CLIENT TALKING POINTS
USD
They tested the patience of the crowded Euro and Yen short positions, but all lines of @Hedgeye resistance for those majors in the Currency War held as the U.S. Dollar Index held all lines of support – no support for the Euro to 1.05 and Yen 121.61 vs USD.
OIL
Oil doesn’t like #StrongDollar, but we like shorting Oil and levered E&P equity schemes on that – WTI failed at the top-end of yesterday’s risk range and has no real support to $41.93 – that’s not a typo.
JAPAN
No typos in the terrible Japanese economic data either (which is perversely the catalyst to be long the Nikkei) – Household Spending and Retail Sales are down -2.9% year-over-year and -1.8% year-over-year, respectively, in FEB with 0.0% year-over-year inflation (ex-Tax) – they’re going to need moarrr central planning #cowbell.
TOP LONG IDEAS
MTW
No typos in the terrible Japanese economic data either (which is perversely the catalyst to be long Nikkei) – Household Spending and Retail Sales are down -2.9% year-over-year and -1.8% year-over-year, respectively, in FEB with 0.0% year-over-year inflation (ex-Tax) – they’re going to need moarrr central planning #cowbell.
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. Builder Confidence retreated for a 3rd consecutive month in March and New Home Starts in February saw their biggest month-over-month decline since January 2007. We think the underlying reality is more sanguine with the preponderance of the weakness in the reported February data largely attributable to weather.
While labor supply constraints may serve as a drag to builder confidence, presumably it is rising demand trends that are driving tighter conditions in the resi employment market. All else equal, we’d view improving demand as a net positive. On the New Construction side, while the sharp drop in Housing Starts captured most of the headlines, we believe the real story was in the 3% gain in permits. We'd expect to see a big rebound in the next two months in housing starts as the data plays catch-up to the thaw.
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. Most of the #Deflation trades bounced to something less-than-terrible (both absolute and relative) for 2015, whereas the real alpha trending in macro markets continues to play to the lower-rates-for-longer camp’s advantage.
Asset Allocation
| CASH | 28% | US EQUITIES | 15% | |
| INTL EQUITIES | 14% | COMMODITIES | 0% | |
| FIXED INCOME | 27% | INTL CURRENCIES | 16% |
THREE FOR THE ROAD
TWEET OF THE DAY
Spent all night vetting and revetting $RH. Bottom line...math doesn't lie. This name has a tremendous setup for FY 2015.
@HedgeyeRetail
QUOTE OF THE DAY
You’ve got to play your game.
-Andrew Miller
STAT OF THE DAY
Facebook reported that 600 million people use its Messenger app monthly.