CLIENT TALKING POINTS
USD
We know Oil/Energy Bulls don’t like that the inverse correlation b/t USD and Oil matters, but it still does (2 wk cor = -0.7); Dollar Down big -1.3% last week but holding long-term @Hedgeye TAIL support, bouncing off oversold levels this am vs. both EUR and YEN.
Oil
Can a 5-day move of +9% change the “charts”? Yep. As bad as Oil’s chart looked in JUL is as good as it looks in AUG but unless it can breakout > $52.11 @Hedgeye TAIL risk resistance, what does it really mean other than some wicked chop with Oil Vol (OVX) still at 35?
UST 10YR
Good luck to the Fed on their latest forecast that GDP is going to “accelerate for the next few quarters” (at the same time they’re looking for “new ways” to calculate GDP); good spot to be buying bonds (and stocks that look like bonds) ahead of Jackson Hole as the world will be reminded of the 1% USA GDP reality on Friday (GDP report); risk range on the 10yr UST = 1.48-1.61%.
TOP LONG IDEAS
GLD
See update on TLT below.
TLT
#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.
GLD
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 | |
|---|---|---|---|---|---|---|
| 8/21/16 | 54% | 3% | 3% | 10% | 18% | 12% |
| 8/22/16 | 51% | 3% | 3% | 11% | 19% | 13% |
Asset Allocation as a % of Max Preferred Exposure
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 8/21/16 | 54% | 9% | 9% | 30% | 55% | 36% |
| 8/22/16 | 51% | 9% | 9% | 33% | 58% | 39% |
THREE FOR THE ROAD
TWEET OF THE DAY
Over 50% probability the Grinch shows up for the holidays. #Fed #ratehike #Fischer pic.twitter.com/kdz2HCVyVE
@Hedgeye
QUOTE OF THE DAY
“Effort only fully releases its reward after a person refuses to quit.”
-Napoleon Hill
STAT OF THE DAY
USA won 46 gold medals at the Olympics this year.
