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Client Talking Points

BUNDS

German Bunds just crashed (yield on the 10YR just quintupled in 8 trading days, from 0.14% to 0.76%) – this is actually wild to watch this morning, so it will be interesting to see how U.S. markets/futures react once everyone gets to work – paging Dr. Draghi….

EURO

The Euro is straight back up to tagging the top-end of a $1.06-1.14 range vs. USD and European stocks do not like that. Both the EuroStoxx50 and German DAX are breaking down through @Hedgeye TREND supports, which is new (only thing that likes this is Oil).

ASIA

There was a nasty 3-day drop for the Shanghai Composite Casino, down another -2.8% overnight (-8% in 3 days). Australia was down again, despite the rate cut. India dropped -3.1% year-to-date, and the Japanese Nikkei was -1.3%, breaking our TRADE support line of 19,682.

Asset Allocation

CASH 57% US EQUITIES 4%
INTL EQUITIES 6% COMMODITIES 0%
FIXED INCOME 31% INTL CURRENCIES 2%

Top Long Ideas

Company Ticker Sector Duration
RH

We think people are missing the magnitude of earnings growth at Restoration Hardware (RH), the sustainability of that trajectory over a long period of time, and ultimately the degree to which that will accrue to equity holders. The question is not whether the stock will go to $110 vs $120 (where we see most price targets), but whether it will get to $200 vs $300. We think the catalyst calendar looks healthy starting with the 1Q15 print set to be release in early June. Following that, RH is set to pick up the cadence of its store opening, with 4 new stores set to be open in the back half of the year. This remains our favorite name in retail.  

ITB

iShares U.S. Home Construction ETF (ITB) is a great way to play our long housing call. Builder performance was choppy in the latest week alongside beta volatility and investor attempts to square the net impact to housing from rising rates and ongoing improvement in housing fundamentals. As it stands currently, rates remain a tailwind to affordability relative to last year and would require a significant, expedited increase to have a material negative impact on housing activity in the immediate/intermediate term. Elsewhere across Housing Macro, the fundamental data continued to roll in strong.

TLT

Insomuch as the April Jobs Report may prove to be a bearish catalyst for Treasury bonds, slowing growth data over the next two quarters should prove decidedly bullish. Fighting buy-side consensus on the long side of Treasury bonds been a great call thus far so we’d be booking gains and taking down our gross exposure to this asset class on the next immediate-term pop. Ultimately, we think our #LowerForLonger theme prevails, but volatility is likely to pick up in the interim.

Three for the Road

TWEET OF THE DAY

The Macro Show, Live with (me) at 8:30AM ET https://app.hedgeye.com/insights/43964-the-macro-show-live-with-keith-mccullough-at-8-30am-et… via @hedgeye

@KeithMcCullough

QUOTE OF THE DAY

Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it’s the only thing that ever has.

Margaret Mead

STAT OF THE DAY

U.S. sales of sportswear apparel is $91 billion, sales are up 9.8% compared to last year.