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Poll of the Day: Will The Fed Raise Rates This Week?

Takeaway: What do you think? Cast your vote. Let us know.


Syria: Another 30 Years War?

Editor's NoteBelow is a complimentary research note written over the weekend by Hedgeye Potomac National Security analyst LTG Dan Christman USA Ret. To access our institutional research email sales@hedgeye.com

 

Syria: Another 30 Years War? - syria

 

With Russian foreign minister Sergei Lavrov at his side, Secretary John Kerry a week ago announced a Syrian cease-fire deal that could lead to coordinated U.S.-Russian air operations against Syria-based jihadists; Kerry also posited that the deal could provide an eventual path to a negotiated political settlement to replace the Assad regime in Damascus.

 

  • Unfortunately, based on previous efforts to secure a pause in the fighting alongside Moscow, this will likely prove to be a classic triumph of hope over experience. 
  • Syria is already on a long path to repeat Europe's 17th Century 30 Years War - one that laid waste to much of what is today's Germany. Syria will never again be the pre-2011 unified state it was before the onset of the current anti-Assad fighting.  Sadly, this latest Kerry deal will probably do nothing to alleviate the horrific suffering of the Syrian population or even begin the process of putting the Syrian "Humpty-Dumpty" back together.

 Consider the deal itself: 

  • In its essence, it requires a cease fire, effective last Monday, in which all parties - the Assad government as well as the opposition - stop air and ground attacks; humanitarian corridors would be opened to relieve suffering in the city of Aleppo in particular; and IF the cease fire is effective for seven continuous days, then and only then would the US and Russia work to establish a Joint Implementation Center (JIC) to coordinate air attacks against ISIS and the principal al Qaeda affiliate in the area, "Syria Conquest" (formerly al Nusra).  
  • But who seriously believes that the dozens of opposition groups battling Assad (many closely intertwined with Syria Conquest) or the Damascus regime will adhere to this? The "support" for the deal from Russia, Iran, Damascus, and Hezbollah is beyond cynical.  Because of "facts on the ground," each now holds the military advantage; there's no incentive for them to change anything.
  • Numerous cease fire violations of the accord this week have confirmed the worst; yet, so far, the deal has gotten off the ground – but barely; sadly, like the “cessation of hostilities” accord from last February, an agonizing death for this deal probably awaits.

Many have talked about what might be needed to change the "facts on the ground" in Syria. Here's one answer: 

  • First, because nearly all of the civilian casualties in major population centers like Aleppo, Homs, and Hama - and the refugees flows from these areas - are caused by barrel bombs, cluster bombs, and chlorine gas dropped from Syrian aircraft and helicopters, Washington needs to bluntly warn Assad, in simplest terms: "NO More!"
  • Then, if Assad uses those systems, after a one hour notice to the Russians (the notice they gave us before they launched their first air combat sorties in Syria), the U.S. should send cruise missiles, drones, rockets, and stealth aircraft to target every Syrian fixed wing asset, every helicopter, and all of Assad's personal aircraft. If a restrike is necessary after a bomb damage assessment (BDA), we should execute it immediately. 
  • The U.S. should then say to Assad, "Don't do this again." This becomes a “no-fly” zone, but vigorously enforced from the outset.
  • The Russians would howl; but Washington would have their attention, and in the end, their cooperation.   

The U.S. is currently not a country that believes in changing "facts on the ground" in the Middle East, even "facts" that have produced over 400,000, largely civilian, deaths. But an action like the one outlined above may be about the only way to get the attention - and the respect - of Vladimir Putin. And it can also help move us to the ultimate goal: a political solution in this fractured country - one that is the only way to end the Syrian version of Europe's 30 Years War. 


Bond Bear Beat Down

Takeaway: In the past year, JGB 10yr yields are down 38bps on the most causal factor in all of macro right now, #GrowthSlowing.

Plenty of clever questions in the @Hedgeye inbox on why “JGB yields might rip” (higher)… and they just went lower (again) instead, back down to -0.07% on the JGB 10yr this morning w/ no support to -0.27-0.28%.

 

As Hedgeye Senior Macro analyst Darius Dale wrote earlier this morning:

 

"Investor consensus is far too focused on the risk of policy action (or inaction) out of the BoJ perpetuating a potentially violent backup in bond yields globally and not nearly enough on the underlying drivers of “lower-for-longer” and negative-yielding debt securities – drivers that are set to remain in place for quite some time."

 

In the past year, JGB 10yr yields are down 38bps on the most causal factor in all of macro right now, #GrowthSlowing.

 

Bond Bear Beat Down - japan gov bond 9 20

 

So why in God’s good name would you “invest” at this stage of the #GrowthSlowing cycle as the #BeliefSystem that the Fed, ECB, BOJ, PBOC, BOE, etc. breaks down?

 

Bond Bear Beat Down - central bankers cartoon 06.29.2016

 

Editor's Note: The snippet above is from a note written by Hedgeye CEO Keith McCullough and sent to subscribers this morning. Click here to learn more.


Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.48%
  • SHORT SIGNALS 78.35%

Daily Market Data Dump: Tuesday

Takeaway: A closer look at global macro market developments.

Editor's Note: Below are complimentary charts highlighting global equity market developments, S&P 500 sector performance, volume on U.S. stock exchanges, rates and bond spreads, key currency crosses, and commodities. It's on the house. For more information on how Hedgeye can help you better understand the markets and economy (and stay ahead of consensus) check out our array of investing products

 

CLICK TO ENLARGE

 

Daily Market Data Dump: Tuesday - equity markets

 

Daily Market Data Dump: Tuesday - sector performance

 

Daily Market Data Dump: Tuesday - volume

 

Daily Market Data Dump: Tuesday - rates and spreads

 

Daily Market Data Dump: Tuesday - currencies

 

Daily Market Data Dump: Tuesday - commodities


September 20, 2016

Want more from Daily Trading Ranges? CLICK HERE to submit up to 4 tickers you'd like to see on the list. 

 

  • Bullish Trend
  • Bearish Trend
  • Neutral

INDEX BUY TRADE SELL TRADE PREV. CLOSE
UST10Y
10-Year U.S. Treasury Yield
1.73 1.52 1.70
SPX
S&P 500
2,105 2,159 2,139
RUT
Russell 2000
1,200 1,264 1,232
COMPQ
NASDAQ Composite
5,111 5,262 5,235
XOP
SPDR S&P Oil & Gas Explore
34.71 37.15 36.09
RMZ
MSCI US REIT
1,140 1,213 1,187
NIKK
Nikkei 225 Index
16,230 16,771 16,519
DAX
German DAX Composite
10,175 10,770 10,373
VIX
Volatility Index
14.02 19.84 15.53
USD
U.S. Dollar Index
94.50 96.25 95.76
EURUSD
Euro
1.11 1.13 1.11
USDJPY
Japanese Yen
101.07 103.86 101.88
WTIC
Light Crude Oil Spot Price
42.05 45.20 43.86
NATGAS
Natural Gas Spot Price
2.66 3.04 2.93
GOLD
Gold Spot Price
1,302 1,352 1,317
COPPER
Copper Spot Price
2.05 2.17 2.15
AAPL
Apple Inc.
108.19 117.99 113.58
AMZN
Amazon.com Inc.
751 791 775
JPM
J.P. Morgan Chase & Co.
65.30 67.62 66.19
INTC
Intel Corp.
35.88 38.00 37.16
LVS
Las Vegas Sands Corp.
53.50 58.67 56.61
CMG
Chipotle Mexican Grill, Inc.
395 414 402

Hedgeye's Daily Trading Ranges are twenty immediate-term (TRADE) buy and sell levels, along with our intermediate-term (TREND) view.  Click HERE for a video from Hedgeye CEO Keith McCullough on how to use these risk ranges.


If the Fed wants to be hawkish, the data isn’t…

Client Talking Points

USD

After signaling immediate-term TRADE overbought on “rate hike fears” USD can easily correct back down to the low-end of my immediate-term risk range = 94.50-96.26 on the USD Index; that would give you a pop in EUR/USD to 1.13 fyi.

JGB

Plenty of clever questions in the @Hedgeye inbox on why “JGB yields might rip” (higher)… and they just went lower (again) instead, back down to -0.07% on the JGB 10yr this morning w/ no support to -0.27-0.28%

Utes

As in Utilities (XLU), ramped back up as Energy stocks reverse intraday yesterday; Utes (XLU) up a full +1% on the day taking their S&P Sector lead for 2016 back up to +15.0% vs. Financials (XLF) -1.3%; market sniffing out another dovish pivot?

Asset Allocation

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
9/19/16 52% 3% 4% 10% 29% 2%
9/20/16 49% 4% 5% 11% 29% 2%

Asset Allocation as a % of Max Preferred Exposure

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
9/19/16 52% 9% 12% 30% 88% 6%
9/20/16 49% 12% 15% 33% 88% 6%
The maximum preferred exposure for cash is 100%. The maximum preferred exposure for each of the other assets classes is 33%.

Top Long Ideas

Company Ticker Sector Duration
GLD

On the inflation front, comps get much easier moving forward (we’ve been in a deflationary environment for 2 years!). Our GDP estimates for Q3 and Q4 are below the street and Central Bank forecasts. For the full-year, we’re well below at +1.2% Y/Y vs. the Fed at 2.0%. If these estimates converge, we expect it to be dovish on the margin when coupled with our bearish rates view.  The inflation comps effect and a policy catalyst are shaping our fundamental views of a longer term gold position (GLD). 

VYM

We continue to observe that growth is slowing in aggregate. We continue to like bonds (TLT, MUB) and bond proxies (VYM). 

TLT

See update on VYM.

Three for the Road

TWEET OF THE DAY

CHART OF THE DAY: A Chance To Buy Long Bonds ... Again app.hedgeye.com/insights/53927… via @KeithMcCullough $TLT #Bonds #Fed pic.twitter.com/9GNn9I0sz0

@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

The Los Angeles Rams have not scored a touchdown since 1994.


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