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EVENT | Credit Cards Black Book Presentation

Wednesday, September 28th at 1:00PM ET

Watch a replay below. 

CLICK HERE to access the associated slides.

CLICK HERE to access the audio-only replay. 

 


ICI Fund Flow Survey | Domestic Stock Funds Printing the Worst Year on Record

Takeaway: In week 37 of 2016, this year's trends in domestic stock funds are ~$40 billion worse than last year and twice as weak as 2008.

Investment Company Institute Mutual Fund Data and ETF Money Flow:

With this week's -$4.5 billion withdrawal from domestic stock mutual funds, the category's losing streak is now the biggest on record at -$323 billion over the past 80 weeks (we define a streak as intact if not offset by 4 weeks of inflows). Through 37 weeks of 2016, this year is setting new outflow records previously set in 2015, with flows in U.S. stock funds -$37 billion worse than last year and shockingly over 2.2x worse than the outflow trends in the first 37 weeks of 2008. With equity markets at all time highs, there is no bigger indication of the secular shift out of the antiquated mutual fund structure (in the equity asset class at this point). Meanwhile, all bond mutual funds except for those with global mandates brought in net subscriptions this week, contributing to total fixed income mutual fund flows of +$6.2 billion. Bond ETFs did not fare as well, however, losing -$2.8 billion. Finally, investors pulled -$29 billion from money market funds.

 

ICI Fund Flow Survey | Domestic Stock Funds Printing the Worst Year on Record - ICI1

 

Running annual recaps outlining the worst outflow on record for 2016:

 

<chart20>

 

In the most recent 5-day period ending September 7th, total equity mutual funds put up net outflows of -$6.1 billion, trailing the year-to-date weekly average outflow of -$4.1 billion and the 2015 average outflow of -$1.6 billion.

 

Fixed income mutual funds put up net inflows of +$6.2 billion, outpacing the year-to-date weekly average inflow of +$3.1 billion and the 2015 average outflow of -$475 million.

 

Equity ETFs had net redemptions of -$770 million, trailing the year-to-date weekly average inflow of +$309 million and the 2015 average inflow of +$2.8 billion. Fixed income ETFs had net outflows of -$2.8 billion, trailing the year-to-date weekly average inflow of +$1.6 billion and the 2015 average inflow of +$1.0 billion.

 

ICI Fund Flow Survey | Domestic Stock Funds Printing the Worst Year on Record - ICI19

 

Mutual fund flow data is collected weekly from the Investment Company Institute (ICI) and represents a survey of 95% of the investment management industry's mutual fund assets. Mutual fund data largely reflects the actions of retail investors. Exchange traded fund (ETF) information is extracted from Bloomberg and is matched to the same weekly reporting schedule as the ICI mutual fund data. According to industry leader Blackrock (BLK), U.S. ETF participation is 60% institutional investors and 40% retail investors.



Most Recent 12 Week Flow in Millions by Mutual Fund Product: Chart data is the most recent 12 weeks from the ICI mutual fund survey and includes the weekly average for 2015 and the weekly year-to-date average for 2016:

 

ICI Fund Flow Survey | Domestic Stock Funds Printing the Worst Year on Record - ICI2

 

ICI Fund Flow Survey | Domestic Stock Funds Printing the Worst Year on Record - ICI3

 

ICI Fund Flow Survey | Domestic Stock Funds Printing the Worst Year on Record - ICI4

 

ICI Fund Flow Survey | Domestic Stock Funds Printing the Worst Year on Record - ICI5

 

ICI Fund Flow Survey | Domestic Stock Funds Printing the Worst Year on Record - ICI6



Cumulative Annual Flow in Millions by Mutual Fund Product: Chart data is the cumulative fund flow from the ICI mutual fund survey for each year starting with 2008.

 

ICI Fund Flow Survey | Domestic Stock Funds Printing the Worst Year on Record - ICI12

 

ICI Fund Flow Survey | Domestic Stock Funds Printing the Worst Year on Record - ICI13

 

ICI Fund Flow Survey | Domestic Stock Funds Printing the Worst Year on Record - ICI14

 

ICI Fund Flow Survey | Domestic Stock Funds Printing the Worst Year on Record - ICI15

 

ICI Fund Flow Survey | Domestic Stock Funds Printing the Worst Year on Record - ICI16



Most Recent 12 Week Flow within Equity and Fixed Income Exchange Traded Funds: Chart data is the most recent 12 weeks from Bloomberg's ETF database (matched to the Wednesday to Wednesday reporting format of the ICI), the weekly average for 2015, and the weekly year-to-date average for 2016. In the third table are the results of the weekly flows into and out of the major market and sector SPDRs:

 

ICI Fund Flow Survey | Domestic Stock Funds Printing the Worst Year on Record - ICI7

 

ICI Fund Flow Survey | Domestic Stock Funds Printing the Worst Year on Record - ICI8



Sector and Asset Class Weekly ETF and Year-to-Date Results: In sector SPDR callouts, investors redeemed -3% or -$206 million from the utilities XLU ETF and -3% or -$222 million from the long duration treasury TLT ETF.

