CLIENT TALKING POINTS
Italy
Getting smoked by the UK at both the Olympics and in real stock market returns – Italy’s MIB Index leads losers again this morning -1.1%, taking its crash back down to -30.8% from the 2015 peak in the Global Equity Bubble… #EuropeImploding (economically) remains a Top 3 Macro Theme @Hedgeye.
Copper
The Doctor looks disinterested in participating in any “demand has bottomed” narrative (US Industrial Production in JUL -0.5% y/y, neg for 11 months in a row), down another -1.0% this morning, leading the decline in the “reflation” trade as USD bounces off it’s immediate-term oversold low vs. both the Yen and Euro.
Yields
Perma Bond Bears continue to cling to the “valuation” call whereas we’ll continue to remind you that long-term yields continue to track the rate of change in long-term GROWTH – get growth right, and I think you’ll get the UST 10-30yr right; from here to 1.63% is a good spot to be buying long-term bonds and their safe-yield proxies.
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 | |
|---|---|---|---|---|---|---|
| 8/16/16 | 55% | 3% | 4% | 12% | 16% | 10% |
| 8/17/16 | 54% | 3% | 3% | 10% | 18% | 12% |
Asset Allocation as a % of Max Preferred Exposure
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 8/16/16 | 55% | 9% | 12% | 36% | 48% | 30% |
| 8/17/16 | 54% | 9% | 9% | 30% | 55% | 36% |
THREE FOR THE ROAD
TWEET OF THE DAY
Capital Brief | #Clinton & #Trump Tangled In Controversy On The Campaign Trail app.hedgeye.com/insights/53150… pic.twitter.com/pSP2UgAtqO
@Hedgeye
QUOTE OF THE DAY
“Carry the battle to them. Don’t let them bring it to you. Put them on the defensive and don’t ever apologize for anything.”
-Harry S. Truman
STAT OF THE DAY
K. Walsh Jennings lost her first Olympic Beach Volleyball match last night. She had never lost a match in the last 4 Olympics.
