y/Y vs. +0.3% Y/Y in June. PPI ex. food and energy came in at 0.0% sequentially vs. +0.4% in June and +0.7% Y/Y from +1.3% in June. #Deflation
Asset Allocation
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 8/14/16 | 61% | 3% | 3% | 10% | 14% | 9% |
| 8/15/16 | 56% | 4% | 4% | 12% | 15% | 9% |
Asset Allocation as a % of Max Preferred Exposure
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 8/14/16 | 61% | 9% | 9% | 30% | 42% | 27% |
| 8/15/16 | 56% | 12% | 12% | 36% | 45% | 27% |
THREE FOR THE ROAD
TWEET OF THE DAY
@KeithMcCullough - Negative yielding bonds hits $13.4T vs. $13.1T last week - good thing we have #GrowthSlowing pic.twitter.com/pT1YOh4GvD
@Hedgeye
QUOTE OF THE DAY
“The world breaks everyone, and afterward, some are strong at the broken places.”
–Ernest Hemingway
STAT OF THE DAY
USA has 69 medals this Olympics so far, 26 of them are gold.
