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May 20, 2014

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BULLISH TRENDS

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BEARISH TRENDS

 

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Poll of the Day Recap: 89% Say Gas Prices Not a Factor in Memorial Day Plans

Takeaway: 89% NO; 11% YES.

Oil prices are surging – meaning higher prices at the pump – just in time for Memorial Day weekend when Americans are being taxed six-ways to Sunday from rent to food. It’s just another sign of #InflationAccelerating. So while every car-owning American who fills up the tank may be feeling the pinch, we wanted to know how it’s affecting your holiday.

 

Today’s poll question was: As a result of rising gas prices, are you planning to change your Memorial Day plans?

 

Poll of the Day Recap: 89% Say Gas Prices Not a Factor in Memorial Day Plans - flags 891055a


At the time of this post, an overwhelming 89% of voters said NO; 11% said YES.


Of those who voted NO, voters explained their various reasons:

  • “While higher gas prices will not affect my Memorial Day plans, it has definitely affected my normal day to day driving habits.”
     
  • “Working class travelers have adjusted their monthly budgets to current prices. Gas prices need to be .50 higher to have the same effect as seen in 2008.”
     
  • “What's a few extra dollars at the pump between friends??”
     
  • “I am numb to higher gas prices after at least 5 years at these inflated levels.”
     
  • “Not sure the price of gas is the swing factor, but it will impact how much the average consumer has left over to spend on potato salad and Bud Light!”
     
  • “We were already planning to not go anywhere.  The price of gas is generally not a factor in our travel decisions.”
     

Conversely, as one YES voter said, “I'd rather not go anywhere than spend $200 roundtrip on gas. It's pure insanity."

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Hedgeye Retail: Target Execs Should Be Afraid for Their Jobs | $TGT

Takeaway: The fact that Target's CMO personally addressed the anonymous letter in public is telling.

Hedgeye Retail: Target Execs Should Be Afraid for Their Jobs | $TGT - 12

 

The Truth Hurts

 

Target CMO, Jeff Jones, in response to an article posted by an anonymous employee on Gawker:

 

• "You’d think that these two incidents alone [Data Breach & CEO resignation] would create enough pain to last a brand a lifetime but one of the most challenging things that has happened, in my opinion, have been reports, some attributed to unnamed team members, that paint a picture of a culture that is in crisis. When a recent post on a well-known blog called me out by name, it only felt right that I should respond."

 

• "While we would have preferred to have a conversation like this with the team member directly, speaking openly and honestly, and challenging norms is exactly what we need to be doing today and every day going forward."

Takeaway From Hedgeye’s Brian McGough:

Normally we wouldn't characterize the opinion of one disgruntled employee as indicative of the corporate culture, but the fact that Target's CMO, Jeff Jones, personally addressed the anonymous letter in public is telling. Jones was actually the only person called out as being a positive influence in the executive ranks. He's speaking up on behalf of the executive officers of Target, most of whom are afraid for their jobs.  They should be.

 

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Editor's Note: This is a complimentary research excerpt from Hedgeye Retail Sector Head Brian McGough. Follow McGough on Twitter @HedgeyeRetail

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FLASHBACK | Cartoon of the Day: Out of Gas

Takeaway: This cartoon was originally published April 14.

FLASHBACK | Cartoon of the Day: Out of Gas - Out of gas 04.14.14

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Fund Flows, Refreshed

Takeaway: The combination of taxable and tax-free bond fund flow had the best week all year versus very light equity fund flows.

Editor's Note: This research note was originally sent to subscribers on May 15, 2014 by Hedgeye’s Financials analyst Jonathan Casteleyn. Follow Jonathan on Twitter @HedgeyeJC.

 

Fund Flows, Refreshed - 2

 

ICI Mutual Fund Data and ETF Money Flow

 

In the most recent 5 day period, the combination of taxable and tax-free bond funds had the best week all year with $5.5 billion in inflow, well above the running year-to-date average of $1.9 billion. Conversely, equity funds had a very light inflow of just $754 million, well below the year-to-date average of $3.3 billion

 

It was an anemic week for equity mutual fund and ETF trends. Total equity mutual fund flows experienced slight relief w/w, improving sequentially from a net outflow last week, but still producing a tally well below the 2014 year-to-date weekly average. The $754 million that flowed into all equity mutual funds during the most recent 5 day period ending May 7th was split between a $2.0 billion outflow from domestic equity funds and $2.7 billion inflow into international equity funds. This outperformance from foreign equity products has been consistent over the past two years; international stock fund inflow has averaged $2.6 billion per week thus far this year, on par with 2013's $2.6 billion inflow, while domestic fund trends have averaged an inflow of just $770 million thus far in '14 and $451 million inflow in '13. The 2014 running weekly average inflow for all equity mutual funds is now $3.3 billion, only a slight improvement from the $3.1 billion weekly average inflow from 2013. 

 

Conversely, fixed income mutual fund flows accelerated notably on a w/w basis. For the five day period ending May 7th, $5.5 billion flowed into all fixed income funds, as opposed to last week's much weaker $931 million inflow. The improvement in bond fund flow this week was the result of $4.4 billion that flowed into taxable products and $1.1 billion that flowed into tax-free or municipal products. The inflow into taxable products this week was the 13th consecutive week of positive flow and the inflow into municipal or tax-free products was the 17th consecutive week of positive subscriptions. The 2014 weekly average for fixed income mutual funds now stands at a $1.9 billion weekly inflow, a vast improvement from 2013's weekly average outflow of $1.5 billion, but still a far cry from the $5.8 billion weekly average inflow from 2012 (our view of the blow off top in bond fund inflow). 

 

Exchange traded funds (ETFs) had polarized trends this week, with a substantial weekly redemption in equity ETFs and a solid week for bond ETFs. Equity ETFs experienced an $8.7 billion outflow w/w, while Fixed Income ETFs experienced $3.0 billion in inflows. The previous week saw a $4 billion inflow into stock ETFs and a $818 million inflow into bond ETFs. The 2014 weekly averages are now a $385 million weekly inflow for equity ETFs and a $1.0 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 negative $16.4 billion spread for the week ($8.0 billion of total equity outflow versus the $8.5 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 $7.4 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 -$37.5 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. 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.   

 

Fund Flows, Refreshed - chart11

Fund Flows, Refreshed - chart12

 

Most Recent 12 Week Flow in Millions by Mutual Fund Product

 

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

 

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Net Results

The net of total equity mutual fund and ETF trends against total bond mutual fund and ETF flows totaled a negative $16.4 billion spread for the week ($8.0 billion of total equity outflow versus the $8.5 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 $7.4 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 -$37.5 billion (negative numbers imply more positive money flow to bonds for the week). 

 

Fund Flows, Refreshed - 9.2 

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