ICI Fund Flow Survey - No Follow Through in Bonds from the Inflow Last Week

Takeaway: Bond funds were unable to follow through on last week's inflow which was the first weekly in 9 weeks with more outflows this week

Investment Company Institute Mutual Fund Data and ETF Money Flow:


Fixed income mutual funds flow showed no follow through with an outflow of $400 million this week, a reversal from the $1.2 billion inflow last week which was the first inflow in 9 weeks


Equity mutual funds booked an another outflow of $3.3 billion for the 5 day period ending October 2nd, a continuation from the $3.7 billion redemption from last week


Within ETFs, passive equity products experienced inflow of $1.3 billion for the 5 day period ending October 2nd with Bond ETFs losing $2.0 billion of investor funds during the week


ICI Fund Flow Survey - No Follow Through in Bonds from the Inflow Last Week - ICI chart 1



For the week ending October 2nd, the Investment Company Institute reported another weekly outflow in combined stock funds to the tune of $3.3 billion, essentially in line with the $3.7 billion outflow last week. The $3.3 billion outflow for the week broke out to a $739 million inflow into international equity products and a $4.1 billion outflow within domestic stock funds. The equity category has been a tale of two tapes recently with domestic equity funds having had outflows in 7 of the past 12 weeks compared to international equity funds which have had inflows every week in the past 12. Despite this weak run in domestic stock fund flows, the year-to-date weekly average for 2013 for all equity mutual funds now sits at a $2.7 billion, a complete reversal from the $3.0 billion outflow averaged per week in 2012.


On the fixed income side, bond funds were not able to maintain the momentum from last week and for the 5 days ending October 2nd, the aggregate of taxable and tax-free bond funds booked a $400 million outflow. The taxable bond category had slight inflows of $468 million which was washed over by the $868 million outflow in tax-free or municipal bonds. While the sharp outflows that marked most of the summer and the start of the third quarter have moderated, the appetite for bonds has hardly rebounded. The 2013 weekly average for fixed income fund flows is now a $525 million weekly outflow, a far cry from the $5.8 billion weekly inflow averaged last year.


We highlighted the year-to-date tallies of this rotation from bonds and into equities last week with the first inflow into total equity funds in 6 years with stock funds running at a $106 billion inflow thus far in 2013. Conversely bond mutual funds are working on their first annual outflow since 2004 with a $23 billion outflow thus far in '13. This is a substantial reversal from the $303 billion inflow into fixed income funds as laid out in our research last week.


Within our asset management sector launch in the middle of the summer, we released our regression models that forecasted an prospective inflow for stock funds of $80 billion and conversely a forward 12 month outflow of $100 billion for bond funds. Thus far into our coverage of the asset managers, the equity rotation has occurred at a faster than expected rate and bond fund flows have been fairly stubborn, although our forecasts have been directionally relevant. As such, we continue to recommend investors are long leading equity manager T Rowe Price (TROW) to capture this shift and conversely avoid or be short a manager more dependent on bonds like Franklin Resources (BEN).


Hybrid funds, or products that combine both fixed income and equity allocation had a surprisingly light week with the first outflow in 14 weeks. The year-to-date weekly average inflow for hybrid products however is still $1.6 billion for '13, almost a 100% increase from 2012's $911 million weekly average.



ICI Fund Flow Survey - No Follow Through in Bonds from the Inflow Last Week - ICI chart 2

ICI Fund Flow Survey - No Follow Through in Bonds from the Inflow Last Week - ICI chart 3

ICI Fund Flow Survey - No Follow Through in Bonds from the Inflow Last Week - ICI chart 4

ICI Fund Flow Survey - No Follow Through in Bonds from the Inflow Last Week - ICI chart 5

ICI Fund Flow Survey - No Follow Through in Bonds from the Inflow Last Week - ICI chart 6



Passive Products:



Exchange traded funds experienced mixed trends during last week with equity products booking an inflow and bond ETFs experiencing redemptions. Equity ETFs gathered $1.3 billion in funds, a deceleration from the $7.3 billion in the prior week and also down from the impressive $25.8 billion two week's ago. Including this week's production however, 2013 weekly average equity ETF trends are averaging a $3.3 billion weekly inflow, a strong improvement from last year's $2.2 billion weekly inflow average.


Bond ETFs experienced the first redemption in 5 weeks of $2.0 billion which was a reversal from the $1.3 billion in new funds garnered last week. Including this most recent outflow within passive bond products, the 2013 weekly bond ETF average is flagging at just a $369 million inflow, much lower than the $1.0 billion average weekly inflow from 2012.


In last week's ICI report we outlined the brewing ETF record for equities with 2013 thus far having produced $129 billion in stock ETF flow, well above the $117 billion produced in 2012 with still a quarter left in the year. Fixed income ETFs are struggling with just a $15 billion annual inflow year-to-date thus far in '13. This is well below 2012's trends of a $56 billion inflow. 



