Correlation Risks

Client Talking Points

USD

The USD is flat vs. both the Euro and the Yen this morning as the U.S. Dollar Index has held @Hedgeye TRADE and TREND levels of support – at -2.4% on the week, last week was its biggest down week of 2015, but still looks very bullish.


OIL

Oil agrees with that conclusion on USD being oversold into Friday’s close, down -2.5% this morning to $45.40 WTI and no immediate-term TRADE support to $42.04 – the 15-day inverse correlation between the USD and Oil is -0.84.

UST 10YR

After an expedited 18 basis point drop last week, the UST 10YR Yield hasn’t budged this morning at 1.93%; you’ll get U.S. CPI and Q4 GDP this week; if the Fed is “data dependent”, those 2 data points will be slow.

Asset Allocation

CASH 34% US EQUITIES 15%
INTL EQUITIES 14% COMMODITIES 0%
FIXED INCOME 24% INTL CURRENCIES 13%

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

GERMANY: in a rare down day, DAX -1% to +21% YTD

@KeithMcCullough

QUOTE OF THE DAY

Courage is the most important of all the virtues because without courage, you can't practice any other virtue consistently.

Maya Angelou

STAT OF THE DAY

Brazillian soccer legend, Pele (Edson Arantes do Nascimento) scored the most league goals in football history, 1281 goals in 1363 games.