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ICI Fund Flow Survey - Equity Products Outperform Across The Board

Takeaway: Both equity mutual funds and equity ETFs had more positive flow trends than fixed income products in the most recent week

Investment Company Institute Mutual Fund Data and ETF Money Flow:

 

In the most recent week, both equity vehicles including mutual funds and ETFs produced higher net inflows than commensurate fixed income products.

 

Total equity mutual funds produced a strong week of inflow with $7.2 billion of net subscriptions, an acceleration from the $1.8 billion inflow the week prior. The $7.2 billion inflow was balanced during the most recent 5 day period, with $4.1 billion flowing into domestic equity funds and $3.1 billion flowing into international stock funds. The 2014 running weekly average inflow for equity mutual funds is now $4.8 billion, an improvement from the $3.0 billion weekly average inflow for 2013. 

 

Fixed income mutual funds also had net inflows during the 5 day period ending February 12th with $1.1 billion flowing into all fixed income funds. The breakout of the slight inflow amounted to $968 million into taxable products and a $162 million inflow into tax-free or municipal products, the 5th consecutive week of inflow into munis after 33 consecutive weeks of outflow. The 2014 weekly average for fixed income mutual funds now stands at a slight $128 million weekly inflow, an improvement from 2013's weekly average outflow of $1.5 billion but a far cry from the $5.8 billion weekly average inflow from 2012 (our view of the blow off top in bond fund inflow).

 

ETFs, across the board, had a strong week of subscriptions with stock ETFs drawing in $6.9 billion in net inflow with bond ETFs taking in $3.0 billion in net new money. This was an improvement on the stock side this week after a record all time withdrawal in equity ETFs the week prior of $27.4 billion. The bond inflow this week of $3.0 billion decelerated from the record all-time inflow the week prior of $14.0 billion. The 2014 weekly averages are now a $5.4 billion weekly outflow for equity ETFs and a $2.8 billion 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 $10.0 billion spread for the week ($14.2 billion of total equity inflow versus the $4.2 billion inflow within fixed income; positive numbers imply inflows for stocks; negative numbers imply inflows for bonds). The 52 week moving average has been $6.6 billion (positive spread to equities), with a 52 week high of $30.9 billion (positive spread to equities) and a 52 week low of -$36.9 billion (negative numbers imply a net inflow into bonds for the week). 

 

Continued strong equity mutual fund inflow trends currently support our favorite long idea in the sector, T Rowe Price (TROW) which should benefit with a leading retail equity mutual fund franchise.

 

Mutual fund flow data is collected weekly from the Investment Company Institute (ICI) and represents a survey representing 95% of the investment management industry's mutual fund assets. This data largely represents 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 data. According to industry leader Blackrock (BLK), U.S. ETF participation is 60% institutional investors and 40% retail investors.   

 

 

ICI Fund Flow Survey - Equity Products Outperform Across The Board - ICI chart 1

 

 ICI Fund Flow Survey - Equity Products Outperform Across The Board - ICI chart 2

 

 

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

 

 

ICI Fund Flow Survey - Equity Products Outperform Across The Board - ICI chart 3

 

ICI Fund Flow Survey - Equity Products Outperform Across The Board - ICI chart 4

 

ICI Fund Flow Survey - Equity Products Outperform Across The Board - ICI chart 5

 

ICI Fund Flow Survey - Equity Products Outperform Across The Board - ICI chart 6

 

ICI Fund Flow Survey - Equity Products Outperform Across The Board - ICI chart 7

 

 

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

  

 

ICI Fund Flow Survey - Equity Products Outperform Across The Board - ICI chart 8

 

ICI Fund Flow Survey - Equity Products Outperform Across The Board - ICI chart 9

 

 

Net Results:

 

 

The net of total equity mutual fund and ETF trends against total bond mutual fund and ETF flows totaled a positive $10.0 billion spread for the week ($14.2 billion of total equity inflow versus the $4.2 billion inflow within fixed income; positive numbers imply inflows for stocks; negative numbers imply inflows for bonds). The 52 week moving average has been $6.6 billion (positive spread to equities), with a 52 week high of $30.9 billion (positive spread to equities) and a 52 week low of -$36.9 billion (negative numbers imply a net inflow into bonds for the week). 

