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ICI Fund Flow Survey - Equity Fund Follow Through...Fixed Income Flat Lines

Takeaway: Both equity mutual funds and ETFs had positive fund flow for the most recent period at the expense of fixed income again

Investment Company Institute Mutual Fund Data and ETF Money Flow:

 

Total equity mutual funds experienced another week of strong follow through for the third week of 2014 with $6.4 billion flowing into all stock funds for the week ending January 22nd. Within the total equity fund result, domestic equity mutual funds gained $2.4 billion, double the emerging 2014 weekly average, with international equity funds posting a $3.9 billion inflow. This robust weekly inflow coupled with the strong result from the week prior has now moved the 2014 weekly average to a $4.7 billion inflow for equities to start 2014, a continuation on 2013's positive trends where $3.0 billion per week on average flowed into stock funds. 

 

Fixed income mutual funds had a slight outflow for the most recent 5 day period however the result essentially netted to a flat result. In the week ending January 22nd, total fixed income mutual funds produced a $247 million outflow, which broke out into a $375 million redemption in taxable bonds and a $128 million inflow into tax-free bonds, the second straight week of inflow for munis. The 2014 weekly average for fixed income mutual funds now stands at a $1.1 billion weekly inflow, an improvement from 2013's weekly average outflow of $1.5 billion. This improved 2014 weekly statistic however is still a far cry from the $5.8 billion weekly average inflow from 2012 (our view of the blow off top in the bond market).

 

ETFs experienced mixed trends during the week but essentially followed the direction of mutual funds with an inflow into passive equity funds and a flat result within bond ETFs. Stock ETFs gained a solid $2.0 billion for the 5 day period ending January 22nd with bond ETFs producing a $92 million inflow.  The 2014 weekly averages considering this new production are now a $389 million weekly inflow for equity ETFs and a $243 million weekly inflow for fixed income ETFs. 

 

The net of total equity mutual fund and ETF trends against total bond mutual fund and ETF flows totaled a positive $8.6 billion spread for the week ($8.5 billion of total equity inflows versus the $155 million outflow within fixed income; positive numbers imply inflows for stocks). The 52 week moving average has been $7.7 billion (positive spread to equities), with a 52 week high of $30.9 billion (positive spread to equities) and a 52 week low of equity/debt weekly spread of -$9.2 billion (negative numbers imply a net inflow into bonds for the week). 

 

Despite the slow start for equity returns in 2014 and nascent fears of global contagion from emerging markets, the continued follow through of positive equity flows is not surprising being that in analyzing 15 years of mutual fund flow versus market performance data that generally there has been a six month lag as retail investors chase performance with fund flow on the equity side and a 9 month historical lag between benchmark fixed income performance and bond fund flows. Hence the dramatic up year of 30% for the S&P 500 and the first loss in the Barclay's Aggregate Bond index in 14 years last year could create tails of up to 2-3 quarters of inflows (for equities) and outflows for bonds (although we acknowledge that the linear 12 week trend lines in fixed income flow below are improving and likely we will see substantial equity outflows next week considering the sharp drop in stocks this week). Although counter intuitive to how "performance" is actually created, this has been the historical behavioral pattern of mutual fund investors which are almost exclusively retail driven.

 

 

ICI Fund Flow Survey - Equity Fund Follow Through...Fixed Income Flat Lines - ICI chart 1

 

 

Most Recent 12 Week Flow in Millions by Mutual Fund Product:

 

 

ICI Fund Flow Survey - Equity Fund Follow Through...Fixed Income Flat Lines - ICI chart 2

 

ICI Fund Flow Survey - Equity Fund Follow Through...Fixed Income Flat Lines - ICI chart 3

 

ICI Fund Flow Survey - Equity Fund Follow Through...Fixed Income Flat Lines - ICI chart 4

 

ICI Fund Flow Survey - Equity Fund Follow Through...Fixed Income Flat Lines - ICI chart 5

 

ICI Fund Flow Survey - Equity Fund Follow Through...Fixed Income Flat Lines - ICI chart 6

 

 

Most Recent 12 Week Flow Within Equity and Fixed Income Exchange Traded Funds:

  

 

ICI Fund Flow Survey - Equity Fund Follow Through...Fixed Income Flat Lines - ICI chart 7

 

ICI Fund Flow Survey - Equity Fund Follow Through...Fixed Income Flat Lines - ICI chart 8

 

 

Net Results:

 

 

The net of total equity mutual fund and ETF trends against total bond mutual fund and ETF flows totaled a positive $8.6 billion spread for the week ($8.5 billion of total equity inflows versus the $155 million outflow within fixed income; positive numbers imply inflows for stocks). The 52 week rolling average spread has been $7.7 billion (positive spread to equities), with a 52 week high of $30.9 billion (positive spread to equities) and a 52 week low of equity/debt weekly spread of -$9.2 billion (negative numbers imply a net inflow into bonds for the week). 

