Client Talking Points
UST 10YR Yield
UST 10YR Yield: 1.85% this morning, it is testing the low-end of our immediate-term 1.82-1.93% risk range as lower-for-longer starts to get priced in – both the March ADP and ISM reports slowed, sequentially, yesterday –“data dependent” rates.
The USD was overbought and was the right immediate-term signal, alongside the inventory numbers yesterday, that helped Oil bounce big to lower-highs – WTI risk range has tightened to $45.81-50.99, so we would re-short Oil and its related stocks/bonds closer to the top-end of the range.
+1.5% this morning for the Russian Trading System Index, finally tapping the top-end of its 837-929 risk range – We have been waiting for a re-entry point on the short side there, it looks like we’re going to get that.
|FIXED INCOME||28%||INTL CURRENCIES||13%|
Top Long Ideas
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.
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.
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
WE'LL DO IT LIVE!!! Join The Macro Show at 8:30AM ET (for free) w @KeithMcCullough @Hedgeye: https://app.hedgeye.com/insights/43294-the-macro-show-live-with-keith-mccullough-at-8-30am-et
QUOTE OF THE DAY
"Yesterday's homeruns don't win today's games."
STAT OF THE DAY
Walmart truck driver base salary: $82,000