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Bad Sushi From the Bank of Japan

Takeaway: Big bang theories on what the BOJ “could do” didn’t pay out overnight.

“The definition of insanity...

...is doing the same thing over and over again,

but expecting different results.”

-Albert Einstein

 

On that note, the Bank of Japan (BOJ) went ahead and implemented the “QQE with Yield Curve Control” plan (i.e. a -0.1% policy rate and a centrally planned 0.00% 10yr Yield rate). 

 

Bad Sushi From the Bank of Japan - z bad sushi

 

QWHAT’S THAT GOING TO DO FOR japan's ECONOMY?

A: NOTHING.

 

Here's a quick breakdown of the BOJ's policy announcementt:

 

  • BoJ to change maximum scale of each ETF buying operation
  • ...to continue buying JGBs at ¥80T annually
  • ...to conduct policy to influence interest rates
  • ...to extend fixed-rate fund-providing operations to 10-yrs from 1-yr
  • ...to begin fixed-rate JGB buying operation
  • ...to increase monetary base until inflation goes above 2%
  • ...adopts inflation-overshooting commitment
  • ...scraps 7-12 year JGB buying duration period
  • ...to use QQE with yield curve control 

 

#Riveting, eh? Yep. A whole lot of nothingness emerged from the latest central-market-plan to literally not let the Japanese 10yr Yield move from 0.00%. With a policy rate of -0.1%, you’re going to need a microscope to see that Bad Sushi Yield Spread.

 

For more insight on Japan, take a look at our Senior Macro analyst Darius Dale's "The BOJ's Stench of Desperation."

Globally...

 

Macro markets doing a big yawn post the BOJ event and I have to admit that some of the “rates are gonna rip” theories are quite clever at this point; not as P&L practical as simply getting #GrowthSlowing right in 2016, but definitely clever! US Treasury 10yr Yield immediate-term risk range = 1.55-1.75%. I’m a buyer of long-term bonds on any move > 1.70%

 

Bad Sushi From the Bank of Japan - TLT safewaters 10.15.14

 

Editor's Note: The note above is from this morning's Early Look written by Hedgeye CEO Keith McCullough. Click here to subscribe.


Target (TGT): Best Idea Short Call Today

Takeaway: TGT will probably survive, but we don't like companies that simply survive.

Target (TGT): Best Idea Short Call Today - tgt black book

 

 

The Hedgeye Retail Team, led by Sector Head Brian McGough, will host a Black Book conference call today (at 11 a.m. ET) to review their SHORT thesis on Target Corporation.

 

Target has historically been largely a macro call, as has Wal-Mart. But it's increasingly clear that this is no longer the case. We think what is missing in the minds of investors is the duration over which this sub-par performance will take its toll on the stock. Our estimates are 15% below consensus next year, and 30% by 2019. 

 

Ultimately, TGT will probably survive, as long as management avoids egregious mistakes. But we don't like companies that simply survive - especially without recognizing the precarious position we believe they're in today. The company will likely ultimately do the right thing, but we think the road to survival will be a costly one.

 

CALL DETAILS

Attendance on this call is limited. Please note if you are not a current subscriber to our Retail research there will be a fee associated with this call. Ping sales@hedgeye.com for more information.

ABOUT HEDGEYE

Hedgeye Risk Management is a leading independent provider of real-time investment research. Focused exclusively on generating and delivering investment ideas, the firm combines quantitative, bottom-up and macro analysis with an emphasis on timing.

 

The Hedgeye team features some of the world's most regarded research analysts - united around a vision of independent, uncompromised real-time investment research as a service.


PREMIUM INSIGHT

[UNLOCKED] Fund Flow Survey | Domestic Stock Funds Printing the Worst Year on Record

[UNLOCKED] Fund Flow Survey | Domestic Stock Funds Printing the Worst Year on Record - dollar pic

This is a complimentary research note originally published September 15, 2016 by our Financials team. If you would like more info on how you can access our institutional research please email sales@hedgeye.com.


