CLIENT TALKING POINTS
USD
#StrongDollar isn’t a panacea for a “breakout” in inflation. Anyone can see that inflation expectations have moved up throughout the year, and with 5yr forw break-evens +18bps last wk to 1.73% it was spikey, but we doubt we'll see follow through; we still think inflation’s cycle (vs. easy base effects from the 2015 deflation/crash) peaks in Q1/Q2 2017.
Rates
Again, we think the move in rates has a lot more to do with a US growth scare than a sustained inflation one – this was a massive move in growth expectations (Russell 2000 was +10.2% last week alone!); we clearly weren't positioned for this and we're not shorting Financials and buying bonds with both hands like we have every other time, this time, either.
Oil
Continues to break-down alongside the broader CRB Index (19 commodities) and that’s one of my leading indicators obviously on inflation expectations; Oil (WTI) was -1.5% last week and is back in the red for the YTD; Gold snapped @Hedgeye TREND support of $1260/oz, so I’m not buying that drop like I ordinarily would either.
TOP LONG IDEAS
GLD
Simply put, it was a wild week in global macro, one that was not kind to our positions over the near term. Copper was up big and our longs were down on the week. From S&P Futures going limit down on Tuesday night to the massive narrative shift as to why Trump is good for growth and the market up 100 handles later, we haven’t seen anything quite like it in our market lifetimes.
Our process is a combination of the bottom up fundamental analysis meeting top-down, quantitative market-signaling, and right now those signals are in conflict. We're discussing the prospect of a potential phase transition that would change our intermediate-term TREND biases.
The big question that we ask is whether or not the market continues to look past the economic deterioration we have seen (see all previous Investing Ideas updates) and continue to expect heading into 2017 and the dust settles on the prospects for a renewed demand surge to meet what is still a supply-side overhang on the back side of the big capacity bubble in resource sectors.
TLT
See update on GLD.
MUB
See update on GLD.
Asset Allocation
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 11/13/16 | 46% | 5% | 5% | 11% | 24% | 9% |
| 11/14/16 | 62% | 6% | 4% | 4% | 12% | 12% |
Asset Allocation as a % of Max Preferred Exposure
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 11/13/16 | 46% | 15% | 15% | 33% | 73% | 27% |
| 11/14/16 | 62% | 18% | 12% | 12% | 36% | 36% |
THREE FOR THE ROAD
TWEET OF THE DAY
An excellent interview in Barron's this weekend on our outspoken, smart as a whip restaurants analyst Howard Penney. barrons.com/articles/paner…
@Hedgeye
QUOTE OF THE DAY
“I’ve missed more than 9000 shots in my career. I’ve lost almost 300 games. 26 times, I’ve been trusted to take the game winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed.”
-Michael Jordan
STAT OF THE DAY
Casey Hayward (San Diego) leads the NFL in interceptions with 5.