 

 

ICI Fund Flow Survey - Equity Products Outperform Across The Board - ICI chart 11 

 

 

Continued strong equity mutual fund inflow trends currently support our favorite long idea in the sector, T Rowe Price (TROW) which should benefit with a leading retail equity mutual fund franchise.

 

 

ICI Fund Flow Survey - Equity Products Outperform Across The Board - ICI chart 12 

 

ICI Fund Flow Survey - Equity Products Outperform Across The Board - ICI chart 13 

 

 

 

Jonathan Casteleyn, CFA, CMT 

 

 

 

Joshua Steiner, CFA

 


THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – February 20, 2014


As we look at today's setup for the S&P 500, the range is 39 points or 1.08% downside to 1809 and 1.05% upside to 1848.                                    

                                                                                           

SECTOR PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

EQUITY SENTIMENT:

 

THE HEDGEYE DAILY OUTLOOK - 10                                                                                                                                                                  

 

CREDIT/ECONOMIC MARKET LOOK:

  • YIELD CURVE: 2.41 from 2.43
  • VIX closed at 15.5 1 day percent change of 11.75%

MACRO DATA POINTS (Bloomberg Estimates):

  • 8:30am: CPI m/m, Jan., est. 0.1% (prior 0.3%)
  • 8:30am: Init Jobless Claims, Feb. 15, est. 335k (pr 339k)
  • 8:58am: Markit US PMI Preliminary, Feb., est. 53.6
  • 9:45am: Bloomberg Economic Expectations, Feb. (prior -5)
  • Bloomberg Consumer Comfort, Feb. 16 (prior -30.7)
  • 10am: Philadelphia Fed Bus Outlk, Feb., est. 8.0 (pr 9.4)
  • 10am: Leading Econ Indicators, Jan., est. 0.4% (pr 0.1%)
  • 10:00am: Mortgage Delinquencies, 4Q (prior 6.41%)
  • 10am: Freddie Mac Mortgage Rates
  • 10:30am: EIA natural gas
  • 11am: DOE Energy Inventories

GOVERNMENT:

    • 8am, USDA begins 2-day 2014 Agricultural Outlook Forum, with remarks from Ag. Sec. Tom Vilsack
    • 2pm, SEC holds closed mtg on enforcement matters

WHAT TO WATCH:

  • Facebook agrees to buy mobile-messaging app WhatsApp for $19b
  • WhatsApp deal seen avoiding U.S. antitrust challenge
  • Sequoia Capital said to make $3.5b backing WhatsApp
  • China manufacturing index slides to lowest level in 7 months
  • Safeway said in talks with firms including CVC, Leonard Green
  • Peltz still seeks PepsiCo split, to lobby shareholders: WSJ
  • Citigroup appoints Mahmud to succeed Prasad as currencies chief
  • Wall Street girds for China bribery probe as share sales beckon
  • Ukraine truce crumbles as fights erupt with talks set to resume
  • BofA said to increase CEO Moynihan’s compensation 17% to $14m
  • Danone earns drop for first time in decade on baby-food scare
  • Sbarro closing 155 North American locations in comeback effort
  • Merck & Co. unit eyed by cos. incl. Bayer, Novartis: Reuters
  • Ardagh Glass may get bids for U.S. unit this week: FT
  • SEC’s Stein calls for short-term lending rules reform: Reuters
  • PBOC drains cash as overnight rate slides to lowest in 10 mos.
  • Japan trade deficit widens to record as import costs jump

AM EARNS:

    • Actavis (ACT) 7am, $3.05
    • AerCap Holdings (AER) 6:57am, $0.65
    • Altisource Residential (RESI) 7:30am, $0.40
    • CVR Energy (CVI) 8:30am, $0.39
    • Dana Holding (DAN) 7am, $0.44
    • Denbury Resources (DNR) 7:30am, $0.30
    • DirecTV (DTV) 7am, $1.29 - Preview
    • Hormel Foods (HRL) 6:30am, $0.58
    • InterDigital (IDCC) 8:30am, $0.30
    • Lexington Realty Trust (LXP) 7:30am, $0.05
    • Loblaw Cos (L CN) 6am, C$0.55
    • Patterson (PDCO) 7am, $0.57
    • Public Service Enterprise (PEG) 7:30am, $0.45
    • Quanta Services (PWR) 6:07am, $0.43
    • Reliance Steel & Aluminum (RS) 8:50am, $0.98
    • Scana (SCG) 7:30am, $0.78
    • Sonus Networks (SONS) 6am, $0.02
    • Teekay (TK) 8am, $(0.04)
    • Teekay LNG Partners (TGP) 8am, $0.55
    • Teekay Offshore Partners (TOO) 8am, $0.39
    • Teekay Tankers (TNK) 8am, $(0.04)
    • Tim Hortons (THI CN) 7:30am, C$0.76
    • Toro (TTC) 8:30am, $0.37
    • TransAlta (TA CN) 7:45am, C$0.20
    • TransCanada (TRP CN) 8:32am, C$0.60 - Preview
    • Ultra Petroleum (UPL) 8am, $0.38
    • Wal-Mart Stores (WMT) 7am, $1.59 - Preview
    • Walter Energy (WLT) 7:38am, $(0.83)
    • Westlake Chemical (WLK) 6am, $2.23
    • Yandex (YNDX) 6am, $11.38

