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Client Talking Points

Europe

German data remains good enough to keep the mainstream bulled up on European central planning (German PMI 52.8 MAR vs 52.4 last) and French/Greek data continues to suck enough to beget more begging for more #cowbell – 1-2 day corrections in everything European Equities and Sov Bonds, then straight back up (Denmark +31.7% year-to-date).

US Dollar

Buying the counter-TREND 2 week selloff in USD and shorting everything Commodity #Deflation getting you paid (again); that said, at $98.50 USD Index it’s signaling immediate-term TRADE overbought, so from a trading perspective we would book some gains here in, currencies, commodities, and commodity stocks.

UST 10YR

The UST 10YR remains to be the best way to be long both Global #Deflation and #GrowthSlowing – 1.92% on the UST 10YR with immediate-term support down at 1.85% and no intermediate-term support to the all-time lows.

Asset Allocation

CASH 31% US EQUITIES 14%
INTL EQUITIES 13% COMMODITIES 0%
FIXED INCOME 28% INTL CURRENCIES 14%

Top Long Ideas

Company Ticker Sector Duration
MTW

Manitowoc  (MTW) is splitting the business into two companies. Given the valuation differential between the sum-of-the-parts and the current enterprise value of the company, the break-up should be a substantial positive. Recent nonresidential and nonbuilding construction data remains firm for 2015, which suggests that MTW’s crane sales should see a pickup in the first half of the year. The Architecture Billings Index (a survey of architects) typically leads nonresidential and residential construction spending by approximately 9-12 months. More importantly, the ABI Index leads MTW Crane Orders by 2 quarters.

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.

Three for the Road

TWEET OF THE DAY

You don't want to blow up your April, on the 1st day of April

@KeithMcCullough

QUOTE OF THE DAY

"If you ain't first, you're last!"

-Ricky Bobby

STAT OF THE DAY

Housing: Purchase Activity rose +5.7% WoW on the back of last week’s +4.9% advance and accelerated to +7.6% on a year-over-year basis.   On a quarterly basis, purchase demand in 1Q15 is up +6.4% sequentially +2.2% YoY, marking the first quarter of positive growth since 3Q13.