CLIENT TALKING POINTS
UST 10YR
Globally, yields are backing off again this morning (10yr JGB and Bund back down to -0.05% and -0.01%, respectively as UST 10yr fails at the top-end of my 1.49-1.73% risk range after Retail Sales down to +1.9% y/y in AUG and Industrial Production slows again sequentially to -1.1% y/y i.e. double-dippin’ cyclical #recession).
VIX
With yesterday’s bad = good move out of the way for US Equity Beta, the volume (accelerating on down days, decelerating on up days) to multi-duration volatility relationship really matters now; immediate-term TRADE support (i.e. the breakout line) for front month VIX = 13.42 (TAIL risk support down at 10.74).
Reflation
Longer-term investors who understood that #Deflation was the biggest risk when cyclicals peaked in 2H14 sidestepped a lot of excuse making in 2015 – then broader US GDP slowed so fast in Q116 that the Fed had to bail out markets with a big dovish pivot to “reflate”… but now what? We’re at the slowest rate of y/y change of the year (local and global GDP), and cyclicals are breaking down again…
TOP LONG IDEAS
GLD
No update this week.
VYM
After a relative pull-back in large cap, low beta, liquid names (an exposure we’ve like for the balance of the year). We can now buy back that exposure lower. As you can see in the style factor table below, high debt, high beta, and small cap stocks in the S&P 500 have outperformed over the last month. As Keith McCullough wrote to II subs Friday:
“We've seen plenty a one-way chart chaser lose lots of other people's money doing it otherwise (they are chasing what’s worked recently). VYM has a 3% Yield and is signaling immediate-term TRADE oversold within our bullish intermediate-term @Hedgeye TREND view.”
TLT
No update this week.
Asset Allocation
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 9/15/16 | 51% | 5% | 4% | 8% | 30% | 2% |
| 9/16/16 | 52% | 3% | 3% | 9% | 31% | 2% |
Asset Allocation as a % of Max Preferred Exposure
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 9/15/16 | 51% | 15% | 12% | 24% | 91% | 6% |
| 9/16/16 | 52% | 9% | 9% | 27% | 94% | 6% |
THREE FOR THE ROAD
TWEET OF THE DAY
CHART OF THE DAY: Online Retail Crushing Brick & Mortar app.hedgeye.com/insights/53858… via @HedgeyeRetail @KeithMcCullough pic.twitter.com/fQxMM0o2bi
@Hedgeye
QUOTE OF THE DAY
“Continuous effort — not strength or intelligence — is the key to unlocking our potential.”
-Liane Cardes
STAT OF THE DAY
Ryan Fitzpatrick threw for 374 yards and 1 TD last night against the Bills.
