That’s a Wrap to Q1

Client Talking Points

JAPAN

The Yen is selling off into month-end, signaling immediate-term TRADE oversold at $103.29 versus the US Dollar.  Meanwhile, the Nikkei is signals immediate-term TRADE overbought in kind at 14,857. As growth data in Japan continues to slow, this is a good spot to short the Nikkei to start your Q2.

ITALY

Consumer price Tax Cuts go to  #StrongCurrency countries. The Italians are ringing the register on that front. Check out Italian CPI which is down to +0.4% year-over-year in March. Italy’s MIB Index is powering forward another +0.7% this morning, ramping it to over +14% year-to-date!

COMMODITIES

Take a look at the CRB Food Index. That’s  where the big absolute performance in Global Macro was at for Q114. It is up a monster +19.3% year-to-date. Meanwhile,  the US Dollar remains well below its $81.17 TAIL risk line of resistance. No, that’s not good for US consumers.

Asset Allocation

CASH 23% US EQUITIES 10%
INTL EQUITIES 12% COMMODITIES 20%
FIXED INCOME 15% INTL CURRENCIES 20%

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.

Three for the Road

TWEET OF THE DAY

Since inflation slows growth, #YieldChasing continues - Utilities $XLU +1.2% last wk in a down tape to +8% YTD @KeithMcCullough

QUOTE OF THE DAY

"Do what you can, with what you have, where you are." - Theodore Roosevelt

STAT OF THE DAY

Japan’s industrial production fell in February, undershooting all forecasts by economists surveyed by Bloomberg News, as the first sales-tax increase since 1997 risks stalling recovery in the world’s third-biggest economy. Output fell 2.3% from the previous month, the steepest drop in eight months. (Bloomberg)


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