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Daily Market Data Dump: Wednesday

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: Wednesday - equity markets

 

Daily Market Data Dump: Wednesday - sector performance

 

Daily Market Data Dump: Wednesday - volume

 

Daily Market Data Dump: Wednesday - rates and spreads

 

Daily Market Data Dump: Wednesday - currencies

 

Daily Market Data Dump: Wednesday - commodities


Big bang theories on what the BOJ “could do” vs. #GrowthSlowing trends = fun debate:

Client Talking Points

BOJ

Implements the “QQE with Yield Curve Control” plan (i.e. a -0.1% policy rate and a centrally planned 0.00% 10yr Yield rate); Q: what’s that going to do for the economy? A: nothing. No change to bullish TREND in Yen (vs. USD). Nikkei ramps +1.9% from oversold lows; 10yr JGB -0.04%. #riveting. 

Rates

Globally doing a big yawn post the BOJ event and we have to admit that some of the “rates are gonna rip” theories are quite clever at this point; not as P&L practical as simply getting #GrowthSlowing right in 2016, but definitely clever! UST 10yr Yield immediate-term risk range = 1.55-1.75%; we're a buyer of long-term bonds on any move > 1.70%.

Gold

Loves the idiocy of the clever central banker – after barely budging during the stock/bond selloff, back up to $1323/oz this morning = +24.5% YTD with immediate-term upside in my risk range to $1350-1360; we think we’ll see that on the next drop in UST 10yr towards 1.55%.

Asset Allocation

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
9/20/16 49% 4% 5% 11% 29% 2%
9/21/16 47% 4% 5% 12% 29% 3%

Asset Allocation as a % of Max Preferred Exposure

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
9/20/16 49% 12% 15% 33% 88% 6%
9/21/16 47% 12% 15% 36% 88% 9%
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: Another Ugly Economic Indicator... Should The #Fed Raise Rates? app.hedgeye.com/insights/53961… via @KeithMcCullough pic.twitter.com/fEvmgg8Voy

@Hedgeye

QUOTE OF THE DAY

 “The road to success is always under construction.”

–Arnold Palmer

STAT OF THE DAY

DJ LeMahieu leads the MLB with a .349 BA.


September 21, 2016

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  • Bullish Trend
  • Bearish Trend
  • Neutral

INDEX BUY TRADE SELL TRADE PREV. CLOSE
UST10Y
10-Year U.S. Treasury Yield
1.75 1.55 1.69
SPX
S&P 500
2,108 2,171 2,139
RUT
Russell 2000
1,200 1,254 1,228
COMPQ
NASDAQ Composite
5,119 5,262 5,241
XOP
SPDR S&P Oil & Gas Explore
34.40 37.26 35.53
RMZ
MSCI US REIT
1,145 1,210 1,185
NIKK
Nikkei 225 Index
16,292 17,002 16,492
DAX
German DAX Composite
10,200 10,609 10,393
VIX
Volatility Index
14.07 19.39 15.92
USD
U.S. Dollar Index
94.50 96.40 95.98
EURUSD
Euro
1.11 1.13 1.11
USDJPY
Japanese Yen
101.17 102.95 101.72
WTIC
Light Crude Oil Spot Price
42.05 47.46 44.05
NATGAS
Natural Gas Spot Price
2.70 3.08 3.05
GOLD
Gold Spot Price
1,305 1,350 1,318
COPPER
Copper Spot Price
2.06 2.19 2.16
AAPL
Apple Inc.
108.57 118.99 113.57
AMZN
Amazon.com Inc.
750 792 780
JPM
J.P. Morgan Chase & Co.
65.00 67.46 66.46
INTC
Intel Corp.
35.89 38.01 37.14
LVS
Las Vegas Sands Corp.
54.04 58.60 56.28
CMG
Chipotle Mexican Grill, Inc.
389 412 400

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