CLIENT TALKING POINTS
USD
Fed Minutes yesterday remind you that these un-elected, lagging economics majors have a 0% policy to fight inflation. So, whether you like it or not, you are going to get more inflation, and that is going to slow consumption growth moar – buy bonds on growth slowing, because that’s all the 10-year yield trades on.
COMMODITIES
Beef prices hit an all-time high yesterday (LA Times), and while all-time is a long time, do not call this inflation. The CRB Index powered to new highs yesterday at +10.7% and Gold charges forward this morning back to +10% year-to-date. Silver is up +2.5% this morning too. This is Fed front-running 101.
10YR
Consensus continues to expect our call from last year (#RatesRising), and rates continue to fall. A 2.65% 10-year yield is basically yelling that the rate of change in US growth from here is down, not up. Meanwhile, the SPX risk range is wide open now to 1. Should be fun.
TOP LONG IDEAS
HOLX
Hologic is emerging from an extremely tough period which has left investors wary of further missteps. In our view, Hologic and its new management are set to show solid growth over the next several years. We have built two survey tools to track and forecast the two critical elements that will drive this acceleration. The first survey tool measures 3-D Mammography placements every month. Recently we have detected acceleration in month over month placements. When Hologic finally receives a reimbursement code from Medicare, placements will accelerate further, perhaps even sooner. With our survey, we'll see it real time. In addition to our mammography survey. We've been running a monthly survey of OB/GYNs asking them questions to help us forecast the rest of Hologic's businesses, some of which have been faced with significant headwinds. Based on our survey, we think those headwinds are fading. If the Affordable Care Act actually manages to reduce the number of uninsured, Hologic is one of the best positioned companies.
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.
Asset Allocation
| CASH | 34% | US EQUITIES | 0% | |
| INTL EQUITIES | 8% | COMMODITIES | 16% | |
| FIXED INCOME | 20% | INTL CURRENCIES | 22% |
THREE FOR THE ROAD
TWEET OF THE DAY
China's March Exports -6.6% y/y; Imports -11.3% y/y! @KeithMcCullough
QUOTE OF THE DAY
"A man with no imagination has no wings." - Muhammad Ali
STAT OF THE DAY
Come grilling season, expect your sirloin steak to come with a hearty side of sticker shock. Beef prices have reached all-time highs in the U.S. and aren't expected to come down any time soon. The retail value of "all-fresh" USDA choice-grade beef jumped to a record $5.28 a pound in February, up from $4.91 the same time a year ago. The same grade of beef cost $3.97 as recently as 2008. (Los Angeles Times)