China, Europe and Oil

Client Talking Points

CHINA

Thou say they word “stimulus”, and all shall be saved (in stock market terms) – Shanghai Composite rips a +2.3% move to the upside overnight to fresh year-to-date closings high of +6.6% vs. S&P 500 -0.3% (and Nikkei +10.4% year-to-date).

EUROPE

Centrally planned markets continue to go parabolic as the German DAX and Italian MIB Index are up another +0.8-1% this morning to +22.3% and +20.7% year-to-date, respectively – Greece, which was allegedly fixed, down -18% since FEB 24th, but who cares – Lithuania’s stock market is +65% year-to-date, baby! #BurningEuros.

OIL

WTI Oil is down another -0.9% (after dropping -9.6% last week) to $44.45/barrel, taking it right back to the JAN lows where #deflation mattered to the world’s revenue and earnings calculus (it still matters). We have a risk range of $43.26-49.03 now as pervasive USD bullishness keeps our TREND price deck for Oil well below consensus.

 

Asset Allocation

CASH 43% US EQUITIES 13%
INTL EQUITIES 12% COMMODITIES 0%
FIXED INCOME 20% INTL CURRENCIES 12%

Top Long Ideas

Company Ticker Sector Duration
ITB

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

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.

TLT

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

Rickards Reveals What He Does Differently (Exclusive Interview With McCullough) https://app.hedgeye.com/insights/42944-jim-rickards-reveals-what-he-does-differently-in-exclusive-interview-w… @JamesGRickards

@KeithMcCullough

QUOTE OF THE DAY

Even if you’re on the right track, you’ll get run over if you just sit there.

-Will Rogers

STAT OF THE DAY

A volcano needs to chill out for 10,000 years before being described as “dormant.”


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