Client Talking Points
Down -1% vs USD yes, +0.5% this morning to $1.08 with a tighter risk range of $1.07-1.09 (vs. 1.04-1.10 two weeks ago) and plenty of bearish intermediate-term TREND resistance overhead.
After another hopeful headline ramp yesterday is met with a -2.5% this morning for WTI, taking it right back into the red for the YTD with an immediate-term risk range of $46.48-53.39 – lots of short selling opportunities again in everything Energy from the top-end of respective risk ranges.
Lower-For-Longer? Yep. German and Dutch 10YR yields falling to 0.17 and 0.34%, respectively, as UST 10YR yield falls back to 1.88% with Fed Fund Futures pushed to DEC 2015 – those shorting these sovereign bonds on “valuation” have no catalyst unless global growth and inflation accelerate.
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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
SPECIAL EVENT: Calling all RIAs!!! ***Cinco De Macro*** Margaritas, Macro & More Ping Matt (firstname.lastname@example.org) pic.twitter.com/tbjFYNhENw
QUOTE OF THE DAY
“Expect problems and eat them for breakfast.”
-Alfred A. Montapert
STAT OF THE DAY
Purchase Applications re-captured the 200-level on the index, rising +6.8% week-over-week following +5.7% and +4.9% sequential gains in the prior two weeks, respectively. On a year-over-basis growth in purchase demand was up +11.9%, marking a 3rd consecutive week of acceleration and the fastest rate of growth in 22 months.