CLIENT TALKING POINTS
US Dollar
USD likes the hawkish pivot (+1.1% last wk) but Yellen and Fischer were already there post the last US jobs report – so what happens to USD this week if the jobs report is bad? That’s right. Asset reflation needs a bad jobs report now… and anyone following this hawkish-dovish clown show gets that.
US 10YR
Yield ramped right back to the top-end of my immediate-term 1.50-1.62% risk range, but now what? Hate to remind Long Bond Bears about this, but the last hike into a slow-down (the hawkish pivot in DEC) was THE catalyst for both Deflation’s Dominoes and rates to crash (and the Fed to go back to dovish again).
Stocks
Dollar Up, Yen Down (Pound Down) = Nikkei and FTSE Up! Nikkei +2.3% overnight so the Japanese Gov Pension Fund loves the idea of Yellen making another policy mistake whereas the Australians (-0.8% All Ords overnight) and Russians (RTSI -1.7% this am) loathe its commodity deflation implications.
TOP LONG IDEAS
GLD
On the other side of the USD expectation, Gold (GLD) lost -1.5% w/w. Again we still like UUP and GLD as a basket against other centrally-planned currency regimes elsewhere.
TLT
Long Bonds (TLT), which has been on Investing Ideas since August 4th, 2014, finished the week -0.25%. We continue to believe that growth is the main catalyst for the curve amidst all the central planning noise. Slower growth gets discounted in a flatter curve so even if rates are hiked into a late cycle slow-down, the yield curve pancakes (the long-end of the yield curve fall and the short-end goes up).
UUP
Strength in the U.S. dollar, with renewed rate hike expectations back in the mix over the last few weeks, gave a good boost to U.S. Dollar (UUP) which finished +1.1% on the week. The bid-yield of December Federal funds futures has ticked 10 bps higher in August to 0.55% to close out the week.
Asset Allocation
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 8/28/16 | 50% | 3% | 5% | 14% | 18% | 10% |
| 8/29/16 | 43% | 7% | 7% | 15% | 22% | 6% |
Asset Allocation as a % of Max Preferred Exposure
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 8/28/16 | 50% | 9% | 15% | 42% | 55% | 30% |
| 8/29/16 | 43% | 21% | 21% | 45% | 67% | 18% |
THREE FOR THE ROAD
TWEET OF THE DAY
CHART OF THE DAY: Fed-Induced Hawkish Hyperventilation app.hedgeye.com/insights/53404… via @KeithMcCullough #Fed #Yellen
@Hedgeye
QUOTE OF THE DAY
Strength does not come from winning. Your struggles develop your strengths. When you go through hardships and decide not to surrender, that is strength.
-Arnold Schwarzenegger
STAT OF THE DAY
Otis Nixon batted .270 over his 17 year career.
