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ICI Fund Flow Survey - Withdrawals Across the Board

Takeaway: Investors continued to pull funds across the board, even withdrawing capital from money market funds.

Investment Company Institute Mutual Fund Data and ETF Money Flow:

 

As markets tumbled prior the Federal Reserve's announcement that it would be patient in raising interest rates, investors continued to pull capital from funds across the board in the most recent ICI survey ending December 17th.  Only tax-free bonds and fixed income ETFs experienced inflows (+$950 million and +$3.8 billion respectively) although aggregate total net bond funds lost $5.6 billion last week with the $10.3 billion withdrawal in taxable bonds. Total equity products (ICI mutual funds and all ETFs according to Bloomberg) lost $12.4 billion last week according to the ICI.

 

ICI Fund Flow Survey - Withdrawals Across the Board - 1

 

In the most recent 5 day period ending December 17th, total equity mutual funds put up net outflows of $6.6 billion according to the Investment Company Institute. The outflow was composed of domestic stock fund withdrawals of $4.2 billion and international stock fund withdrawals of $2.4 billion. The international and domestic equity categories have been polarized this year with international stock funds having inflows in 48 of the past 50 weeks, versus domestic trends which have been very soft with inflow in just 16 of the past 50 weeks. The running year-to-date weekly average for all equity fund flow continues to decline and now settles at a $702 million inflow, well below the $3.1 billion weekly average inflow from 2013. 

 

Fixed income mutual funds put up outflows of $9.4 billion with $10.3 billion of outflows from taxable funds offset by $950 million of inflows into tax-free funds.  Munis have had a solid year with subscriptions in 48 of the past 50 weeks. The 2014 weekly average for fixed income mutual funds now stands at an $804 million weekly inflow, an improvement from 2013's weekly average outflow of $1.3 billion, but still a pittance of the weekly average of +$5.8 billion in 2012 (our view of the blow off top in bond fund inflow). 

 

ETF results were mixed; equity ETFs put up a $5.8 billion outflow, well below the the 2014 weekly average of a $2.6 billion inflow. Fixed income ETFs, however, put up a $3.8 billion inflow, well above the year-to-date average of a $1.1 billion inflow.

 

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.   

 

Most Recent 12 Week Flow in Millions by Mutual Fund Product: Chart data is the most recent 12 weeks from the ICI mutual fund survey and includes the running weekly year-to-date average for 2014 and the weekly quarter-to-date average for 4Q 2014:

 

ICI Fund Flow Survey - Withdrawals Across the Board - 2 2

 

ICI Fund Flow Survey - Withdrawals Across the Board - 3 2

 

ICI Fund Flow Survey - Withdrawals Across the Board - 4 2

 

ICI Fund Flow Survey - Withdrawals Across the Board - 5 2

 

ICI Fund Flow Survey - Withdrawals Across the Board - 6 2

 

 

Most Recent 12 Week Flow Within Equity and Fixed Income Exchange Traded Funds: Chart data is the most recent 12 weeks from Bloomberg's ETF database (matched to the Wednesday to Wednesday reporting format of the ICI) and the running weekly year-to-date average for 2014 and the weekly quarter-to-date average for 4Q 2014. The third table are the results of the weekly flows into and out of the major market and sector SPDRs:

 

ICI Fund Flow Survey - Withdrawals Across the Board - 7 2

 

ICI Fund Flow Survey - Withdrawals Across the Board - 8 2

 

Sector and Asset Class Weekly ETF and Year-to-Date Results: In sector SPDR callouts, the the XLB materials ETF experienced a reversal from the prior week, losing 9% or $288 million in withdrawals.  The XLY Consumer discretionary experienced the largest flow on a percentage bases at a +10% (+$738 million inflow).

 

ICI Fund Flow Survey - Withdrawals Across the Board - 9 2

 

 

Net Results:

The net of total equity mutual fund and ETF trends against total bond mutual fund and ETF flows totaled a negative $6.8 billion spread for the week ($12.4 billion of total equity outflow versus the $5.6 billion outflow from 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 $1.8 billion (more positive money flow to equities), with a 52 week high of $17.7 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). 

