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Client Talking Points

USD

After a 2-day drop, then straight back up overnight as EUR/USD backs off from $1.10 to $1.08 and the Yen failed @Hedgeye resistance too – US currency doesn’t operate in a vacuum – TRADE and TREND support for USD Index intact.

Commodities

The CRB Index was +1.8% yesterday to close at 220 + +5.3% off multi-year lows but now at the top-end of its 209-221 risk range with Oil and Gold backing off the top-ends of theirs too; USD is holding its ground keeps #deflation risks on.

China

Epic ramp for the Chinese stock market (up another +2.5% overnight to +22.5% year to date for the Shanghai Comp = 7 year high as A) both growth and inflation data slows and B) stimulus hopes run rampant) – We just had a Real Conversation @HedgeyeTV w/ Steve Roach where we focus the 1st part on China here: https://app.hedgeye.com/feed_items/43360-real-conversations-stephen-roach-on-global-imbalances-risks-and-how

 

Asset Allocation

CASH 33% US EQUITIES 11%
INTL EQUITIES 15% COMMODITIES 0%
FIXED INCOME 30% INTL CURRENCIES 11%

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

EVENT: Hedgeye's Q2 Global Macro Themes Call 11AM EST @KeithMcCullough

QUOTE OF THE DAY

“I played the game one way.  I gave it everything I had.  It doesn’t take any ability to hustle.”

                        -Wade Boggs

STAT OF THE DAY

Once again, ZERO perfect NCAA March Madness brackets were submitted.