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Client Talking Points

Japan

With the Dollar Up and the Yen Down, the Nikkei rips to new 7 year highs (+0.8% overnight to +14.9% YTD vs SPX +1.1% YTD); the caveat here is that my FX risk ranges are tightening, so up here we’ll register an overbought signal in Japanese stocks .

Commodities

Dollar Up -> CRB Commodities Index has a big -2.5% down day (led by Oil’s -5.6% daily decline); while it’s tempting to get off the #Deflation theme, there’s no fundamental research reason to do so yet.

Gold

While it appeared to enjoy the 3 week Dollar Down, Rates Down combo move (you need those 2 things happening at the same time for Gold to really work), now you have USD Up and Rates trading in a lower, but tighter range – and Gold doesn’t enjoy that, -0.5% to $1196/oz and still signaling bearish TREND @Hedgeye.

Asset Allocation

CASH 34% US EQUITIES 13%
INTL EQUITIES 15% COMMODITIES 0%
FIXED INCOME 30% INTL CURRENCIES 8%

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

Looking forward to being LIVE w/ Maria @MariaBartiromo for the hour at 9AM EST @OpeningBellFBN 

@KeithMcCullough

QUOTE OF THE DAY

“While you’re sitting there thinking about it someone else is out there doing it.”

         -Rodger Halston

STAT OF THE DAY

Dwayne "The Rock" Johnson eats about 821 pounds of Cod per year.