  

ICI Fund Flow Survey - Withdrawals Across the Board - 10 2

 

Exposures: The weekly data herein is important for the public asset managers with trends in mutual funds and ETFs impacting the companies with the following estimated revenue impact:

 

ICI Fund Flow Survey - Withdrawals Across the Board - 11 

 

 

 

Jonathan Casteleyn, CFA, CMT 

 

 

 

Joshua Steiner, CFA

 

 


Japan and Russia

Client Talking Points

YEN

As the Yen burns, Japanese Consumer Prices (CPI) are +2.7% year-over-year. But Japanese Household Spending (in Burning Yen Terms) is down -2.5% year-over-year, and the Savings Rate of the Japanese people just went negative alongside real wage growth. The immediate term risk range for the Yen is 118.23-121.11 (bearish).

NIKKEI

But as long as the Nikkei (which, by the way, we’ve been suggesting you be long, while short Yens vs USD) is up, the financial media that panders to central-planning-access is going to tell you that this Abenomics thing could actually work. The immediate term risk range for the Nikkei is 17261-17995 (bullish).

RUSSIA

Despite “bouncing” off its lows, the Russian Trading System Index is down -38.4% year-to-date, and would only have to be +63% (from here) to get whoever “allocated assets” to it a year ago back to breakeven. The immediate term risk range is 642-875. In other words, with the RTSI (Russian Stock Market) currently trading at 847, it has immediate-term upside of +3% and immediate-term downside of -24%.

Asset Allocation

CASH 56% US EQUITIES 4%
INTL EQUITIES 2% COMMODITIES 0%
FIXED INCOME 31% INTL CURRENCIES 7%

Top Long Ideas

Company Ticker Sector Duration
EDV

The Vanguard Extended Duration Treasury (EDV) is an extended duration ETF (20-30yr). U.S. real GDP growth is unlikely to come in anywhere in the area code of consensus projections of 3-plus percent. And it is becoming clear to us that market participants are interpreting the Fed’s dovish shift as signaling cause for concern with respect to the growth outlook. We remain on other side of Consensus Macro positions (bearish on Oil, bullish on Treasuries, bearish on SPX) and still have high conviction in our biggest macro call of 2014 - that U.S. growth would slow and bond yields fall in kind.

TLT

We continue to think long-term interest rates are headed in the direction of both reported growth and growth expectations – i.e. lower. In light of that, we encourage you to remain long of the long bond. The performance divergence between Treasuries, stocks and commodities should continue to widen over the next two to three months. As it’s done for multiple generations, the 10Y Treasury Yield continues to track the slope of domestic economic growth like a glove. We certainly hope you had the Long Bond (TLT) on versus the Russell 2000 (short side) as the performance divergence in being long #GrowthSlowing hit its widest for 2014 YTD (ex-reinvesting interest).

XLP

The U.S. is in Quad #4 on our GIP (Growth/Inflation/Policy) model, which suggests that both economic growth and reported inflation are slowing domestically. As far as the eye can see in a falling interest rate environment, we think you should increase your exposure to slow-growth, yield-chasing trade and remain long of defensive assets like long-term treasuries and Consumer Staples (XLP) – which work decidedly better than Utilities in Quad #4. Consumer Staples is as good as any place to hide as the world clamors for low-beta-big-cap-liquidity.

Three for the Road

TWEET OF THE DAY

$LINE down another -5% - not a merry christmas for people who got sucked into owning that

@KeithMcCullough

QUOTE OF THE DAY

A mind that is stretched by a new experience can never go back to its old dimensions.

-Oliver Wendell Holmes

STAT OF THE DAY

The U.S. 10YR Yield ticks back down to 2.25%, -26% year-to-date as growth and inflation expectations fall. 


CHART OF THE DAY: A (Not So) Merry Christmas In Russia

CHART OF THE DAY: A (Not So) Merry Christmas In Russia - EL 12.26.14

 

Editor's note: Below is a brief excerpt from today's Morning Newsletter by Hedgeye CEO Keith McCullough. For more information on how you can get a couple steps ahead of consensus every morning click here.

 

In other Global Macro news, other than getting to play Denmark in the 1st round of the 2015 IIHF World Junior Hockey Championship today, things for Russia still suck.