 

 

ICI Fund Flow Survey - Equity Fund Follow Through...Fixed Income Flat Lines - ICI chart 9

 

 

Key Asset Management Stat of the Week:

 

 

Despite the slow start for equity returns in 2014 and nascent fears of global contagion from emerging markets, the continued follow through of positive equity flows is not surprising being that in analyzing 15 years of mutual fund flow versus market performance data that generally there has been a six month lag as retail investors chase performance with fund flow on the equity side and a 9 month historical lag between benchmark fixed income performance and bond fund flows. Hence the dramatic up year of 30% for the S&P 500 and the first loss in the Barclay's Aggregate Bond index in 14 years last year could create tails of up to 2-3 quarters of inflows (for equities) and outflows for bonds (although we acknowledge that the linear 12 week trend lines in fixed income flow below are improving and likely we will see substantial equity outflows next week considering the sharp drop in stocks this week). Although counter intuitive to how "performance" is actually created, this has been the historical behavioral pattern of mutual fund investors which are almost exclusively retail driven.

 

 

ICI Fund Flow Survey - Equity Fund Follow Through...Fixed Income Flat Lines - ICI chart 10

 

ICI Fund Flow Survey - Equity Fund Follow Through...Fixed Income Flat Lines - ICI chart 11

 

 

 

Jonathan Casteleyn, CFA, CMT 

 

 

 

Joshua Steiner, CFA


LVS 4Q 2013 CONF CALL NOTES

Another bad hold Q in Singapore shouldn’t overshadow a hold adjusted beat, accelerating share repurchases, 40% sequential hike in the quarterly dividend, and growing enthusiasm for retail mall monetization.

 

 

CONF CALL

  • Non-gaming also did well in Macau
  • Raised dividend to $2 for 2014
  • Led market by far in mass market and premium mass
  • More people visiting Macau and LVS properties on Cotai
  • Mainland visitation up 15% in 2013
  • Macau average length of stay still below Hong Kong's 
  • Table productivity will get better
  • 4Q:  17.4MM visits to Macau property portfolio (8MM visits to Venetian Macau)
  • MBS:  
    • Record for mass win/table/day:  $4.63MM
    • ADR: $425 occu: 97%
  • Parisian:  remain on budget and on schedule.  Target a late 2015 opening.
  • Japan:  pursuing IR opportunity
  • Korea:  increased activity in that market
  • Returned $700MM to Sands China shareholders
  • Sands China Limited 2014 dividend increased by 31% to HK$0.87; HK$0.77 special dividend will be paid in February
  • $1.4 BN repurchase program left.  Will repurchase at least $75MM per month.
  • Comfortable with 2.0x-3.5x gross leverage ratio; current leverage ratio is at 2.0x

 

Q & A

  • Hold adjusted MBS margin: little north of 47%
  • MBS:  seeing increased volume in slot and mass business especially premium portions- margin remains low 60s
  • MBS hold:  2.7% - 3.0% is achievable
  • $12-14BN- monetizable retail mall sales opportunity:  commencing process for final approval from Macau govt
  • Macau:  infrastructure improvements in Southern China
  • 3 properties opening in 2015:  Galaxy Macau (PH2), MSC and the Parisian; Parisian may open before at least one of them.
  • MPEL doing quite well in premium mass- but LVS catching up
  • Got ok for Four Seasons Co-op sale.  Got ok for sale of St. Regis tower.
  • SCC:  rooms are biggest driver of mass/VIP.  Still in the infancy stage of growth.
    • Can hit 15-16k on mass win/table/day from current 13k
  • Don't want to be in position where they owe money
  • Japan:  1st legislation has been passed; 2nd legislation should be passed in June (location/ bidding information/licensing); everyone they spoke to believe the 2nd piece of legislation will be passed.  Some major Japanese conglomerates have expressed interest. 
    • In a favored position; MBS often talked about as the IR model in Tokyo; 22% of conventions had Japan ties
  • Macau - 800 games generating $8-9k win per day
  • Been putting in more ETGs in SCC and Venetian
  • Chimelong resort on Henquin will benefit LVS 
  • S'pore VIP market:  junket structure not in discussion; pure mass play disappearing (S'pore locals); sees a flat market in the near-term, not much VIP RC growth in future; want to focus on margins; real growth resides in non-rolling chip segment
  • Vegas:  2014 convention business in good shape (rates moving up a little bit)
  • Commissions higher at Venetian.  Mix between premium direct and junket affected the number. 
  • SCC:  will see 44%-46% margins on non-rolling segment.  Pure mass margins will tick up. 
  • S'pore low hold:  not as much dollar volume as Macau; betting less in ties in baccarat; very volatile play
  • Expect $60MM VIP RC for MBS annually

Tough Spot: SP500 Levels, Refreshed

Takeaway: I’ll go with low gross and tight net, for now.

