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ICI Fund Flow Survey - Balanced on an Absolute Basis but Bond Slopes are more Favorable

Takeaway: In the most recent week, absolute money flow into mutual funds was balanced but fixed income continues to display relatively better trends

Investment Company Institute Mutual Fund Data and ETF Money Flow:

 

In the most recent week, absolute money flow into mutual funds was balanced between fixed income and equity products but bond trends continue to display improving rates of change versus decreasing momentum in equities:

 

Total equity mutual fund flow improved sequentially week-to-week but produced a tally below the 2014 year-to-date weekly average. The $3.1 billion that came into all equity mutual funds during the most recent 5 day period ending April 2nd was split between a fairly weak $949 million inflow into U.S. equity funds versus the $2.1 billion that moved into international stock funds. This higher demand for foreign equity products has been consistent over the past two years with international stock fund inflow having averaged $2.8 billion per week this year and $2.6 billion per week last year in 2013 with domestic fund products averaging an inflow of just $1.2 billion thus far in '14 and a $451 million inflow last year in comparison. The 2014 running weekly average inflow for all equity mutual funds is now $4.0 billion, still an improvement from the $3.0 billion weekly average inflow for 2013. 

 

Fixed income mutual fund flow improved sequentially week-to-week and the 12 week linear trend lines in the product graphs below display improving momentum for bond funds versus equity funds. For the week ending April 2nd, $3.3 billion flowed into all fixed income funds, an improvement from last week's $1.2 billion inflow. The breakout of improving bond fund inflow amounted to $3.1 billion into taxable products and a $202 million inflow into tax-free or municipal products. The inflow into taxable products this week was the 8th consecutive week of positive flow and the inflow into municipal or tax-free products was the 12th consecutive week of positive subscriptions. The 2014 weekly average for fixed income mutual funds now stands at a $1.9 billion 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 experienced positive trends during the week, with a very strong week of subscriptions into stock ETFs with $4.1 billion in net inflow with bond ETFs experiencing a slightly above average inflow of $1.6 billion for the most recent 5 day period. The 2014 weekly averages are now a $421 million weekly inflow for equity ETFs and a $946 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 $2.3 billion spread for the week ($7.3 billion of total equity inflow versus the $4.9 billion inflow within fixed income; positive numbers imply greater money flow to stocks; negative numbers imply greater money flow to bonds). The 52 week moving average has been $7.2 billion (more positive money flow to equities), with a 52 week high of $31.0 billion (more positive money flow to equities) and a 52 week low of -$37.4 billion (negative numbers imply more positive money flow to bonds for the week). 

 

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.   

 

 

ICI Fund Flow Survey - Balanced on an Absolute Basis but Bond Slopes are more Favorable - ICI chart 1

 

 

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

 

 

ICI Fund Flow Survey - Balanced on an Absolute Basis but Bond Slopes are more Favorable - ICI chart 2

 

ICI Fund Flow Survey - Balanced on an Absolute Basis but Bond Slopes are more Favorable - ICI chart 3

 

ICI Fund Flow Survey - Balanced on an Absolute Basis but Bond Slopes are more Favorable - ICI chart 4

 

ICI Fund Flow Survey - Balanced on an Absolute Basis but Bond Slopes are more Favorable - ICI chart 5

 

ICI Fund Flow Survey - Balanced on an Absolute Basis but Bond Slopes are more Favorable - ICI chart 6

 

 

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

  

 

ICI Fund Flow Survey - Balanced on an Absolute Basis but Bond Slopes are more Favorable - ICI chart 7

 

ICI Fund Flow Survey - Balanced on an Absolute Basis but Bond Slopes are more Favorable - 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 $2.3 billion spread for the week ($7.3 billion of total equity inflow versus the $4.9 billion inflow within fixed income; positive numbers imply greater money flow to stocks; negative numbers imply greater money flow to bonds). The 52 week moving average has been $7.2 billion (more positive money flow to equities), with a 52 week high of $31.0 billion (more positive money flow to equities) and a 52 week low of -$37.4 billion (negative numbers imply more positive money flow to bonds for the week).

 

 

ICI Fund Flow Survey - Balanced on an Absolute Basis but Bond Slopes are more Favorable - ICI chart 9 

 

 

 

Jonathan Casteleyn, CFA, CMT 

 

 

 

Joshua Steiner, CFA

 



It's The Fed's Fault

“And oftentimes excusing of a fault, doth make the fault the worse by the excuse.”

-William Shakespeare

 

As we high-earning commoners read the inflationary “minutes” from our un-elected overlords @FederalReserve yesterday, we gave thanks and praise for not being the 80% of America that will be plundered by them.

