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Client Talking Points

US 10YR

We were always 1 bad jobs report away from the Fed coming around to our lower-for-longer view on rates; 1.83% yield for the US 10YR this morning with an immediate-term risk range = 1.80-1.93%, and no intermediate-term support to the all-time closing (yield) lows.

USD

The USD was down hard on Friday, especially vs. the Euro, as the short position in EUR/USD (futures/options contracts -225,776 net SHORT position) is massive; risk range now $1.07-1.10 and we think the rates move is much more important from an intermediate-term point of view.

Commodities

Gold loves Down Dollar, Down Rates – it’s +1.2% to $1222/oz this am but signaling immediate-term overbought; Oil +3.5% on the same, but tapping the top-end of its current 46.48-51.06 WTI risk range too

Asset Allocation

CASH 36% US EQUITIES 11%
INTL EQUITIES 13% COMMODITIES 0%
FIXED INCOME 30% INTL CURRENCIES 10%

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

REALITY CHECK #2: We have been long bonds & $TLT since 4/1/14 in Real-Time Alerts. It's up +22% since. @Hedgeye @KeithMcCullough

QUOTE OF THE DAY

“Yesterday is not ours to recover, but tomorrow is ours to win or lose.”

                     -Lyndon B. Johnson

STAT OF THE DAY

Today in 1808, John Astor (America's 1st millionaire), incorporated the American Fur Company.