PM EARNS:

    • Agrium (AGU CN) 5:30pm, $0.85
    • Allscripts Healthcare Solution (MDRX) 4:01pm, $0.08
    • Aruba Networks (ARUN) 4:05pm, $0.17
    • Bill Barrett (BBG) 4pm, $(0.03)
    • Cabot Oil & Gas (COG) 5:01pm, $0.17
    • Capstone Mining (CS CN) 5:37pm, $0.07
    • Exelixis (EXEL) 4:12pm, $(0.38)
    • Express Scripts Holding (ESRX) 4:01pm, $1.12 - Preview
    • First Quantum Minerals (FM CN) 5pm, $0.22
    • Groupon (GRPN) 4pm, $0.02
    • Hewlett-Packard (HPQ) 4:04pm, $0.84 - Preview
    • Intuit (INTU) 4pm, $0.02
    • Lundin Mining (LUN CN) 5:56pm, $0.07
    • Marvell Technology Group (MRVL) 4:03pm, $0.25
    • Mohawk Industries (MHK) 4:01pm, $1.75
    • MRC Global (MRC) 4:05pm, $0.42
    • Newmont Mining (NEM) 4:15pm, $0.44
    • Nordstrom (JWN) 4:04pm, $1.34 - Preview
    • Pharmacyclics (PCYC) 4:01pm, $0.88
    • Priceline.com (PCLN) 4:01pm, $8.30 - Preview
    • Qlik Technologies (QLIK) 4:05pm, $0.30
    • Tile Shop Holdings (TTS) 4:01pm, $0.04
    • WebMD Health (WBMD) 4pm, $0.24

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • Gold Losing Stigma for UBS as Tully Increases Forecasts for 2014
  • WTI Oil Falls From Four-Month High as China Manufacturing Slows
  • Coffee Exports From Indonesia to Drop on World Cup; Prices Jump
  • Rarest of Rare Iridium Gains as Growth Spurs Demand: Commodities
  • Gold Advances as Investors Weigh Fed Outlook Against U.S. Data
  • Ivorian Cocoa Crop Seen by Ecobank Rising to Highest in 3 Years
  • Soybean Futures Climb as Drought in Brazil May Cut Production
  • Cocoa Rebounds on Slowing Ivory Coast Deliveries Before Mid-Crop
  • China Iron Ore Mining Decline May Be Global Producer Bonanza
  • Switzerland Sent 80% of Bullion Exports to Asia in January
  • Shale Gas Halted in U.K. by Six-Month Wait for Permits: Energy
  • U.S. Aluminum Premiums Falling as Metal Released From Financings
  • Key Potash Demand Driver at Risk as India Mulls Subsidy Freeze
  • Palm Oil Advances to 17-Month High as Malaysian Exports Expand

THE HEDGEYE DAILY OUTLOOK - 5

 

CURRENCIES

 

THE HEDGEYE DAILY OUTLOOK - 6

 

GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 3

 

THE HEDGEYE DAILY OUTLOOK - 4

 

EUROPEAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - 7

 

ASIAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - 8

 

MIDDLE EAST

 

THE HEDGEYE DAILY OUTLOOK - 9

 

 

The Hedgeye Macro Team

 

 

 

 

 

 

 

 

 

 

 

 

 



the macro show

what smart investors watch to win

Hosted by Hedgeye CEO Keith McCullough at 9:00am ET, this special online broadcast offers smart investors and traders of all stripes the sharpest insights and clearest market analysis available on Wall Street.

Price-Fixing Crisis

“Government policy is the primary cause of the financial crisis.”

