Today we bought the iShares Dow Jones US Home Construction ETF at $22.83 a share at 10:38 AM EDT in our Real-Time Alerts. Josh Steiner reiterates his call this morning on #HousingsHammer (the bulls aren't bullish enough).
In preparation for WMS's F2Q earnings release tomorrow, we’ve put together the recent pertinent forward looking company commentary.
YOUTUBE FROM FQ1 CONFERENCE CALL
Takeaway: While it may “feel” like "risk assets" are poised to run out of steam here, the “data” suggests otherwise.
Our five-person Macro Team has three former collegiate ice hockey players, a former collegiate football player and a former semi-professional body builder. Needless to say, we’re not the most sensitive bunch – particularly when it comes to our feelings.
In fact, I’d argue we’re not very good at interpreting our feelings at all – especially when making research calls and risk management decisions. That’s why we’ve grounded our two-pronged investment process in the embracement of uncertainty, in addition to constantly supplementing it with as much data as we can legally acquire.
Looking to the global macro universe, our fundamental research and quantitative risk management processes continue to suggest further upside to “risk asset” prices from here.
On the fundamental research front:
On the quantitative risk management front:
All told, a positive outlook for global economic growth looks to overcome tired pessimism about US fiscal policy, Eurozone sovereign debt woes, Chinese growth scares and other 2012-style bear theses to continue underpinning “risk asset” prices – for now at least. Specifically, our modeling of the key indicators and indices suggest there is further upside to be risk managed over the intermediate term.
Our updated World GIP outlook is included in the chart below. We’re now at +2.6-3.4% for full-year 2013 global real GDP growth. That compares to roughly +2.1% in 2012 and the implied positive delta therein should continue to cushion risk asset prices – at least until all the good news is priced in. A confirmed TRADE line breakdown on the SPX would be one of the key early signals of that occurring domestically.
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#GrowthStabilizing will continue to work until it doesn't. What can put an end to global growth? High oil prices. Over the last three months, we've seen Brent crude oil work its way to above $116 a barrel while the US dollar falls in strength. $130 a barrel oil and higher gas prices will slow down consumption which in turn slows growth. Keep your eye on oil over the next month; we'll see where this takes us.
Takeaway: Expectations are upbeat for SSS. That makes sense to us w Discount Stores and weather-sensitive apparel. Otherwise data is underwhelming.
Here’s a nugget for you in advance of Same Store Sales on Thursday. The spread in the growth rate between Discount stores and Department stores jumped by a full point in the final week of January to 3.3%. That marks only the fourth time since October 2011 where this spread was greater than 3 points. For the latest week, Discount Stores grew 2.6% per the Redbook Index, while Department Stores contracted by 0.7%.
Expectations for same store sales in January seem to be universally upbeat. That makes sense to us on the Discount Store side, and perhaps in areas that were helped by the cold weather snap in January. But otherwise, the data is hardly overwhelming.
Johnson Redbook Index: Discount Store Sales vs. Department Stores
There’s been much noise on the Euro in recent days, perhaps the loudest from France’s President, Francois Hollande, who said that “a monetary zone must have an exchange rate policy or else it ends up being subjected to a rate that does not fit with the true state of the economy.” How do you say currency manipulation in French? As the global currency wars heat up we note our currency outlook below going into this Thursday’s ECB and BOE policy rate decisions and the beginning of the European Union Summit.
We see a heavy immediate TERM resistance level in the EUR/USD around $1.36/7 and intermediate term TREND support at $1.31.
As we continue to show in our research, CFTC data shows decidedly that market participants have anchored on Draghi’s all hands on deck approach to save the common currency via the introduction of the OMT bond purchasing program in early August 2012. While we don’t expect this momentum to erode materially, we do think that the cross will fade at our resistance level as the underlying data in the region is still coming off very low levels of improvement and a muted outlook.
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