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A Must-See Edition of The Macro Show: Hedgeye Energy Analyst Kevin Kaiser's Latest Short Call

Join us for a special edition of The Macro Show tuesday.

 

A Must-See Edition of The Macro Show: Hedgeye Energy Analyst Kevin Kaiser's Latest Short Call - Kaiser

 

Maverick Energy Sector Head Kevin Kaiser will be featured on The Macro Show, Hedgeye's live pre-market global macro analysis, Tuesday morning at 8:30AM ET.

 

Kevin will deliver a high-level look at his latest short call on Chesapeake Energy (CHK) and answer questions from viewers.

 

CLICK HERE to subscribe and join us live at 8:30am ET.

 

 



Why Twitter's Problems Run Deep | $TWTR

Hedgeye's Internet & Media Sector Head Hesham Shaabban stopped The Macro Show last week to discuss some of the key structural headwinds currently facing Twitter.

 

Subscribe to The Macro Show today for access to this and all other episodes. 

 


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3 Charts - Don't Hike!

Editor's Note: This comes from a research note Hedgeye CEO Keith McCullough sent to subscribers Friday. If you're serious about stepping up your market game we encourage you to take a look at our offerings.

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3 Charts - Don't Hike! - Fed cartoon 06.11.2015

While the macro narrative on why bond yields rallied to lower-long-term highs (again) remains malleable, the data is not.

 

When strategists tell you “inflation is breaking out – so bond yields are going higher,” send them these 3 charts. To be clear, bottoms are processes, not points. And all we’re seeing is a reflation of one mother of a #deflation risk.

 

If the Fed makes a mistake and raises rates (Dollar Up, Commodities Smoked), they’ll perpetuate #deflation and a corporate profit slow-down in #LateCycle sectors that have already lost pricing power.

KM

 

  • 1st chart = Headline and Core YoY
  • 2nd chart = Goods vs Services, YoY
  • 3rd Chart = Energy – MoM & YoY

 

Click to enlarge

3 Charts - Don't Hike! - z 1

 

3 Charts - Don't Hike! - z 2

 

3 Charts - Don't Hike! - z 3


ICI Fund Flow Survey | 2015 Domestic Equity Flows - The Biggest Loser

Takeaway: The first 5 months of 2015 for domestic equity mutual funds have had the worst start to any annual period since 2012 (and worst than 2008).

This note was originally published June 11, 2015 at 11:50 in Financials. For more information on our various products and how you can subscribe click here.

Investment Company Institute Mutual Fund Data and ETF Money Flow:

Equity ETF flows and taxable bond mutual fund flows were strong last week at +$7.3 billion and +$2.0 billion respectively. Meanwhile, domestic equity and tax-free bond funds continued their losing streaks, although munis were basically flat at just a -$2 million redemption (although now totaling 5 straight weeks of outflows). Domestic equity mutual funds however continue to be the biggest loser in weekly surveys with another -$4.2 billion taken back by investors during the most recent 5 days. As depicted in the chart below, the asset class has now lost a total of -$45.7 billion in the first 23 weeks of 2015, the weakest start to a year since 2012 (and a worst start than 2008).

 

ICI Fund Flow Survey | 2015 Domestic Equity Flows - The Biggest Loser - ICI 12

 

Overall, demand for total equity products (mutual funds and ETFs) outweighed that for total bond as investors reacted to the recent grind higher in yields; total equity flows net of total bond flows were +$4.2 billion.


ICI Fund Flow Survey | 2015 Domestic Equity Flows - The Biggest Loser - zici

In the most recent 5-day period ending June 3rd, total equity mutual funds put up net outflows of -$882 million, trailing the year-to-date weekly average inflow of +$606 million and the 2014 average inflow of +$620 million. The outflow was composed of international stock fund contributions of +$3.3 billion and domestic stock fund withdrawals of -$4.2 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 +$2.0 billion, trailing the year-to-date weekly average inflow of +$2.2 billion but outpacing the 2014 average inflow of +$929 million. The inflow was composed of tax-free or municipal bond funds withdrawals of -$2 million and taxable bond funds contributions of +$2.0 billion.

Equity ETFs had net subscriptions of +$7.3 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 inflows of +$245 million, trailing the year-to-date weekly average inflow of +$1.1 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:

ICI Fund Flow Survey | 2015 Domestic Equity Flows - The Biggest Loser - ICI 2

ICI Fund Flow Survey | 2015 Domestic Equity Flows - The Biggest Loser - ICI 3

ICI Fund Flow Survey | 2015 Domestic Equity Flows - The Biggest Loser - ICI 4

ICI Fund Flow Survey | 2015 Domestic Equity Flows - The Biggest Loser - ICI 5

ICI Fund Flow Survey | 2015 Domestic Equity Flows - The Biggest Loser - ICI 6


Cumulative Annual Flow in Millions by Mutual Fund Product: Chart data is the cumulative fund flow from the ICI mutual fund survey for each year starting with 2008.

