Client Talking Points
The Euro risk range blows out to $1.03-1.10 (a widening range = rising variance --> leading indicator for more, not less, foreign currency market volatility). Ex-Germany (good not great PMI of 52.4 vs 51.1 last) there is still plenty of bad European data (French PMI of 48.2, Finland PPI -1.8% year-over-year) – we say you re-short the Euro at $1.10.
Not to be confused with German data, Chinese and Japanese PMIs were terrible, slowing in March to 49.2 and 50.4, respectively – Chinese stocks hit new year-to-date highs of +14.1% on that, of course, the worse the data is, the moarrr stimulus!
The UST 10 YR looks at Global #Deflation and #GrowthSlowing for what it is year-to-date, i.e. the fundamental case to stay long the Long Bond for longer; 1.91% UST 10YR Yield in the U.S. with no immediate-term support to 1.85% and intermediate-term TREND support down at 1.69%.
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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
Tune in live @8:30 to the @Hedgeye Macro Show to watch @KeithMcCullough deliver a heroic performance: https://app.hedgeye.com/insights/43111-the-macro-show-live-with-keith-mccullough-at-8-30am-et …. #PlayingHurt
QUOTE OF THE DAY
You can’t be common, the common man goes nowhere; you have to be uncommon.
STAT OF THE DAY
Target will raise their minimum wage next month to $9 an hour, 20% of the industry is now at this level.