-John Allison

 

That’s “fundamental theme” #1 in one of the most important post 2008 market crisis books – Chairman (and former longstanding CEO of BB&T Bank), John Allison’s The Financial Crisis and The Free Market Cure.

 

As I was taking a few pseudo vaca days with my kids (if you own a small business in America, there are no bailouts – no real vacations either – and real capitalists like that), I was struck by the simplicity of what hasn’t changed in this country – government price fixing.

 

Price-Fixing Crisis - go2

 

Yep, that’s what Allison and anyone who has studied economic #history calls it too (plenty of big time capitalists like Charles Koch agree). That’s what “forward rate guidance” by the Fed really is; it’s also what Presidential executive orders on minimum wage hikes and Policies to Inflate via currency devaluation are. Inflation is an un-elected tax that politicians aren’t accountable to. That’s why they cheer it on.

 

Back to the Global Macro Grind

 

Who needs to cheer for Latvia’s hockey team when you can wake up in America watching the Treasury Secretary (Jack Lew) whine about taxes (consumer price inflation) on European consumers being “too low.” Heck, the descendent of Geithner and Wesley Mouch is egging on the Japanese to burn its currency at the stake too.

 

Not to be outdone, the Congressional Budget Office is now analyzing what Obama thinks is his only way out of the tax he and Bush had the Bernanke impose on America’s poor (Down Dollar, Food/Energy Inflation) – wage inflation. My brother runs a McDonald’s franchise – ask him how many new stores he’ll be interested in opening if food costs rip and his “poor” employees cost him 10-20% more…

 

In other central planning news, Venezuela is “expelling” US diplomats this morning for “undermining the government.” Evidently some of these Americans aren’t yet socialist enough. Argentina and Venezuela are realizing the other side of currency devaluation, debt-rising, and #InflationAccelerating this morning – it’s called social unrest.

 

#InflationAccelerating? Who the heck does this Canadian think he is making that call without the government’s approval?

  1. US Dollar is down again this morning = down for 3 consecutive weeks, and now negative for 2014 YTD
  2. CRB Commodities Index (19 commodities) was up another +1.1% yesterday to a fresh 52-wk high of 302 (+7.9% YTD)
  3. Natural Gas is up (again!) this morning to $6.20 = +46.7% YTD (they don’t have heat or air conditioning in Washington)

I know, I know. It’s all the weather. Wages, Rents, Schooling – Facebook paying $16B for “WhatsApp”, Candy Crush going public – all of it!

 

But, but, the US stock market (SP500) is only down -1.1% YTD. And:

  1. Slow-growth Gold is +9.3% YTD
  2. Slow-growth-yield-chasing Utilities (XLU) are +5.9% YTD
  3. Lever-yourself-up-long Real Estate (REITS) are +7.5% YTD

Yep. As #InflationAccelerates, 71% of the US economy (consumption) gets A) taxed and B) slows:

  1. US Consumer Discretionary Stocks (XLY) are -3.2% YTD
  2. Consumer Staples Stocks (XLP) are -3.4% YTD
  3. Financials (XLF) are -2.2% YTD

But, don’t worry about it – when the weather improves, it’s all coming back – all of it.

 

Wait a minute. Will the spring in the Northeast change US monetary and fiscal policy? Or, as the economy slows, will Lew and Yellen quintuple down on the Down Dollar, Down Rates, House Flipping American Dream?

 

How’s that working out for Barney Frank and Ben Bernanke btw? US Mortgage Purchase Applications were down another -6% last week (after being down -5% in the week prior), testing post 2008 crisis lows. Imagine that, as the purchasing power of Americans falls alongside interest and savings rates, there are less lemmings this time who are going to join Than Merrill’s “Flip This House!”