 

Despite “bouncing” off its lows, the Russian Trading System Index is:

 

1. Down -38.4% for 2014 YTD

2. And would only have to be +63% (from here) to get whoever “allocated assets” to it a year ago back to breakeven

3. With an immediate-term risk range of 642-875

 

In other words, with the RTSI (Russian Stock Market) currently trading at 847:

 

1. It has immediate-term upside of +3%

2. And immediate-term downside of -24%

 

#sweet

 

 


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Shadow Boxing

“I’ve seen George Foreman shadow boxing, and the shadow won.”

-Muhammad Ali

 

Traditionally observed by Commonwealth Nations like my homeland, today is Boxing Day.

 

Much to Muhhamad Ali’s chagrin, today has nothing to do with him beating up on Foreman or Frazier. It used to be the day when British servants received gifts from their overlords in a “Christmas Box.”

 

Now, barring any central plan you might receive from upon high, it’s just another day off for Canadians to drink beers and watch the World Junior Hockey tournament (which is being held in Toronto and Montreal this year).

 

Shadow Boxing - a5

 

Back to the Global Macro Grind…

 

Although its economy is getting speed-bagged, Japan doesn’t do Boxing Day. That said, their bureaucrats love central planning. In a holiday message to the people he is plundering via currency debasement, this is what the Prime Minister, Shinzo Abe, had to say:

 

“I want companies with high profits that are benefiting from the weak yen to raise wages, investment, and on top of that, consider the prices they pay their suppliers…”

 

Isn’t that just great – thanks for the pep talk, Shinzo.

 

In other news, the people of Japan don’t want to do what Abe is telling them to do. Not to be confused with the Policy To Inflate the Weimar Nikkei’s last price, here’s what’s cooking in Japan, economically:

 

1. As the Yen burns, Japanese Consumer Prices (CPI) are +2.7% year-over-year

2. But Japanese Household Spending (in Burning Yen Terms) is down -2.5% year-over-year

3. And the Savings Rate of the Japanese people just went negative alongside real wage growth

 

I know, this is all progressing so very well…

 

But as long as the Nikkei (which, by the way, we’ve been suggesting you be long, while short Yens vs USD) is up, the financial media that panders to central-planning-access is going to tell you that this Abenomics thing could actually work.

 

In other Global Macro news, other than getting to play Denmark in the 1st round of the 2015 IIHF World Junior Hockey Championship today, things for Russia still suck.

 

Despite “bouncing” off its lows, the Russian Trading System Index is:

 

1. Down -38.4% for 2014 YTD

2. And would only have to be +63% (from here) to get whoever “allocated assets” to it a year ago back to breakeven

3. With an immediate-term risk range of 642-875

 

In other words, with the RTSI (Russian Stock Market) currently trading at 847:

 

1. It has immediate-term upside of +3%

2. And immediate-term downside of -24%

 

#sweet

 

And so is worldwide #GrowthSlowing + #deflation risk, right? Maybe if you’re shadow boxing USA style with year-end performance chasing, or something like that. But I wouldn’t confuse that with trending global macroeconomic gravity.

 

Our immediate-term Global Macro Risk Ranges are now (I’ve added the our intermediate-term TREND view in brackets – you can get our Top 12 macro ranges and TREND views in our Daily Trading Range product):

 

UST 10yr 2.03-2.30% (bearish = bullish Long Bond)

SPX 1 (bullish)

RUT 1125-1220 (neutral)

Nikkei 175 (bullish)

VIX 12.95-24.11 (bullish)

USD 89.26-90.89 (bullish)

EUR/USD 1.21-1.23 (bearish)

YEN 118.23-121.11 (bearish)

Oil (WTI) 54.08-57.99 (bearish)

Nat Gas 2.91-3.47 (bearish)

Gold 1161-1197 (bearish)

Copper 2.83-2.93 (bearish)

 

Happy Holidays – best of luck and health to you and your families,

KM

 

Keith R. McCullough

Chief Executive Officer

 

Shadow Boxing - EL 12.26.14


December 26, 2014

December 26, 2014 - HE DTR 12 26 14.001


Cartoon of the Day: Merry Christmas!

Cartoon of the Day: Merry Christmas! - Christmas cartoon 12 25 2014  2

 

From all of us at Hedgeye, we wish you and your families the best this holiday season.


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