This note was originally published by CEO Keith McCullough Tuesday January 28, 2014 at 10:51am in Macro. For more information on how you can begin unleashing the power of Hedgeye research click here.

POSITION: 6 LONGS, 4 SHORTS @Hedgeye

Tough Spot: SP500 Levels, Refreshed - 55 

That breakdown through our immediate-term TRADE line of 1837 mattered last week. So did the VIX breaking out above our TREND line of 14.91. Now we’re in a tough spot. While 1779 TREND support is holding, the signal is registering TRADE support below that at 1769.

 

Lots of levels – but here are the ones that matter to me most:

  1. Immediate-term TRADE resistance = 1819
  2. Intermediate-term TREND support = 1779
  3. Immediate-term TRADE support = 1769

In other words, the first shots across the bow are direct hits (SPX is TRADE bearish and signaling both lower-highs and lower-lows within its immediate-term risk range). If the TREND breaks, there is no long-term TAIL support to 1678.

 

So I’ll go with low gross and tight net, for now.

KM

 

Keith R. McCullough
Chief Executive Officer

 

Tough Spot: SP500 Levels, Refreshed - keith1

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Charts: #BullishGermany

Our bullish outlook on Germany remains in place as we head into month-end (etf: EWG).

 

Below we refresh the charts of the three confidence bureaus we track  – ZEW, IFO, and GfK.  While the 6-month forward looking ZEW Economic Expectations took a slight dip in the January reading, its first decline in 6 months, it’s but one survey among other very favorable consumer and business sentiment readings and strong Services and Manufacturing PMIs.

 

We continue to be bullish on German equities and maintain our call of strong EURO/strong DAX that is a function of Keith’s quantitative levels and the correlations we’re seeing between high frequency German data sets and the EUR/USD.

 

The major takeaway for us is the purchasing power boost that German consumers and businesses are receiving with a strong currency and decelerating inflation. We see a strong currency positively flowing through to confidence and consumption.  Also, we do not read recent levels in the EUR/USD (the average over the last year has been $1.3321) as prohibitive to German export expansion.

 

In the bottom two charts we show Germany’s positive trade balance versus one of its main peers, France. We also note the trend of underlying strong demand from China for German goods –while the latest reading is from 7/2013 (stale), we believe that recent purchasing data and given the basket of German exports—skewed to high tech/specialized goods—should support strong demand in 2014 despite Chinese growth slowing.

 

As another piece of favorable data, this week the German government reported that it is considering raising its growth forecast for 2014 to 1.8% compared with 1.7% published late last year.

 

Matthew Hedrick

Associate

 

Charts: #BullishGermany - z.1

 

Charts: #BullishGermany - z. 2

 

Charts: #BullishGermany - z. 3

 

Charts: #BullishGermany - z. 4

 

Charts: #BullishGermany - z. 5

 

Charts: #BullishGermany - z. 6

 

Charts: #BullishGermany - z. 7

 

Charts: #BullishGermany - z. 8

 

Charts: #BullishGermany - z. 9

 

Charts: #BullishGermany - z. 10

 

Charts: #BullishGermany - z. 11


DRI: THE PRESSURE COOKER IS BUILDING

The hedge fund community has historically stayed away from DRI, but this is no longer the case.

 

DRI is now in the top ten holdings of hedge funds in the restaurant space.  At 14% ownership, Darden is slightly above the restaurant space’s overall average of 12% and well above the 9% average we see when excluding WEN, BKW, and BAGL.

 

Between 2010 and 2012, hedge funds have only owned between 2-4% of Darden’s shares based on publicly reported holdings.  This number briefly rose to 6% in late 2010 but, in general, Darden’s management team has never been under the microscope of the outspoken hedge fund crowd.

 

This all changed in May 2013.  Hedge funds now own 14% of the company—8% of which is accounted for by Starboard and Barington—and there is a growing list of other investors that are looking for the company to make significant changes.  This story is far from over and we imagine that the list will only grow from here.

 

The obvious risk to this setup is if management continues to dig their heels in and these hedge funds don’t stick around to see how the story plays out.  On the other hand, we believe that if this comes down to a proxy fight, and the hedge funds are still very much involved, the management team of Darden will not survive in its current form.

 

Tomorrow at 11am, Barington will make a formal presentation highlighting its plan for change at Darden and, in the following weeks, we expect to hear from Starboard about their value creation plan.  As sophisticated investors begin to reveal their case for significant upside to DRI stock, the pressure cooker will continue build.  We’d be very surprised if management is able to withhold this pressure.

 

While we look forward to hearing Barington’s presentation tomorrow, something tells us that management’s response will be the highlight of the day.

 

DRI: THE PRESSURE COOKER IS BUILDING - 1 29 2014 2 28 03 PM

 

 

Howard Penney

Managing Director

 


[VIDEO] Emerging Inequality? How Inflation Pays the Rich & Starves the Poor


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