ICI Fund Flow Survey | 2015 Domestic Equity Flows - The Biggest Loser - ICI 12

ICI Fund Flow Survey | 2015 Domestic Equity Flows - The Biggest Loser - ICI 13

ICI Fund Flow Survey | 2015 Domestic Equity Flows - The Biggest Loser - ICI 14

ICI Fund Flow Survey | 2015 Domestic Equity Flows - The Biggest Loser - ICI 15

ICI Fund Flow Survey | 2015 Domestic Equity Flows - The Biggest Loser - ICI 16


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:

ICI Fund Flow Survey | 2015 Domestic Equity Flows - The Biggest Loser - ICI 7

ICI Fund Flow Survey | 2015 Domestic Equity Flows - The Biggest Loser - ICI 8


Sector and Asset Class Weekly ETF and Year-to-Date Results: In sector SPDR callouts, the long treasury TLT continued to bleed funds. It lost another -$314 million or -7% in net withdrawals last week.

ICI Fund Flow Survey | 2015 Domestic Equity Flows - The Biggest Loser - ICI 9


Cumulative Annual Flow in Millions within Equity and Fixed Income Exchange Traded Funds: Chart data is the cumulative fund flow from Bloomberg's ETF database for each year starting with 2013.

ICI Fund Flow Survey | 2015 Domestic Equity Flows - The Biggest Loser - ICI 17

ICI Fund Flow Survey | 2015 Domestic Equity Flows - The Biggest Loser - ICI 18


Net Results:
The net of total equity mutual fund and ETF flows against total bond mutual fund and ETF flows totaled a positive +$4.2 billion spread for the week (+$6.4 billion of total equity inflow net of the +$2.3 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 +$1.5 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 -$13.1 billion (negative numbers imply more positive money flow to bonds for the week.)

ICI Fund Flow Survey | 2015 Domestic Equity Flows - The Biggest Loser - ICI 10

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 | 2015 Domestic Equity Flows - The Biggest Loser - ICI 11


Jonathan Casteleyn, CFA, CMT
203-562-6500
jcasteleyn@hedgeye.com

Joshua Steiner, CFA
203-562-6500
jsteiner@hedgeye.com


USD, Commodities and Restaurant Sales

Client Talking Points

USD

To get things like Oil prices and PPI (producer prices) up year-over-year, what the Fed actually needs to do is devalue the Dollar and start talking up no-rate-hike. In other words, the bull case for stocks, commodities, and bonds is #SlowerForLonger. The U.S. Dollar Index  was down -1.4% last week (down -4.5% in the last 3 months), the immediate-term risk range is 94.01-95.98.

COMMODITIES

The CRB index is up +0.4% week-over-week (+4.1% in the last 3 months). We generally regard changes in commodity prices on the margin as having meaningful consumption implications. WTI Oil was up +1.4% week-over-week (+14.7% in the last 3 months) and Gold was up +1.0% week-over-week (+2.2% in the last 3 months).

RESTAURANT SALES

Same-restaurant sales retracted to +1.1% and same-restaurant traffic decreased -2.3% both down 80 basis points sequentially. Traditionally, strong employment trends would suggest a healthy sales environment for restaurant operators. There continues to be a clear divergence between improvement in the employment data and same-store sales and traffic trends for the industry.    

Asset Allocation

CASH 43% US EQUITIES 6%
INTL EQUITIES 12% COMMODITIES 10%
FIXED INCOME 27% INTL CURRENCIES 2%

Top Long Ideas

Company Ticker Sector Duration
PENN

Penn National Gaming will likely tee off on the bears with a strong Q2, upward 2015/2016 EPS revisions, and the start of a 2 year growth period. PENN’s stock has climbed 27% this year on stabilizing regional gaming revenues, transaction-fueled optimism (real estate) surrounding the regional gaming companies and proximity to the opening of the new Plainridge racino on June 24. So what will drive even more upside? More and better. We think regional gaming trends are even better than anticipated by the Street and Q2 earnings should be a solid beat even before Plainridge contributes.

ITB

Housing outperformed in the latest week alongside choppy price action in equities and further, extraordinary volatility in sovereign bond markets.  Fundamental data was light with weekly purchase applications data from the MBA the lone release of import for the industry.  The first, high-frequency update on purchase demand in June, however, was positive. Purchase demand rose +9.7% sequentially, taking the index to its strongest level in 2 years at reading of 214.3. On a year-over-year basis, growth accelerated for a  4th consecutive week to +14.6%. Inclusive of last weeks gain, demand in 2Q is tracking +14.3% QoQ and +13.4% YoY.

TLT

The market has been jockeying for positioning in front of next week’s policy statement from Janet Yellen. We believe Yellen signaling that she remains “data dependent” (i.e. repeats what she said at the March 18thmeeting) is the most probable outcome. To be clear, we remain the long-bond bulls (TLT, EDV, MUB). With that being said we aren’t claiming to be able to predict the outcome of next week’s meeting (sure we do have biases). What we do know is that Hedgeye estimates for growth and inflation shake out much lower against both consensus and central bank forecasts for the full year 2015 (remember that this is after their forecasts have already been downwardly revised).

Three for the Road

TWEET OF THE DAY

Top Private Investor Buddy Carter Talks Process, Market Volatility and Ranges with Keith McCullough https://app.hedgeye.com/insights/44663-keith-mccullough-and-top-private-investor-buddy-carter-talk-process-m… via @hedgeye

@KeithMcCullough

QUOTE OF THE DAY

Vision without execution is hallucination.

Thomas Edison

STAT OF THE DAY

According to a study published in the journal BMC Public Health, the average American is 33 pounds heavier than the average Frenchman, 40 pounds heavier than the average Japanese citizen, and 70 pounds heavier than the average citizen of Bangladesh.


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