Client Talking Points
The U.S. Dollar Index continues to go parabolic, making another new high at $98.40, which puts it +9.1% year-to-date vs. Euros and Yens which remain flaming balls for devaluation – ugly morning for everything commodities, including Russian stocks which failed @Hedgeye TREND resistance and are -3% today.
It’s mathematically impossible for the Europeans, Japanese, and Chinese to create reported inflation well into the summer time – including the commodities bounce to lower-highs in FEB, Chinese producer prices dropped -4.8% year-over-year (Norwegian PPI -9.9% year-over-year) – many producers report lower revenues/earnings during #deflation.
10YR German Yield retesting the lows at 0.31% (Swiss 10YR is negative -0.13) and that puts the spread between the German 10YR and the UST at +188 basis points (widest of the cycle). We think this mean reverts with the UST yield falling again – Janet Yellen just needs to breathe dovish on –t-bonds for that to happen.
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Top Long Ideas
iShares U.S. Home Construction ETF (ITB) is a great way to play our long housing call, U.S. #HousingAccelerating remains 1 of the Top 3 Global Macro Themes in the Hedgeye Institutional Themes deck right now. Not only did U.S. home prices accelerate (in rate of change terms) in the Core Logic data this week to +5.7%, but the supply/demand data has been improving throughout the last 3 months.
Penn National Gaming is the best way to play improving domestic regional gaming trends due to its superior operational management and unit growth opportunities. Catalysts include positive estimate revisions, the opening of the first Massachusetts casino in June, and industry leading earnings growth in 2015 and 2016.
Low-volatility Long Bonds (TLT) have plenty of room to run. Late-Cycle Economic Indicators are still deteriorating on a TRENDING Basis (Manufacturing, CapEX, inflation) while consumption driven numbers have improved. Inflation readings for January are #SLOWING. We saw deceleration in CPI year-over-year at +0.8% vs. +1.3% prior and month-over-month at -0.4% vs. -0.3% prior. Growth is still #SLOWING with Real GDP growth decelerating at -20 basis points to +2.5% year-over-year for Q4 2014.The GDP deflator decelerated -40 basis points to +1.2% year-over-year.
Three for the Road
TWEET OF THE DAY
LIVE @ 1230pm today Healthcare Sector Head @HedgeyeHC Talks SHORT $ZMH & Answers Your Questions Click here to watch: https://app.hedgeye.com/insights/42844-hedgeye-healthcare-sector-head-tom-tobin-talks-short-zmh-and-answers-y
QUOTE OF THE DAY
Tomorrow hopes we have learned something from yesterday.
STAT OF THE DAY
9% of American adults have never sent an email.