The U.S. Dollar trades near decade-plus highs versus the Euro.
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In this brief excerpt from this morning's Macro Show, Hedgeye Macro Analyst Darius Dale offers his most important takeaways from the latest Chinese trade data, whether to expect more action from central planners, and why seasonality is a factor for these numbers.
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Takeaway: Yeah, there's hype around the Masters, Spieth and UA. But we need to find another 5mm golfers (25%) to get to pre Tiger-gate levels.
WHY GOLF IS BROKEN
While everyone basks in Jordan Spieth’s lights-out victory this weekend in Atlanta, let’s keep one thing in perspective about the Golf Industry. We’re seeing a massive bifurcation in participation, and it’s not particularly healthy. Simply put, a significantly smaller number of golfers are playing a far greater number of rounds. The number of golfers in the US has declined by 5mm, or 16%, in the past six years. On the flip side, the number of rounds per player is up 12% to 19 rounds per year over that same period.
Two factors explain away 80% of this drop. One is the ’07-’09 recession, which took the marginal golfer out of the game (‘core’ golfers will golf in any economy, weather, zombie apocalypse, or whatever…). Then just as the US emerged from a crippling recession (6/09), Tiger Woods fell from grace (11/09), thereby removing the biggest positive mass-marketing force the game has ever seen.
Fortunately, what we call ‘core’ golfers (plays at least 8 times a year) accounts for about 56% of golfers, and 85% of spending. For the most part, this is a healthy demographic. But someone who plays 20, 30, or even 50 rounds per year almost certainly does not go to a Golf Galaxy or a Dick’s. They likely belong to a Club, and buy gear at the Club’s pro shop.
It’s the ‘non-core’ golfer (less than 8x per year) who uses mass channels, and that group has been decimated – accounting for almost all the decline in players over the past six years. Before the Recession/Tiger Debacle, there were 13.2mm ‘non-core’ golfers. Now there’s closer to 10mm. That’s roughly a 25% decline in a customer base for the mass golf retailers.
Could they come back? Of course. But we’re going to need a lot more than Tiger passing the torch to Rory McIlroy, or UA’s Spieth crushing the field at the Masters.
UA - Jordan Spieth is Masters Champ, Big Win for UA
Takeaway: Spieth and Under Armour had a good week last week. With Spieth leading the masters after every round and ultimately winning by 4 shots, the UA logo, which is seen on every piece of Spieth's clothing, spent many hours front and center on national TV.
In January, Under Armour presciently signed a new 10 year contract with Spieth and just 3 months later he wins the season's first major championship in record fashion. Spieth's contract likely had built in performance incentives which means UA will have to pay him extra after his victory, but after showcasing the brand at the top level Kevin Plank will be happy to write him the check.
SHLD - REIT
Retailers Are Under Fire for Work Schedules
TGT - Target Canada closing, ending 2-year foray
AMZN - Amazon.ca drops free shipping for remote customers
AMZN - Amazon Acquired Data Migration Startup Amiato
China Restricts Hong Kong Visits
Sprint RadioShack launches in 1,435 stores
Client Talking Points
European equities are mostly flattish to up small across the board. The two outliers are Greece up about 1% and Russia up about 1.3%. Volume in European equities is pretty quiet, at about 2/3 of the one month average. The Euro continues to be in free fall, pushing the low end of our risk range, down about 45 basis points. Our immediate term risk range for the Euro is 1.05-1.08.
Germany is one equity market we want to highlight, it continues to be in a bullish formation and we remain long term bulls. Exports account for 47% of German GDP, so weak EUR policy is a huge TAILWIND for Germany. German fundamentals are outperforming peers and showing positive lift (business & economic confidence; IP, factory orders).
The Shanghai Composite Index is up about 2.7%, it is reportedly up on speculation of increased stimulus. The World Bank effectively came out and said that China will have to do some stimulus to sustain its growth rate. March trade data was kind of disappointing across the board, exports down about 15% year-over-year from 48.3%. March trade balance was $3.08B from $60.62B, this is the narrowest balance since FEB 2014.
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Top Long Ideas
Manitowoc (MTW) is splitting the business into two companies. While the crane business receives the most attention in part due to its cyclicality and because they are well, more noticeable, Manitowoc’s other business, Foodservice equipment, is the larger of the two in terms of operating income (60% vs. 40% for Cranes). Several indicators are pointing towards upward momentum for MTW’s Foodservice business. Restaurant same store sales have benefitted since the drop in oil prices. Furthermore, an indicator by the National Restaurant Association, RPI Capital Expenditures Index, has surged recently in part due to lower fuel prices driving restaurant traffic and restaurant owners’ outlook.
iShares U.S. Home Construction ETF (ITB) is a great way to play our long housing call. The housing data was again strong with Pending Home Sales, HPI and Purchase Demand all accelerating to close out March. Pending Home Sales rose +3.1% sequentially in February with signed contract activity up a remarkable +12% YoY, taking the index to a new 19-month high. Mortgage Purchase Applications – the most real-time, high frequency housing demand indicator - rose +5.7% WoW on the back of last week’s +4.9% advance and accelerated to +7.6% on a year-over-year basis. HPI: The Case-Shiller 20-city series showed home prices grew +4.6% year-over-year in January. A stabilization/inflection in home price growth is important as housing related equity performance tracks the slope of home price growth strongly.
It was another week of declining long-term yields getting you paid on the long-side of Low-volatility Long Bonds (TLT). To reiterate our view over the longer-term, we pin a good chance the U.S. Dollar will reach new highs ($120 anyone?) with the probably of long-term Treasury yields reaching all-time lows very much in play.
Three for the Road
TWEET OF THE DAY
Real Conversations: Roach on Global Imbalances, Risks and How It... https://www.youtube.com/watch?v=JqCyo_0yxz8 via @YouTube
QUOTE OF THE DAY
Work hard in your silence. Let your success be your noise.
STAT OF THE DAY
92.1% of software developers are men.
Below are key European banking risk monitors, which are included as part of Josh Steiner and the Financial team's "Monday Morning Risk Monitor". If you'd like to receive the work of the Financials team or request a trial please email
While it fulfilled a promise to meet a payment deadline on its IMF loan, Greek spreads widened. This may be an indication that, in the debate of whether Greece is unwilling or unable to repay, investors are leaning towards the latter.
European Financial CDS - Swaps mostly tightened among European banks last week. However, Greek bank swaps widened between 24 and 77 bps, even as Greece met a deadline for repayment of part of its IMF loan and Greek finance minister Yanis Varoufakis promised that the country would meet "all obligations to all creditors". There has been debate recently about the possibility that Greece can make repayments but is unwilling. Now that Greece has shown its willingness to make payments, continued spread widening could be an indication that investors are leaning towards the belief that the country is unable.
Sovereign CDS – Sovereign swaps modestly tightened over last week. Portugal tightened the most, by -3 bps to 132. Of those that widened, German sovereign swaps widened by 1 bp to 17.
Euribor-OIS Spread – The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States. Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal. By contrast, the Euribor rate is the rate offered for unsecured interbank lending. Thus, the spread between the two isolates counterparty risk. The Euribor-OIS spread was unchanged at 12 bps.
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