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Short Bill Gross and the Bond Bears (Again)

Editor's Note: This is an excerpt from Hedgeye research this morning. If you're curious and considering becoming a subscriber (a very good idea), please feel free to take a look around and see how we can help you by clicking here.

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So, a very loud and vocal chorus of Bond Bears was out in force yesterday (see Bill Gross on German Bunds… and in the U.S., those saying the Housing data was “too good”, so that meant the Fed would hike, etc, etc).

 

All that chirping accomplished was tap the top-end of our 1.84-1.99% immediate-term risk range for 10YR UST (which we are still long via TLT).

 

Our advice? Buy red, sell green. In other words, buy more bonds at the top-end of the yield range.

 

Rinse and repeat.

 

Short Bill Gross and the Bond Bears (Again) - zowsa


JAPAN ECONOMIC UPDATE: WIN-WIN-WIN?

Takeaway: We reiterate our bullish bias on Japanese equities amid a powerful trifecta of supportive factors.

Below watch a video update of our intermediate-to-long term thesis on the Japanese economy and its financial markets.

 

CLICK HERE to download the associated presentation in PDF format (11 slides).

 

As always, feel free to ping us with questions.

 

Best of luck out there,

 

DD

 

Darius Dale

Associate


Keith's Macro Notebook 4/23: VIX | UST 10YR | Gold

Hedgeye's Macro Analyst Darius Dale shares the the top three things in CEO Keith McCullough's macro notebook this morning.


investing ideas

Risk Managed Long Term Investing for Pros

Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.

Retail Callouts (4/23): SKX, TJX, ZQK, SPLS, EBAY

Takeaway: Removing SKX from our short bench.

EVENTS TO WATCH

Retail Callouts (4/23): SKX, TJX, ZQK, SPLS, EBAY - 4 20 chart2

 

 

COMPANY HIGHLIGHTS

 

SKX - Removing From Short Bench

 

Takeaway: We’re removing SKX from our Short Bench. We added the name to the Bench on Monday after we flagged it as a negative on our SIGMA screen this past week. As a reminder, this analysis triangulates the P&L and balance sheet to hone in on which companies are likely to beat on the Gross Margin line, and of course...which companies are going to miss. We were looking for 1) the SIGMA trajectory coming out of 1Q15 and 2) the quality of the print. Both of which looked good enough for us to pull this name off our radar screen on the short side for now.

Retail Callouts (4/23): SKX, TJX, ZQK, SPLS, EBAY - 4 23 chart1

 

 

OTHER NEWS

 

EBAY - Ebay lays out post-split vision for marketplace and PayPal

(http://www.ft.com/intl/cms/s/0/be5f96a4-e92c-11e4-b7e8-00144feab7de.html#axzz3Y85swnQj)

 

TJX - TJX chairman Cammarata to retire, CEO Meyrowitz will succeed him

(http://www.chainstoreage.com/article/tjx-chairman-cammarata-retire-ceo-meyrowitz-will-succeed-him)

 

ZQK - Quiksilver Investor Renews Calls for Retailer to Pursue Sale

(http://www.bloomberg.com/news/articles/2015-04-22/quiksilver-investor-urges-retail-chain-to-put-itself-up-for-sale)

 

SPLS - Staples Acquires Makr to Make More Design Services Happen

(http://investor.staples.com/phoenix.zhtml?c=96244&p=irol-newsArticle&ID=2039135)

 

ABG Acquires Jones New York And Taps Mark Weber, Former CEO LVMH, Inc., As Strategic Advisor

(http://www.prnewswire.com/news-releases/abg-acquires-jones-new-york-and-taps-mark-weber-former-ceo-lvmh-inc-as-strategic-advisor-300070947.html)

 

Bill Langsdorf Named to Lead Former Wet Seal

(http://wwd.com/business-news/human-resources/bill-langsdorf-lead-former-wet-seal-10115497/)

 

Kering - Puma Appoints General Manager for EMEA

(http://wwd.com/business-news/human-resources/puma-appoints-general-manager-for-emea-10115485/)

 

M - Macy's gets intimate with Heidi Klum

(http://www.retailingtoday.com/article/macys-gets-intimate-heidi-klum)

 

Ikea changes the rules on high-tech furnishings

(http://www.retailingtoday.com/article/ikea-changes-rules-high-tech-furnishings)

 

Metro interested in some Target Canada stores

(http://www.chainstoreage.com/article/metro-interested-some-target-canada-stores)

 

Sears Hometown and Outlet CEO to leave Aug. 1

(http://www.retailingtoday.com/article/sears-hometown-and-outlet-ceo-leave-aug-1)


U.S. Stocks Battle Back

Client Talking Points

VIX

A critical component to our model is how we model historical volatility (as a leading indicator), and it’s signaling a range of 12.07-14.32 on front-month right now – that’s bullish for equity beta. We’ll see if the Fed is the catalyst the market has been sniffing out (SPX only -0.5% off her all-time high as of yesterday’s close).

10YR UST

Very loud chorus of Bond Bears yesterday (Gross on German Bunds, and in the U.S. some said the Housing data was “too good”, so the Fed would hike?); all that did was tap the top-end of our 1.84-1.99% immediate-term risk range for 10YR UST – buy more bonds at the top-end of the yield range.

GOLD

Another clean cut way to play an easier Fed (Down Dollar) and rates at the top-end of the range is obviously buying Gold at the low-end of its $1181-1208 range – we haven’t been a Gold Bull lately, but we have no problem changing our mind, from a time/price.

Asset Allocation

CASH 31% US EQUITIES 14%
INTL EQUITIES 16% COMMODITIES 4%
FIXED INCOME 31% INTL CURRENCIES 4%

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

VIDEO (4mins on Fox) Here's How We're Playing 'Rates Down' https://app.hedgeye.com/insights/43663-mccullough-to-bartiromo-on-fox-business-here-s-how-we-re-playing-rat

@KeithMcCullough

QUOTE OF THE DAY

The genius thing that we did was never give up.

Jay-Z

STAT OF THE DAY

The first YouTube clip was shared 10 years ago.


CHART OF THE DAY: Homebuilders + Long Bonds (No Cognitive Dissonance Here)

CHART OF THE DAY: Homebuilders + Long Bonds (No Cognitive Dissonance Here) - 04.23.15 chart

 

Editor's Note: This is a chart and brief excerpt from today's Morning Newsletter by Hedgeye CEO Keith McCullough. Click here to learn more and subscribe.

 

...I remain bullish on both Long-Duration Bonds (TLT, EDV, MUB, etc.) and Housing (ITB, DHI, MTG, etc.), 

 


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