CLIENT TALKING POINTS
Italy
Another big bear market bounce for Southern European Equities this morning with Italian Stocks leading the way as sovereign bond yields take a breather; Italy’s MIB Index +1.6% leads the way, but is still down -21% YTD and -30% from the 2015 peak in Global Equities.
Russell
You don’t hear much banter about it, but the Russell 2000 never got back above its 2015 Global Equity peak (JUL 2015) of 1295 and is currently -6.6% below that mark, signaling bearish TREND @Hedgeye with a consensus net LONG position (non-commercial CFTC futz & options contracts) of +1.7x on a 1yr z-score.
Sectors
7 of 9 S&P Sectors down yesterday, with Utilities up +0.5% (after being up +1.3% last wk) to +10.9% YTD vs. SPX +4.0% YTD; I know it’s boring, but it sure beats making up a narrative that industrial, basic material, etc. “earnings have bottomed”… US Industrial Production came in at -1.1% y/y in SEP (that’s 13 straight months of negative y/y).
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 | |
|---|---|---|---|---|---|---|
| 10/17/16 | 51% | 6% | 4% | 14% | 25% | 0% |
| 10/18/16 | 53% | 6% | 4% | 13% | 24% | 0% |
Asset Allocation as a % of Max Preferred Exposure
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 10/17/16 | 51% | 18% | 12% | 42% | 76% | 0% |
| 10/18/16 | 53% | 18% | 12% | 39% | 73% | 0% |
THREE FOR THE ROAD
TWEET OF THE DAY
Chipotle could drop 40% to $227. Worst-case scenario? Chipotle may drop as much as 58% to $166 a share. app.hedgeye.com/insights/54607… $CMG
@Hedgeye
QUOTE OF THE DAY
“You have to be able to center yourself, to let all of your emotions go. You play with your soul as well as your body”.
–Kareem Abdul-Jabbar
STAT OF THE DAY
Dave Winfield hit 465 HR's over his 22 year MLB career. He also stole 223 bases.
