CLIENT TALKING POINTS
USD
Perfect storm for FX Correlation Risk yesterday as the Pound got blasted to immediate-term TRADE oversold at $1.27 and USD Index ramped back above 96.00, then the “rate hike” rhetoric rolled through and literally everything we like on the long side got smoked. Big buying opportunities ahead of the jobs report – any rate of change slow-down = USD bearish from here.
Rates
It wasn’t just a USD/UST ramp, it was another bounce (to lower-highs) in European Yields too on some ridiculous rumor that “the ECB is going to taper” – the ECB denied that, obviously, this morning but there are plenty of 2016 Bond Bears out there looking to get Fed. Winter is coming. And they’re starving…
Gold
Smashed on Dollar Up, Rates Up… that was actually the biggest down day in 3 years. We remember that well as that’s when we were bearish on Gold due to US #GrowthAccelerating; now it’s still slowing, and we’ll see who the real Gold bulls are out there as it “collapses” to +20% YTD with an immediate-term risk range of $1/oz.
TOP LONG IDEAS
GLD
See update on VYM. #GrowthSlowing
VYM
If you’ve followed our #GrowthSlowing call, the connection between XLU, TLT, MUB, VYM should be is straighforward – low beta instruments, with fixed cash flows or dividend payments in the future that get discounted at lower rates when the yield curve flattens (a smaller denominator in a fraction = a higher number). And when rates go to zero globally, yield-seeking fund managers rotate from Treasuries, into corporates or munis. And then when rates move even lower they rotate to bond-like proxies like Utilities or High Dividend Blue Chips (VYM).
TLT
See update on VYM. #GrowthSlowing
Asset Allocation
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 10/4/16 | 54% | 6% | 4% | 12% | 22% | 2% |
| 10/5/16 | 50% | 8% | 4% | 14% | 24% | 0% |
Asset Allocation as a % of Max Preferred Exposure
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 10/4/16 | 54% | 18% | 12% | 36% | 67% | 6% |
| 10/5/16 | 50% | 24% | 12% | 42% | 73% | 0% |
THREE FOR THE ROAD
TWEET OF THE DAY
Fund Flow Survey | Higher Lows for Stock Fund Flows by @hedgeyeJC @HedgeyeFIG app.hedgeye.com/archives/54298… @KeithMcCullough #Stocks
@Hedgeye
QUOTE OF THE DAY
"I am a great believer in luck, and I find the harder I work, the more I have of it."
-Thomas Jefferson
STAT OF THE DAY
Tom Brady returns for the New England Patriots this weekend, he has been out for the past 4 games. The Patriots are 3-1.