 

ICI Fund Flow Survey | Domestic Stock Funds Printing the Worst Year on Record - ICI9



Cumulative Annual Flow in Millions within Equity and Fixed Income Exchange Traded Funds: Chart data is the cumulative fund flow from Bloomberg's ETF database for each year starting with 2013.

 

ICI Fund Flow Survey | Domestic Stock Funds Printing the Worst Year on Record - ICI17

 

ICI Fund Flow Survey | Domestic Stock Funds Printing the Worst Year on Record - ICI18



Net Results:

The net of total equity mutual fund and ETF flows against total bond mutual fund and ETF flows totaled a negative -$10.3 billion spread for the week (-$6.8 billion of total equity outflow net of the +$3.4 billion inflow to fixed income; positive numbers imply greater money flow to stocks; negative numbers imply greater money flow to bonds). The 52-week moving average is -$5.0 billion (negative numbers imply more positive money flow to bonds for the week) with a 52-week high of +$20.2 billion (more positive money flow to equities) and a 52-week low of -$18.4 billion (negative numbers imply more positive money flow to bonds for the week.)

  

ICI Fund Flow Survey | Domestic Stock Funds Printing the Worst Year on Record - ICI10

 


Exposures:
The weekly data herein is important for the public asset managers with trends in mutual funds and ETFs impacting the companies with the following estimated revenue impact:

 

ICI Fund Flow Survey | Domestic Stock Funds Printing the Worst Year on Record - ICI11 



Jonathan Casteleyn, CFA, CMT 

 

 

 

Joshua Steiner, CFA

 

Patrick Staudt, CFA







*TODAY* BlackStone Group (BX) | Economic Gravity - Adding to Best Ideas List as a Short

Takeaway: We are hosting a new Best Ideas call today at 11 am EST to discuss BlackStone Group as a short idea.

*TODAY* BlackStone Group (BX) | Economic Gravity - Adding to Best Ideas List as a Short - cover invite smaller

 

Rate of Change Decelerating: BlackStone is a market leader in all four of its business lines and a well liked and respected company which make it a dangerous stock in our view. The core factors that drive shares are starting to decelerate with distributable earnings sourced by net accrued performance fees now declining which is forcing the stock down in lock step. We calculate to make the Street's estimates next year that BX will have to expend 66% of its year end accrued performance fees, over 20 points higher than the balance expended for 2016 distributions and above the all time high of accrued fees paid out in 2015. 

 

Big Data Points to a Hyper Cyclical: The causal factors of BX stock price and internal fundamentals point to a hyper cyclical stock with positive coefficients to all market indices, consumer confidence, and nonfarm payrolls. Negative betas are evident to corporate credit costs, the U.S. unemployment rate, and both equity and fixed income volatility. With the economy entering late cycle territory and the path of least resistence higher for both vol and unemployment trends, we think investors risk overstaying their welcome remaining long the stock compared to the growing risks of shares inflecting lower with the economy.

 

Earnings Quality Will Matter Again:  The entire Alternatives group ranks poorly as Non GAAP accounting beneficiaries which make results look stronger than they really are. The entire earnings quality measure of the S&P 500 has been deteriorating since 2009 and is now back to the worse levels since 2007. The S&P 500 is now averaging a GAAP-to-Non GAAP ratio of 77%, which means that there is a -23% discount between adjusted and GAAP results. The Alternatives are much worse averaging a 59% ratio, or a GAAP discount of -41%. When the tide turns and investors look for safety in defensive stocks, we think the Alternatives group will fail to qualify for that category and will experience substantial declines on a flight to quality. 

 

Fair Value? Our base case valuation for BX shares is $20, or ~25% downside from current levels with a $15 per share valuation in our Bear case scenario, or -40% downside.

 

CALL DETAILS - Wednesday, September 7th at 11 am EST

  • Toll Free Number:
  • Toll Number:
  • UK: 0.
  • Conference Code: 13642040
  • To Automatically add to your Outlook Calendar Click HERE
  • For the Events Page and Live Video Link and Event Materials Click HERE

 

Please let us know of any questions.



Jonathan Casteleyn, CFA, CMT 

 

 


Joshua Steiner, CFA

 

 

Patrick Staudt, CFA

 


BlackStone Group (BX) | Economic Gravity - Adding to Best Ideas List as a Short

Takeaway: We are hosting a new Best Ideas call tomorrow Wednesday September 7th at 11 am EST to discuss BlackStone Group as a short idea.