 

To be, or not to be plundered (by the aristocracy)? That remains the question that my man William asked The People over 400 years ago. In storytelling terms, Shakespeare’s questioning of the perceived wisdom of his day is timeless.

 

The aforementioned quote comes from The Life and Death of King John. But what will become of thy modern day central planning Queen Yellen? “Here once again she sits; once again crown’d”… and in real-life terms, the poor are getting hungrier…

 

Back to the Global Macro Grind

 

BREAKING: “Beef Price Hits All-Time High” –LA Times

 

It's The Fed's Fault - cow

 

And whilst all-time is by many considered a very long time, whatever you do, do not call this #InflationAccelerating! Immediately after the Federal Reserve released their groupthink meeting “minutes” yesterday, commodities ripped to freshly squeezed YTD highs.

 

Orange juice (+18% YTD) or Coffee (+68% YTD) for breakfast anyone?

 

I know. Silly Mucker. This, according to the Keynesian jesters in the high court of devaluing the Dollar, is “non-core” to American life. Food prices +20% YTD (CRB Foodstuffs Index) and the broader commodities complex (CRB Index, 19 commodities) +10.7% YTD (versus the almighty Dow down YTD) is nothing but a manifestation of my own cherry picking. At least I can eat those.

 

But that your royal pleasure must be done, this act is as an ancient tale new told.” –Shakespeare

 

And that tale is called a Policy To Inflate. Calling it by any other name, would be un-American.

 

To review what brainiacs in academic call “causal”, this is how the Policy To Inflate works:

  1. The Fed says something along the lines of price fixing the rate of return on American Savings at 0%, forever
  2. Then the Global Currency Market reads price fixing as US Dollar Bearish (that’s why we have a 22% allocation to other FX)
  3. Then the Commodity, Gold Bond, and #YieldChasing community buys everything they can with Burning Bucks

#cool, eh?

 

For the 20% of us who can buy inflation and slow-growth, maybe. For the 80%, not so much. That’s why the emerging “inequality” in this country that has been perpetuated by both the Bush and Obama administrations is largely the Fed’s Fault.

 

Unfortunately, you can’t eat an iPad.

 

It's The Fed's Fault - Burning Cash

 

If you’re in the top quintile of Americans (yes, most of you reading this are), you don’t have to worry about your kid dropping the next $700 burning bucks on the Qe6 iPhone upgrade either – you just need to keep buying inflation in order to finance his/her spending:

  1. Gold up another +0.7% this morning to +10.1% YTD
  2. Slow-growth Utilities (XLU) up another +1.0% on the Fed “minutes” yesterday to +10.3% YTD
  3. #YieldChasing REITS up another +0.7% yesterday to +10.3% YTD too!

Yes, there is something eerie about all three of these things being up the same % per day and YTD (Hint: it’s called machines front-running the Fed – which, in turn, slows US real consumption growth).

 

In real-life, you’ll be getting paid in nominal terms today. Nominal means whoever is writing the checks doesn’t adjust your weekly comp as the value of your purchasing power falls (i.e. the things that you need to buy go up in price).

 

Nominal is always obfuscated by money printers and plunderers alike as real growth. As you can see from the Chart of The Day, nominal US consumption growth is on a death path to perdition (i.e. it’s both secular and cyclical). That’s largely the Fed’s Fault too.

 

Rather than rant any longer (see our newly minted Q2 Global Macro Themes slide deck for all the non-Fed propaganda details – 48 slides ), I will leave you with the only solution to all of this (from King John):

 

“What you would have reform'd that is not well,
And well shall you perceive how willingly
I will both hear and grant you your requests”

 

Unfortunately all that is not well is not being reformed. Neither your Republican nor Democrat governments are hearing your requests. Both parties support weak Dollar policy. Excusing the Fed’s Fault this time will only make all of this worse.

 

Our immediate-term Global Macro Risk Ranges are now as follows:

 

UST 10yr Yield 2.63-2.75%

SPX 1

Nasdaq 4041-4203

VIX 13.11-15.67

USD 79.41-80.04

Gold 1

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

It's The Fed's Fault - Chart of the Day


Early Look

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Relied upon by big institutional and individual investors across the world, this granular morning newsletter distills the latest and most vital market developments and insures that you are always in the know.

THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – April 10, 2014


As we look at today's setup for the S&P 500, the range is 60 points or 2.25% downside to 1830 and 0.95% upside to 1890.                                      

                                                                                         

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: 2.31 from 2.33
  • VIX closed at 13.82 1 day percent change of -7.19%

MACRO DATA POINTS (Bloomberg Estimates):

  • 7am: Bank of England interest rate decision
  • 8:30am: Initial Jobless Claims, April 5, est. 320k (prior 326k)
  • Continuing Claims, March 29, est. 2.835m (prior 2.836m)
  • 8:30am: Import Price Index m/m, March, est. 0.2% (prior 0.9%)
  • Import Price Index y/y, March, est. -0.9% (prior -1.1%)
  • 8:45am  Bloomberg April U.S. Economic Survey
  • 9:45am: Bloomberg Consumer Comfort, April 6
  • 10:30am: DOE Energy Inventories
  • 11:30am: Fed’s Evans speaks in Washington along with Reserve Bank of India’s Rajan, other central bankers
  • 2pm: Monthly Budget Statement, March, est. -$36b (year ago -$106.5b)

GOVERNMENT:

    • President Barack Obama speaks at LBJ Library in Texas
    • House takes up Rep. Paul Ryan’s budget proposal
    • 9am: House panel plans to consider whether to hold hold former IRS official Lois Lerner in contempt
    • FY Budget request testimony/panels:
    • 9:30am: Senate Armed Services Cmte: Air Force Sec. Deborah Lee James
    • 10am: House Appropriations panel: HUD Secretary Shaun Donovan
    • 10am: Senate Appropriations Cmte: Commerce Sec. Penny Pritzker
    • 10am: Senate Finance Cmte: HHS Secretary Kathleen Sebelius
    • 11am: Senate GOP leader Mitch McConnell, House Ways and Means Cmte Chairman Dave Camp among speakers at Americans for Tax Reform news conf.
    • 11:15am: House Speaker John Boehner holds press conf.
    • 1:45pm: Morgan Stanley President Gregory Fleming speaks at Sifma Private Client Conf. in  NYC
    • U.S. ELECTION WRAP: Sidelined Donors; Incumbent Disadvantage

WHAT TO WATCH:

  • March retail sales likely hurt by weather, Easter
  • Ally Financial raises $2.38b pricing IPO low end of range
  • Colorado State releases Atlantic hurricane forecast 11am
  • Bed Bath & Beyond drops after profit forecast trails ests.
  • Dimon says banks to gain as crisis-era rules hurt cities, poor
  • Merck data Show potent drug rival to Gilead’s Hepatitis C pill
  • GM argues park-it order unneeded because recalled cars are safe
  • Greece said to get $28b of orders in return to bond mkt
  • China unveils plan to connect Shanghai and Hong Kong bourses
  • BOE seen keeping key rate at record low with slack in focus
  • LVMH rises on fastest fashion rev. growth in 2 yrs
  • White House said to consider community bankers for Fed’s board
  • New Jersey’s rating lowered to A+ by S&P amid budget imbalances
  • PC unit shipments drop; corporate demand slows pace of decline
  • Putin expected to sign China gas deal as crisis forces hand
  • GE may sell 43% stake in Hyundai Capital: Korea Economic Daily

EARNINGS:

    • Commerce Bancshares/MO (CBSH) 7am, $0.68
    • Corus Entertainment (CJR/B CN) 7am, C$0.32
    • Family Dollar Stores (FDO) 7am, $0.90  - Preview
    • iGATE (IGTE) 6:32 am, $0.42
    • Pier 1 Imports (PIR) 6am, $0.40
    • Rite Aid (RAD) 7am, $0.05
    • Shaw Communications (SJR/B CN) 8:15am C$0.41

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • Brent Crude Premium to U.S. Oil Narrows to Least Since September
  • Sugar Exports From India Seen Sustained Next Year on Inventories
  • Iron-Ore Bear Market Deepens as Aussie Mines Expand: Commodities
  • Gold Rises to Two-Week High in London as Fed Minutes Spur Demand
  • Uralkali Cuts 2014 Global Potash Sales Forecast as Profit Drops
  • Shanghai Clearing House Mulls Yuan-Denominated Iron Ore Swaps
  • Palm Oil Drops After Malaysian Stockpiles Exceed Estimates
  • Rubber Falls to Two-Month Low as China Trade Misses Estimates
  • U.S. Gulf Coast Fills With Crude Oil That Few Ships Can Take Out
  • Polar Politics Threaten Norway’s Deepest Drive in Arctic: Energy
  • Miners Urge Chile Not to Squander Wealth in Development Efforts
  • MORE: European Cocoa Grind Rose 0.4% in First Quarter
  • Hedge Fund Twins Stage Campaign to Undercut Energy Regulator
  • China Aluminum Exports Highest Since 2011 on Overseas Premium

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

 

 

 

 

 

 

 

 

 

 

 

 

 


April 10, 2014

April 10, 2014 - Slide1

BULLISH TRENDS

April 10, 2014 - Slide2

April 10, 2014 - Slide3

April 10, 2014 - Slide4

April 10, 2014 - Slide5

April 10, 2014 - Slide6

BEARISH TRENDS

April 10, 2014 - Slide7

April 10, 2014 - Slide8

April 10, 2014 - Slide9

April 10, 2014 - Slide10

April 10, 2014 - Slide11
April 10, 2014 - Slide12


LEISURE LETTER (04/10/2014)

