CLIENT TALKING POINTS
UK
Pound takes another dip down to $1.21/lb vs USD and the UK Bond Market is really moving on the associated inflation expectations with burning the purchasing power of The People now (10yr Gilt +10bps to 1.19% this am); US Dollar big winner on this front of the Currency War.
UST 10YR
Yield in the USA up obviously on Friday’s Dudley commentary (1.80% last), and now the WSJ has another Rosengren article talking up DEC as Fed Fund futures move to 65% in DEC; risk range widens out to 1.58-1.84% as we cut our Q3 GDP forecast to 1.7% (from 1.9%) q/q SAAR which implies 1.2% y/y.
Gold
Stabilized last week (+0.1% w/w) and is +0.2% this morning to +18.1% YTD as consensus macro looks to have sold (CFTC non-commercial futz & options position down -51,400 contracts last wk taking Gold’s net long position down to 0.05x on a 1yr z-score vs. Oil at +2.23x).
TOP LONG IDEAS
GLD
See update on TLT.
VYM
See update on TLT.
TLT
One of our 3 major Macro Themes for Q3 centers on the past-peak nature of consumption and income growth and how the slowdown in credit expansion is an important recent additive to the consumer spending slowdown. This all equates to growth slowing and a late-cycle economy which we highlight and explain on a weekly basis with respect to our current active positions - you know the logic.
To highlight last week's Retail Sales report:
- The headline sales number increased +0.6% M/M, showing acceleration on a 1-year and 2-year basis with auto sales being a huge contributor to a positive number (+5% M/M which was largely expected from a comps perspective)
- 9 of 13 industry subgroups in the report improved on month-over-month basis with Building Materials, Gas Stations (simply higher gas prices) and food & Drink leading. On a year-over-year basis the breadth was more balanced with only 7 of 13 showing sequential acceleration
- The Control Group (the GDP input) was positive m/m for September after falling in July and August. But aggregating the three months together, the numbers that go into the calculation of Q3 GDP, Retail Sales increased +0.3% on a quarter-over-quarter annualized basis after a +6.8% reading for Q2 – a sizable decline to a large GDP contributing data point.
Asset Allocation
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 10/16/16 | 52% | 6% | 4% | 13% | 25% | 0% |
| 10/17/16 | 51% | 6% | 4% | 14% | 25% | 0% |
Asset Allocation as a % of Max Preferred Exposure
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 10/16/16 | 52% | 18% | 12% | 39% | 76% | 0% |
| 10/17/16 | 51% | 18% | 12% | 42% | 76% | 0% |
THREE FOR THE ROAD
TWEET OF THE DAY
REPLAY! This Week On HedgeyeTV app.hedgeye.com/archives/54574… via @Hedgeye
QUOTE OF THE DAY
“I always look on the bright side of everything. If you keep aiming for some goal, you usually get there if you don't give up.”
–Bart Cummings
STAT OF THE DAY
Odell Beckham Jr. had 8 receptions for 222 yards (27.8 AVG) yesterday against the Baltimore Ravens.
