CLIENT TALKING POINTS
CHINA
China has been very topical this week, Chinese equities had another strong day today up 2.2%. We continue to believe that cyclical headwinds will weigh on Chinese growth. Chase the A-shares at your own risk.
GREECE
There will be no debt deal for Greece by April 24th when the Eurogroup meets. Banks abroad have been told to exit their Greek debt holdings and neighboring banks have reduced exposure to Greek banks...clearly a lot of preparation for some sort of Greek default.
OIL
OPEC reported that its March production jumped 810,000 bpd to 30.79 million bpd. The International Energy Agency also reported a surge in OPEC production to 31 million bpd, which it said could delay a tightening in the global market. CLICK HERE to watch Director of Research Daryl Jones discusses the three biggest bearish data points on oil for both intermediate and long-term durations.
TOP LONG IDEAS
MTW
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.
ITB
iShares U.S. Home Construction ETF (ITB) is a great way to play our long housing call. The housing data was again strong in the latest week 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.
TLT
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.
Asset Allocation
| CASH | 34% | US EQUITIES | 12% | |
| INTL EQUITIES | 14% | COMMODITIES | 3% | |
| FIXED INCOME | 30% | INTL CURRENCIES | 7% |
THREE FOR THE ROAD
TWEET OF THE DAY
Rich K on $KMI call: "there's just a lot of very cheap money flowing into the energy segment." But none of it's going into $KMI, right Rich?
@HedgeyeEnergy
QUOTE OF THE DAY
The trouble with most of us is that we would rather be ruined by praise than saved by criticism.
Norman Vincent Peale
STAT OF THE DAY
Based on a study conducted by YouGov in August 2013, 6% of Americans don’t know how to ride a bike.
