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1. Deere Continues to Defy
By Sham Gad
8:18 a.m. EST
Deere's (DE - Get Report) earnings today reaffirm my views of the multiyear growth cycle in ag/farming that we are starting to see. Earnings blew past all estimates on top of a healthy top-line growth number.I heard an interesting tidbit this morning on CNBC that the ag space continues to run at 100% capacity -- the only industry doing so in these economic conditions. Indeed Deere is a very uniquely positioned business with a first-rate franchise. My favorite subsector of the ag business, fertilizer, is running at anything but full capacity. But I believe that over the next three years, this sector will vastly outperform the overall market. And for the momentum players out there, yes, I believe Deere's numbers could single-handedly push the markets higher today -- but please don't bet the farm :). No positions.
2. Housing Starts
By Tim Melvin
10:03 a.m. EST From a long-term perspective, the rise in housing starts is horrible news. We have enough inventories. The fact that more is being created was pretty obvious from the delinquencies report yesterday. We do not need a bunch of new houses going up. An annual pace of 591,000 homes, in addition to existing inventory and the potential foreclosures ahead, is going to make it tough for prices to stabilize, in my opinion. Even with rates at historically low levels, mortgage applications fell last week. In the short term, the housing starts number is being cheered as a sign of new demand. In the long view, I would love to see building just stop and let the market catch up. No positions.