ICI Fund Flow Survey - No Follow Through in Bonds from the Inflow Last Week - ICI chart 7

ICI Fund Flow Survey - No Follow Through in Bonds from the Inflow Last Week - ICI chart 8




Jonathan Casteleyn, CFA, CMT







Joshua Steiner, CFA



Hungering For Less

This note was originally published at 8am on September 26, 2013 for Hedgeye subscribers.

“Always my soul hungered for less than it had.”

-T.E. Lawrence


Suffice it to say, this new book I have been reading (Lawrence in ArabiaWar, Deceit, Imperial Folly and the Making of The Modern Middle East) has provided me both timely and profound context for the times in which we live.


In general, that’s why I read so much history. I believe that leadership starts with having an ability to empathize. If you can’t contextualize where people and/or ideas come from, how can you lead them toward the path you’d like them to take?


And what if the path you thought you should take (like devaluing the purchasing power of your people and establishing a perpetual savings rate of 0%) ends up becoming the wrong path? Only the objective and flexible can change their mind. That’s evolution.


Back to the Global Macro Grind


October is coming. For the US stock and bond markets, that’s not always a good thing. October 1987 is a date that many of you who lead firms today remember. October of 1907 is a date you’ll only respect and remember if you’ve studied economic history.


In October of 1907, a panic on Wall Street sparked a nationwide run on banks and nearly halved the value of the New York Stock Exchange in a matter of days. Among the hardest hit by the panic was the heavily leveraged William Henry Yale, whose enormous fortune was virtually wiped out.” (Lawrence in Arabia, pg 25)


It wasn’t just the Yale family that got crushed. Many “who were born to tremendous advantage… lost it all in the blink of an eye” (pg 24), and that crisis gave birth to a whole new set of growth opportunities. With no job in NYC, William Yale’s son went on to work for Standard Oil in the Middle East (his office was a backpack and a tent). He’s was one of the first Americans on the ground.


How many of your sons or daughters are prepared for a life where you lost it all?


The America that their United States had back then didn’t have hand-holding socializers of risk. In 1907, they didn’t have the Federal Reserve either. Many self made men and women in this country were frugal and, as Nasim Taleb would say, anti-fragile.


How about the President of the United States? What did he stand for then versus now? If you had to pick between Theodore Roosevelt and Bush or Obama, who would you have lead your son or daughter into “the struggle” that Teddy called life?


William Henry Yale’s son didn’t whine and beg for an un-elected bureaucrat called Burns or Bernanke to bail him out. He sucked up his father’s mistakes and made his own path.


That didn’t just happen. Despite having all the money in the world, Yale believed (like Teddy did) that a “true man… was a rugged individualist, physically fit as well as intellectually cultured” (pg 25).


How many of your sons or daughters are well-read individualists who are prepared to take on the tyranny of a centrally planned USA? Too much to think about this morning. I know. But, please, don’t let the government’s groupthink stop you or your kids from thinking. We don’t live in the great depression Bernanke fear-mongers about. We might, if we keep trying to ban the economic cycle.


Moving on, after 5 straight down days for US stocks, here are some USA levels to consider:

  1. US Dollar – US Dollar Index long-term TAIL support = $79.11; intermediate-term TREND resistance = $81.35
  2. US Bonds – US 10yr Treasury Yield intermediate-term TREND support 2.55%; immediate-term TRADE resistance = 2.76%
  3. US Equity Volatility (VIX) – 12.95 immediate-term TRADE support; 18.98 intermediate-term TREND resistance
  4. US Equities (SP500) – 1655 intermediate-term TREND support; 1704 immediate-term TRADE resistance
  5. US Growth Equities (Nasdaq) – 3702 immediate-term TRADE support; 3789 immediate-term TRADE resistance

And here are some risk management questions to consider:

  1. Will the supposed leaders of this country allow an un-elected man to keep devaluing America’s Currency?
  2. Will Ben Bernanke and Janet Yellen be allowed to impose a perpetual depression on American Savers?
  3. Will @FederalReserve’s latest “communication tool” be to drive uncertainty, locking in a YTD VIX low?
  4. Will the all-time high for the US stock market (SPX 1725) be another Bernanke Bubble top?
  5. Will there ever be a bull case America believes in that doesn’t include a #StrongDollar and real growth?

I for one am Hungering For Less government intervention in our currency and bond markets. I’m hungering for a life that doesn’t include having to wake up worrying about what sub-regional-anti-dog-eat-dog-federal-reserve-vice-president says on CNBC next.


I’m hungering for what has always reflected the strength and character of any nation – confidence in both the currency and resolve of its people to be the change born out of crisis.


Our immediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 2.57-2.76%

SPX 1683-1704

VIX 12.95-14.98

USD 79.99-81.28

Yen 98.02-98.99

Brent 106.98-110.51


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Hungering For Less - Chart of the Day


Hungering For Less - Virtual Portfolio

Sell the Fear

Client Talking Points


It held! The U.S. Dollar Index TAIL risk line of $79.21 support holds as the Burning Buck v-bottoms off USD/YEN $96.45 TREND support too. Yes, Japanese and U.S. stocks will definitely like that development, especially if SPX recovers its 1663 TREND line. There are 23 handles of immediate-term upside in the S&P 500 if the VIX snaps 18.98. 


