Hedgeye Macro and Housing Analyst Christian Drake sits down with Macro Analyst Ben Ryan to discuss the hot topic of rising rates and the housing market.
Drake explains the trend in rates, its real impact on the housing market and what we can expect going forward. One key takeaway is that rates impact affordability of a home, not the decision to buy a home.
If you can’t make money in stocks or bonds, what do you do?
This is one of the main reasons we have been steadily raising cash to the highest level in our Hedgeye Asset Allocation Model of the year.
62% to be precise.
Over in Europe, stocks continue to break our immediate-term TRADE lines of support with the German DAX leading losers this morning down -2.3%. If ECB Mario Draghi lets Euro rates do this, he’ll let stocks drop faster.
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May 13 - IGT 1Q CC 8am, ; PW: 2660253
May 14 - Genting Singapore 1Q CC 6am
May 14 - Macau Legend Development 1Q CC 8:30pm
WYNN - The largest individual shareholder, T.Rowe Price, in Wynn Resorts Ltd has cut its stake by almost 40%, according to a filing to Nasdaq on Monday. TRowe now holds 10.4 million shares of WYNN, down from ~17.1 million it held .
Takeaway: Long only's finally capitulating in Macau stocks?
GC.CN - Great Canadian Gaming to acquire Casino New Brunswick for ~$95M. The purchase price represents an acquisition multiple of approximately 8.0x – 8.5x the casino's 2014 normalized EBITDA. Closing is expected to occur in fall of 2015.
Universal Entertainment - The Philippine gaming regulator (PAGCOR) has confiscated a PHP100-million (US$2.2 million) guarantee payment from Tiger Resort, Leisure and Entertainment Inc – developer of casino resort Manila Bay Resorts (pictured in a rendering) – citing delays in the project.
Francis Hernando, VP of PAGCOR said that the provisional gaming licence is in danger of being suspended because Tiger Resort has not met the minimum requirement of 50 percent project completion by the March 2015 deadline.
In February, Tiger Resort sought for an extension of the deadline to the second quarter of 2017, citing changes in the design of the casino project – a request denied by Pagcor, the news agency reports.
Takeaway: Okada's Philippines project is in serious trouble.
Viking - Delivery of Viking Sky has been rescheduled from June 2016 to February 2017.
Singapore licenses - Singapore has "no plans" currently to offer additional casino licenses when the moratorium on such licences expires in 2017, Senior Minister of State for Trade and Industry Lee Yi Shyan said yesterday.
The Government will instead focus on working with the two integrated resorts (IRs) to ensure their attractions and services continue to meet the needs of Singaporeans and enhance the country's tourism appeal, he added in Parliament.
Macau Cash Handouts - The head of the Social Welfare Bureau, Iong Kong Io, said yesterday that the government does not intend to bring an end to its cash handout program next year, Radio Macau reported. “I don’t think the cash handout program will be canceled. The government is assessing this matter according to its budget; so the cash handout value will either decrease or be maintained,” he stated.
Iowa SS April Gaming Revs: -2% YoY
Puerto Vallarta port calls canceled - Civil unrest and violence around Puerto Vallarta led to cruise lines canceling ship calls there.
Hedgeye Macro Team remains negative Europe, their bottom-up, qualitative analysis (Growth/Inflation/Policy framework) indicates that the Eurozone is setting up to enter the ugly Quad4 in Q4 (equating to growth decelerates and inflation decelerates) = Europe Slowing.
Takeaway: European pricing has been a tailwind for CCL and RCL but a negative pivot here looks increasingly likely in 2015.
Takeaway: Domestic equity flows continue to stand out. The category had its worst net outflow in 44 weeks with a -$7.3 billion redemption.
This note was originally published May 07, 2015 at 07:32 in Financials. For more information on how you can subscribe to our services click here.
Investment Company Institute Mutual Fund Data and ETF Money Flow:
Domestic equity fund flows in 2015 continue to accelerate to the downside. In the 5-day period ending April 29th, investors withdrew a net -$7.3 billion from the asset class, the category's largest outflow in 44 weeks. As previously outlined, seasonality plays a substantial part of investor allocations and the first quarter since 2007 has been the most robust period annually with capital flow declining linearly into the fourth quarter (see our seasonality outline here). While this week's redemption is alarming, we are expecting continued soft sledding especially considering weaker equity market perform during the past month. We continue to highlight our highest conviction Short/Avoid idea T Rowe Price as most impacted by this trend.
In the most recent 5-day period ending April 29th, total equity mutual funds put up net outflows of -$3.2 billion, trailing the year-to-date weekly average inflow of +$988 million and the 2014 average inflow of +$620 million. The outflow was composed of international stock fund contributions of +$4.1 billion and domestic stock fund withdrawals of -$7.3 billion. International equity funds have had positive flows in 48 of the last 52 weeks while domestic equity funds have had only 10 weeks of positive flows over the same time period.
Fixed income mutual funds put up net inflows of +$3.1 billion, outpacing the year-to-date weekly average inflow of +$2.3 billion and the 2014 average inflow of +$929 million. The inflow was composed of tax-free or municipal bond funds contributions of +$1.0 billion and taxable bond funds contributions of +$2.1 billion.
Equity ETFs had net subscriptions of +$3.7 billion, outpacing the year-to-date weekly average inflow of +$1.9 billion and the 2014 average inflow of +$3.2 billion. Fixed income ETFs had net outflows of -$363 million, trailing the year-to-date weekly average inflow of +$1.5 billion and the 2014 average inflow of +$1.0 billion.
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 weekly average for 2014 and the weekly year-to-date average for 2015:
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), the weekly average for 2014, and the weekly year-to-date average for 2015. In the third table are the results of the weekly flows into and out of the major market and sector SPDRs:
Sector and Asset Class Weekly ETF and Year-to-Date Results: With GDP coming in lower than expected and concerns over the Fed raising rates, investors made net redemptions from almost all sector SPDR ETFs. The long-treasury TLT and materials XLB experienced the highest percentage withdrawals. The TLT lost -3% or -$142 million. The XLB lost -4% or -$113 million.
The net of total equity mutual fund and ETF flows against total bond mutual fund and ETF flows totaled a negative -$2.2 billion spread for the week (+$555 million of total equity inflow net of the +$2.8 billion inflow to fixed income; positive numbers imply greater money flow to stocks; negative numbers imply greater money flow to bonds). The 52-week moving average is +$1.1 billion (more positive money flow to equities) with a 52-week high of +$27.9 billion (more positive money flow to equities) and a 52-week low of -$15.5 billion (negative numbers imply more positive money flow to bonds for the week.)
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:
Jonathan Casteleyn, CFA, CMT
Joshua Steiner, CFA
Hedgeye Director of Research Daryl Jones shares the top three things in CEO Keith McCullough's macro notebook this morning.
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