BlackStone Group (BX) | Economic Gravity - Adding to Best Ideas List as a Short - cover invite smaller

 

Rate of Change Decelerating: BlackStone is a market leader in all four of its business lines and a well liked and respected company which make it a dangerous stock in our view. The core factors that drive shares are starting to decelerate with distributable earnings sourced by net accrued performance fees now declining which is forcing the stock down in lock step. We calculate to make the Street's estimates next year that BX will have to expend 74% of its year end 2016 accrued performance fees, almost double the 39% put out for distributions in 2016 and over 10 points more than the former high of 61% of accrued fees in 2014. 

 

Big Data Points to a Hyper Cyclical: The causal factors of BX stock price and internal fundamentals point to a hyper cyclical stock with positive coefficients to all market indices, consumer confidence, and nonfarm payrolls. Negative betas are evident to corporate credit costs, the U.S. unemployment rate, and both equity and fixed income volatility. With the economy entering late cycle territory and the path of least resistence higher for both vol and unemployment trends, we think investors risk overstaying their welcome remaining long the stock compared to the growing risks of shares inflecting lower with the economy.

 

Earnings Quality Will Matter Again:  The entire Alternatives group ranks poorly as Non GAAP accounting beneficiaries which make results look stronger than they really are. The entire earnings quality measure of the S&P 500 has been deteriorating since 2009 and is now back to the worse levels since 2007. The S&P 500 is now averaging a GAAP-to-Non GAAP ratio of 77%, which means that there is a -23% discount between adjusted and GAAP results. The Alternatives are much worse averaging a 59% ratio, or a GAAP discount of -41%. When the tide turns and investors look for safety in defensive stocks, we think the Alternatives group will fail to qualify for that category and will experience substantial declines on a flight to quality. 

 

Fair Value? Our base case valuation for BX shares is $20, or ~25% downside from current levels with a $15 per share valuation in our Bear case scenario, or -40% downside.

 

CALL DETAILS - Wednesday, September 7th at 11 am EST

  • Toll Free Number:
  • Toll Number:
  • UK: 0.
  • Conference Code: 13642040
  • To Automatically add to your Outlook Calendar Click HERE
  • For the Events Page and Live Video Link and Event Materials Click HERE

 

Please let us know of any questions.



Jonathan Casteleyn, CFA, CMT 

 

 


Joshua Steiner, CFA

 

 

Patrick Staudt, CFA

 


BlackStone Group (BX) | Economic Gravity - Adding to Best Ideas List as a Short

Takeaway: We are hosting a new Best Ideas call next Wednesday September 7th at 11 am EST to discuss BlackStone Group as a short idea.

BlackStone Group (BX) | Economic Gravity - Adding to Best Ideas List as a Short - cover invite smaller

 

Rate of Change Decelerating: BlackStone is a market leader in all four of its business lines and a well liked and respected company which make it a dangerous stock in our view. The core factors that drive shares are starting to decelerate with distributable earnings sourced by net accrued performance fees now declining which is forcing the stock down in lock step. We calculate to make the Street's estimates next year that BX will have to expend 74% of its year end 2016 accrued performance fees, almost double the 39% put out for distributions in 2016 and over 10 points more than the former high of 61% of accrued fees in 2014. 

 

Big Data Points to a Hyper Cyclical: The causal factors of BX stock price and internal fundamentals point to a hyper cyclical stock with positive coefficients to all market indices, consumer confidence, and nonfarm payrolls. Negative betas are evident to corporate credit costs, the U.S. unemployment rate, and both equity and fixed income volatility. With the economy entering late cycle territory and the path of least resistence higher for both vol and unemployment trends, we think investors risk overstaying their welcome remaining long the stock compared to the growing risks of shares inflecting lower with the economy.

 

Earnings Quality Will Matter Again:  The entire Alternatives group ranks poorly as Non GAAP accounting beneficiaries which make results look stronger than they really are. The entire earnings quality measure of the S&P 500 has been deteriorating since 2009 and is now back to the worse levels since 2007. The S&P 500 is now averaging a GAAP-to-Non GAAP ratio of 77%, which means that there is a -23% discount between adjusted and GAAP results. The Alternatives are much worse averaging a 59% ratio, or a GAAP discount of -41%. When the tide turns and investors look for safety in defensive stocks, we think the Alternatives group will fail to qualify for that category and will experience substantial declines on a flight to quality. 

 

CALL DETAILS - Wednesday, September 7th at 11 am EST

  • Toll Free Number:
  • Toll Number:
  • UK: 0.
  • Conference Code: 13642040
  • To Automatically add to your Outlook Calendar Click HERE
  • For the Events Page and Live Video Link and Event Materials Click HERE

 

Please let us know of any questions.



Jonathan Casteleyn, CFA, CMT 

 

 


Joshua Steiner, CFA

 

 

Patrick Staudt, CFA

 


EVENT | BlackStone Group (BX) BlackBook

Wednesday, September 7th at 11:00AM ET

 

Watch a replay below.

CLICK HERE to access the associated slides.

CLICK HERE to access an audio-only replay.

 


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