Front month-fear is as much an opportunity on the upside for U.S. Equities now as it was a risk to the downside. If our 18.98 TREND line snaps today (and 1663 SPY holds), this could be one of the many 2013 #EOW (end of world) head-fakes perpetuated by #OldWall’s government access media. Sell the fear.  


We bought Germany’s stock market back on red yesterday as it tested and held our immediate-term TRADE line of 8508 support. The fact of the matter is that European stocks couldn’t have cared less about US “default” fear-mongering.Our macro team will go through why we like German stocks in our #EuroBulls Macro Theme for Q413 tomorrow.

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

WWW is one of the best managed and most consistent companies in retail. We’re rarely fans of acquisitions, but the recent addition of Sperry, Saucony, Keds and Stride Rite (known as PLG) gives WWW a multi-year platform from which to grow. We think that the prevailing bearish view is very backward looking and leaves out a big piece of the WWW story, which is that integration of these brands into the WWW portfolio will allow the former PLG group to achieve what it could not under its former owner (most notably – international growth, and leverage a more diverse selling infrastructure in the US). Furthermore it will grow without needing to add the capital we’d otherwise expect as a stand-alone company – especially given WWW’s consolidation from four divisions into three -- which improves asset turns and financial returns.


Health Care sector head Tom Tobin has identified a number of tailwinds in the near and longer term that act as tailwinds to the hospital industry, and HCA in particular. This includes: Utilization, Maternity Trends as well as Pent-Up Demand and Acuity. The demographic shift towards more health care – driven by a gradually improving economy, improving employment trends, and accelerating new household formation and births – is a meaningful Macro factor and likely to lead to improving revenue and volume trends moving forward.  Near-term market mayhem should not hamper this  trend, even if it means slightly higher borrowing costs for hospitals down the road.


Financials sector senior analyst Jonathan Casteleyn continues to carry T. Rowe Price as his highest-conviction long call, based on the long-range reallocation out of bonds with investors continuing to move into stocks.  T Rowe is one of the fastest growing equity asset managers and has consistently had the best performing stock funds over the past ten years.

Three for the Road


TREASURIES: 10yr yield holds our #RatesRising @Hedgeye TREND line of 2.58% like a champ @KeithMcCullough


One of the greatest pains to human nature is the pain of a new idea.
-Walter Bagehot 


The Yield Spread (growth signal) is up 8 basis points in the last 48 hours. In other words, there is no default fear there 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.

October 10, 2013

October 10, 2013 - dtr



October 10, 2013 - 10yr

October 10, 2013 - spx

October 10, 2013 - dax

October 10, 2013 - nik

October 10, 2013 - VIX

October 10, 2013 - euro

October 10, 2013 - oil

October 10, 2013 - natgas



October 10, 2013 - yen

October 10, 2013 - gold
October 10, 2013 - copper



Reminder that our slots Black Book conference call will be held at 11:00am today.





  • Stocks of the big U.S. gaming supply companies are up 30% to 95% on the year yet big fundamental hurdles have emerged.
  • How will these same stocks fare over the coming months and years in the face of stagnating replacement demand, a dearth of new markets, pricing pressure, and bad demographics?
  • We'll analyze the issues - there are many - and explain who is at risk and for how long.






  • Toll Free Number:
  • Direct Dial Number:
  • Conference Code: 187413#
  • MaterialsCLICK HERE








According to some travel agencies, package tour dropped by 80% after the new tourism law took effect, while package tour were all fully booked in September.  Package tour price went up from the previous HK$2,000 - $3,000 to as high as HK$6,000.  However, the new law has seen no impact on tourists visiting under the Individual travel scheme.



The City of Dreams Manila project, set to open in mid-2014, now requires an initial outlay of US$680 million, or US$60 million more than previously announced, said CEO Lawrence Ho. MPEL said Philippine gaming regulation amendments had allowed it to increase the number of gaming tables and machines.


City of Dreams Manila is now anticipated to be able to operate up to 365 gaming tables, 1,680 slot machines and 1,680 electronic table games upon opening.  The increased budget was also due to its decision to use its City of Dreams and Crown Towers brands for the property. 



Chinese conglomerate Fosun International is teaming up with South African hotelier and casino king Sol Kerzner’s company to build a US$1.5 billion resort on China’s holiday island Hainan, a Kerzner official said.  The 62-hectare property, which will feature a water park and luxury 1,300-room hotel, will be located in Hainan’s southern coastal city Sanya.

Kerzner, which operates the Atlantis casino resort in the Bahamas and Atlantis hotel on Dubai’s artificial Palm Island, says the resort in Sanya will not include a casino.

Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.52%
  • SHORT SIGNALS 78.67%