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Client Talking Points

YEN

The Japanese Nikkei corrected last week and Mr. Hamada announced this morning the potential need for more cowbell = Yen Down, Nikkei +1.4% to +14.7% year-to-date. We still like Japanese Equities, don’t forget how committed Abe/Kuroda are to currency devaluation and stock market appreciation.

EUROPE

Europe loves Down Euro, and we have day-2 of that this morning + a big German ZEW print taking the DAX (which we like) +1.4% to +23% year-to-date. Denmark rocketing +2% to +36.6% year-to-date (oh and Greek stocks -3.2% to fresh year-to-date lows of -14.1%).

S&P 500

We called it the Pain Trade because bears sold the lows (again) last week, taking the net SHORT position in SPX (Index + Emini) to -40,978 contracts (the 6 month average is a net LONG position of +31,930 contracts) – maybe a more dovish Fed gets fully priced in before the news next week (April 29th meeting); we’ll see.

Asset Allocation

CASH 31% US EQUITIES 15%
INTL EQUITIES 17% COMMODITIES 1%
FIXED INCOME 30% INTL CURRENCIES 6%

Top Long Ideas

Company Ticker Sector Duration
MTW

MTW revised down its 2015 guidance for the Foodservice Equipment segment and preannounced a weaker than expected 1Q 2015. Sales in the quarter are a noteworthy miss, but we do not believe that the release has relevance for our sum-of-the-parts valuation thesis, and see many reasons to anticipate stronger operating results in 2H 2015.  Basically, we think investors stand to be paid for suffering through this volatility, with potential share price upside on separation ranging from the high 20s to low 40s. Near-term profit weakness is partly why the shares are ‘cheap’, and we think holders may be compensated well for the volatility. The shares are currently trading lower on a weaker than expected 1Q15, but 2Q15 should show improved Crane segment results and 2H should show better Foodservice Equipment results.

ITB

iShares U.S. Home Construction ETF (ITB) is a great way to play our long housing call. The housing data was mixed in the latest week with the April homebuilder confidence survey (NAHB HMI) putting in a strong sequential improvement, while March Housing Starts were a bit soft. The National Association of Home Builders (NAHB) released its April Housing Market Index survey (HMI) – essentially a survey of builder confidence. The print was strong as it showed a nice bounce across all three survey categories: traffic of prospective buyers, current conditions, and expectations 6 months out.  Housing Starts were up sequentially in March, but by less than the market expected. Total Starts rose by 2% to 926,000 (seasonally-adjusted annualized rate) from 908,000 in February.

TLT

On the domestic fixed income front we’re looking at lower yields for longer. Lower yields benefit those slow-growth fixed income cash flows tied to the treasury curve (yields down, bonds up). TLT sets-up nicely in a slow-growth, deflationary setting because inflation missing=expectation for even easier policy=more central-planning cowbell=lower yields for longer.

Three for the Road

TWEET OF THE DAY

All in, this was an 'ok' qtr by $UA standards. But outstanding qtr by most other standards.

Managing the biz well thru explosive growth.

@HedgeyeRetail

QUOTE OF THE DAY

Most great people have attained their greatest success just one step beyond their greatest failure.

Napoleon Hill

 

 

STAT OF THE DAY

Mobile searches related to mortgages, credit cards, loans and life insurance are gowing 48% year-over-year.