 

John Allison’s book is a Top-10 on my shelf because he explains the basics of economics that we attempt to articulate each and every risk management morning. Two more of his “Fundamental Themes” are:

  1. “Government policy created a bubble in residential real estate”
  2. “Almost every government action taken since the crisis started (even those that may help in the short-term) will reduce the standard of living in the long-term”

#Agreed

 

And sometimes the short-term morphs into the long-term a lot faster than consensus government policy apologists think…

 

Our immediate-term Macro Risk Ranges are now:

 

SPX 1

Nikkei 14083-14992

VIX 12.76-16.99

USD 79.82-80.51

Natural Gas 5.34-6.22

Gold 1

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Price-Fixing Crisis - Chart of the Day

 

Price-Fixing Crisis - Virtual Portfolio


February 20, 2014

February 20, 2014 - Slide1

BULLISH TRENDS

February 20, 2014 - Slide2

February 20, 2014 - Slide3

February 20, 2014 - Slide4

February 20, 2014 - Slide5

February 20, 2014 - Slide6

February 20, 2014 - Slide7

February 20, 2014 - Slide8

February 20, 2014 - Slide9

BEARISH TRENDS

February 20, 2014 - Slide10

February 20, 2014 - Slide11

February 20, 2014 - Slide12


Fighting Growth Bulls

This note was originally published at 8am on February 06, 2014 for Hedgeye subscribers.

“After the fight is over the winning animal emerges with even higher levels of testosterone.”

-John Coates

 

The thing about fighting bulls are those damn horns. No matter what the math, data, or weather, the perma ones are really stubborn too. They’ll just sit there sometimes and stare at you. So, when you’re a bear, it’s better to attack them from behind.

 

The aforementioned quote comes from a chapter in The Hour Between Dog and Wolf that John Coates calls The Fuel of Exuberance. “Biologists studying animals in the field had noticed that an animal winning a fight or a competition for turf was more likely to win its next fight” (pg 166).

 

Fighting Growth Bulls - bulls

 

Sounds like trending bullish and bearish price momentum to me. All our back-tests show the most powerful ramps in market emotion (fear and greed) occur when there is a reversal from bearish to bullish (or bullish to bearish) on our intermediate-term TREND duration. In other words, bear vs. bull fights matter; especially at the big TREND turns.

 

Back to the Global Macro Grind

 

From a #behavioral market strategy perspective, does the “Winner Effect” (Coates) matter? Big time. Why? It especially matters in modern markets because, newsflash: machines chase price.

 

What are the most interesting bullish-to-bearish reversals in the @Hedgeye quant model right now?

  1. Nikkei reversing to bearish TREND
  2. SP500 reversing to bearish TREND
  3. 10yr US Treasury Yield reversing to bearish TREND

How about the most interesting bearish-to-bullish reversals in TREND?

  1. Commodities (CRB Commodities Index) reversing to bullish TREND
  2. Utilities (XLU) reversing to bullish TREND
  3. Fear (VIX) reversing to bullish TREND

From a Global Macro Theme perspective it’s easy to explain why all 6 of these intermediate-term TREND reversals rhyme: with #InflationAccelerating, growth expectations in Japan and the US are slowing.

 

These same risk management signals started to manifest in Q1 of 2008 (that’s why we got so bearish on the US consumer back then), but they also started to coagulate again in Q1 of 2011.

 

2011 was a very interesting year in that while US stocks (SP500) closed flat on the year:

  1. Fear (VIX) ripped from 15 to 24 in Q1 of 2011
  2. Utilities (XLU) and Treasuries (TLT) marched steadily higher (relative and absolute) throughout 2011
  3. Commodities (CRB Index) had a monster Q1 of 2011

Fast forward to mid-Q1 of 2014 and here’s the score:

  1. Nikkei -13.1% YTD
  2. SP500 -5.2% YTD
  3. US Treasuries (TLT) +5.2% YTD
  4. CRB Commodities Index +2.5% YTD
  5. Utilities (XLU) +1.1% YTD
  6. Fear (VIX) +45.4% YTD

Just saying.

 

Oh, and there was that “financial innovation” thing (a Policy to Inflate asset prices; especially Bonds and Commodities) that eventually caused the all-time highs in commodities like Gold in Q3 of 2011 called the quantitative easing…

 

So, play it forward – what do you think the Mother of All Doves (Yellen) is going to do if US growth continues to slow? Bernanke didn’t go to Jackson Hole last year, but I’m betting that she’ll strap on the cowboy pants and start printing again.

 

I know, Hilsenrath hasn’t leaked that probability memo to the bulls or bears yet. But Mr. Macro Market has. So keep your head on a swivel out there as these currency devaluation and money printing animals at the Federal Reserve still think they’re winning.

 

Our immediate-term Global Macro Risk Ranges are now:

 

SPX 1737-1774

Nikkei 13825-14482

VIX 15.81-20.41

USD 80.93-81.46

NatGas 5.05-5.51

Gold 1242-1274

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Fighting Growth Bulls - drake1


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