TICKERS: PNK, RHP, NCLH, MTN

 

EVENTS TO WATCH:  UPCOMING EARNINGS / CONFERENCES / RELEASES

Thursday, April 10

Mid-America Gaming Congress (Columbus, OH)

 

Thursday, April 10

HST Investor Day

 

COMPANY NEWS

PNK - CEO Anthony Sanfilippo and CFO Carlos Ruisanchez met with Albany Mayor Kathy Sheehan and toured a proposed site in the city adjacent to Exit 23 on the New York Thruway, neighboring the town of Bethlehem.  

TAKEAWAY: PNK’s intentions are unclear and whether the company is looking for a management contract or an all-inclusive management and ownership opportunity. Regardless the direction, a new growth strategy is needed.

  

RHP – Judge Norman Haglund, a Denver District Court judge, on Wednesday dismissed a lawsuit for lack of standing filed by a group hotels (including the Curtis, the Broadmoor, the Brown Palace, the JW Marriott Denver Cherry Creek, the Courtyard Denver Downtown, the Magnolia, the Oxford and the Westin Westminster hotels) against Aurora's Gaylord Rockies Hotel and Conference Center.  The dismissal cleared the path for the 1,500-room hotel and water park near Denver International Airport.  The plaintiffs sought to overturn the $81.4 million award to Aurora under the Regional Tourism Act by the Colorado Economic Development Commission in 2012.  Depending on the outcome of another lawsuit, construction could start on the $750 million to $850 million Gaylord project sometime next year, with an opening in 2017. The property will be located on 64th Avenue between Tower Road and E-470.

TAKEAWAY: Another Gaylord Conference Center for both RHP and MAR in 2017 - a year in which the US will experience a large increase in hotel rooms with more than 3,500 also at Genting's RWLV.

 

SHO - held an investor day yesterday by the senior management team highlighted the significantly lower leverage (debt plus preferreds divided by LTM EBITDA) >8x to <5x today and a goal of <3x in 3 years) as well as a more focused and improved hotel portfolio. Q1 RevPAR guidance was raised.

TAKEAWAY: Phase 1 of the restructuring is complete, Phase 2 which includes driving room and F&B revenues is more difficult.

 

NCLH - canceled port stops in Roatan, Honduras this week after a crew member from Norwegian Pearl was killed during an attempted robbery

TAKEAWAY: More negative press associated with the cruise industry.

 

MTN - in a bizarre twist to the Park City Mountain Resort-Talisker lawsuit, PCMR filed documents with the court wherein PCMR indicated it would dismantle and remove most of the area's chair lifts except for Jupiter, Thaynes, and Motherlode.  Talisker's eviction notice to PCMR maintains that structures and improvements "that are affixed" to the property belong to Talisker. PCMR disagrees and asserted they can remove most of the lifts because although the ski lift towers are bolted to concrete footings, they are not "otherwise affixed to the land."

TAKEAWAY: Sounds like capex will be higher than MTN's forecast.

 

INDUSTRY NEWS

US Gaming Industry - the United States commercial casino industry generated $37.8 billion in 2013, expanding by 1.3 percent. The growth in gaming revenue was the result of gaming expansion in new markets, but was tempered by existing markets experiencing declining revenue and market cannibalization.  In 2013, there were 23 states with commercial gaming operations. Of these states, six expanded gaming in 2013. Gaming expansion is defined as the opening of new casinos or expanding casino game offerings, such as table games.

TAKEAWAY:  New property openings continue to pressure ROIC. 

  

Revel Atlantic City - The city's main casino workers' union, Local 54 of the Unite-HERE, issued a report on Wednesday claiming Revel Casino Hotel is worth between $25 million and $73 million.based on Revel's finances through publicly available documents versus $2.4 billion cost to build.  Revel is presently seeking a buyer. Presently, the casino, which is seeking a buyer.

TAKEAWAY: Yeah, yeah we get it. Revel was a disaster.

 

Las Vegas Valley feeling ill - Southern Nevada Health District officials report they have seen an increase in cases Norovirus , the gastrointestinal illness, over the past few weeks. Health officials said an investigation began March 28 when people at a conference at the Planet Hollywood started feeling unwell.

TAKEAWAY: Norovirus not just for cruise ships. 

 

MACRO

Hedgeye remains negative on consumer spending and believes in more inflation.  Following  a great call on rising housing prices, the Hedgeye Macro/Financials team is turning decidedly less positive.

TAKEAWAY:  We’ve found housing prices to be the single most significant factor in driving gaming revenues over the past 20 years in virtually all gaming markets across the US.


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