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Client Talking Points

Volume

US Equity volume is deader than a doornail on the squeeze yesterday (down -20% versus TREND average). Nope, that's definitely not a good thing as front-month VIX (volatility)  held Hedgeye TREND support of 14.72, while SPX signals lower-highs of resistance at 1866 now. US consumer prices (CPI) should continue to surprise on the upside this morning with #InflationAccelerating.

DAX

Germany broke my TREND support signal line last week and was not able to get back above that (9,273) on the bounce. German Bunds well bid again with the 10-year Bund Yield down 10 basis points month/month to 1.56%. German #GrowthSlowing (on the margin) might be the read-through here.

UST 10YR

The UST 10-year yield at 2.67% this morning has confirmed the bearish TREND (2.80% resistance). This makes sense as #InflationAccelerating has slowed US growth here in Q114. Again.

Asset Allocation

CASH 41% US EQUITIES 7%
INTL EQUITIES 9% COMMODITIES 14%
FIXED INCOME 13% INTL CURRENCIES 16%

Top Long Ideas

Company Ticker Sector Duration
OC

Construction activity remains cyclically depressed, but has likely begun the long process of recovery.  A large multi-year rebound in construction should provide a tailwind to OC shares that the market appears to be underestimating.  Both residential and nonresidential construction in the U.S. would need to roughly double to reach post-war demographic norms.  As credit returns to the market and government funded construction begins to rebound, construction markets should make steady gains in coming years, quarterly weather aside, supporting OC’s revenue and capacity utilization.

DRI

Darden is the world’s largest full service restaurant company. The company operates +2000 restaurants in the U.S. and Canada, including Olive Garden, Red Lobster, LongHorn and Capital Grille. Management has been under a firestorm of criticism for poor performance. Hedgeye's Howard Penney has been at the forefront of this activist movement since early 2013, when he first identified the potential for unleashing significant value creation for Darden shareholders. Less than a year later, it looks like Penney’s plan is coming to fruition. Penney (who thinks DRI is grossly mismanaged and in need of a major overhaul) believes activists will drive material change at Darden. This would obviously be extremely bullish for shareholders and could happen fairly soon driving shares materially higher.

FXB

We remain bullish on the British Pound versus the US Dollar, a position supported over the intermediate term TREND by prudent management of interest rate policy from Mark Carney at the BOE (oriented towards hiking rather than cutting as conditions improve) and the Bank maintaining its existing asset purchase program (QE). UK high frequency data continues to offer evidence of emergent strength in the economy, and in many cases the data is outperforming that of its western European peers, which should provide further strength to the currency. In short, we believe a strengthening UK economy coupled with the comparative hawkishness of the BOE (vs. Yellen et al.) will further perpetuate #StrongPound over the intermediate term.

Three for the Road

TWEET OF THE DAY

FX: Yen backs up again vs Burning Buck this morning - $101.19-102.43 risk range vs USD @KeithMcCullough

QUOTE OF THE DAY

"You are never too old to chase your dreams." - Diana Nyad

STAT OF THE DAY

Most people have very little tucked away for retirement, and many aren't even trying to figure out how much they'll need later in life, a new national survey reveals. About 36% of workers have less than $1,000 in savings and investments that could be used for retirement, not counting their primary residence or defined benefits plans such as traditional pensions, and 60% of workers have less than $25,000. (USA Today)