“I got the Holy Spirit… You should get on it… it’s a good train!”

-Lyle (from The Italian Job)

And a very Merry Medici Italian Bank Job morning to you all as we head into the heart of the holiday season!

Since private investors didn’t want anything to do with Italy’s Monte dei Paschi bank, the Italian government has decided to socialize the risk, committing 20 billion Euros in bailout moneys for Christmas.

If you’re the one receiving this wonderful gift, you might say “Buone Feste” and a “felice Anne Nuovo!”

If you’re a little more to the point, you might just say what Lyle did in English (the aforementioned quote came from The Italian Job after Lyle found out how much money his crew stole).

Merry Medici! - Italian bank cartoon

Back to the Global Macro Grind

In all seriousness, on behalf of the Hedgeye crew, I want to wish you and your loved ones a very Happy Holiday season – Vi auguro un Natale de amore, pace e felicita!

Since many of you are busy getting ready for the long weekend, I’ll keep this morning’s missive tight and highlight my Top 3 Things (I usually send it out around 6AM to Institutional subscribers as summary bullet points):

  1. US GDP – after 5 consecutive quarterly rate of change slow-downs (from the Q1 2015 cycle peak of +3.3% year-over-year US GDP growth), Q3 2016’s +3.5% q/q headline implies +1.7% year-over-year growth (vs. the 5 quarter low of +1.3% in Q2 of 2016). Post yesterday’s economic data, our GIP Model (predictive tracking algo) has GDP accelerating again in Q4 to +1.94% year-over-year = Quad2 = Bullish for USD, Rates, and Stocks
  2. ITALY – Bellissimo! Another public to private socialization of risk for Christmas! After failing to sell the deal to us (investors), it looks like the Italian government is going to provide 20B Euros from Santa’s sleigh – both Italian Stocks (+0.9% on the session, +17% in the last month) and Italian Bonds (10yr yield -5bps to 1.80%) love that
  3. CHINA – not a lot of love for Chinese stocks since A) Chinese growth is slowing again (talk that they’re cutting their made up GDP expectation for 2017 to 6.5% - see Reuters, wires, etc.) and B) King Trump is giving them no love = Shanghai Comp down another -0.9% overnight and -4.0% in the last month alone

No, I don’t want you to buy US stocks at the top end of my immediate-term 2 risk range. I want you to have a happy holiday, eat, drink, and wait for pullbacks… buying them at the low-end of that range!

Being bullish (on US growth accelerating and its associated macro exposures) has been my macro Holy Spirit for the last 4-5 weeks. No matter what your celebratory language or religion, you should get on it! It’s the good stuff.

Con i migliori auguri to you and to yours,

KM

Keith R. McCullough
Chief Executive Officer

P.S. Here are some risk ranges with our intermediate-term TREND views in brackets (including 6 stocks):

UST 10yr Yield 2.39-2.64% (bullish)

SPX 2 (bullish)
RUT 1 (bullish)

NASDAQ 5 (bullish)

XOP 40.95-43.50 (bullish)

RMZ 1109-1160 (bearish)

Nikkei 19001-19602 (bullish)

DAX 11170-11572 (bullish)

VIX 10.92-13.93 (neutral)
USD 101.30-104.35 (bullish)
EUR/USD 1.03-1.05 (bearish)
YEN 114.04-119.36 (bearish)
Oil (WTI) 50.90-54.29 (bullish)

Nat Gas 3.24-3.76 (bullish)

Gold 1115-1153 (bearish)
Copper 2.45-2.65 (bullish)

AAPL 113.40-118.00 (bullish)

AMZN 752-778 (neutral)

FB 116-120 (bearish)

GOOGL 793-823 (bullish)

MU 20.40-23.78 (bullish)

TWX 94.02-96.61 (bullish)

Merry Medici! - 12.23.16 EL Chart