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PREMIUM INSIGHT

About Everything: Aging Boomers (Big "Silver Tsunami" Implications)

About Everything:  Aging Boomers (Big "Silver Tsunami" Implications) - seniorwave1

In this complimentary edition of About Everything, Hedgeye Demography Sector Head Neil Howe discusses how America's aging Baby Boomers will feed (or starve) a wide range of industries—thanks to their sheer demographic size and generational preferences.


Cartoon of the Day: BOJ to the Rescue?

Cartoon of the Day: BOJ to the Rescue? - Nikkei  BOJ cartoon 09.13.2016

 

Sure, this is normal. The BOJ (already a top-five owner of 81 companies in Japan’s Nikkei 225) is on course to become the #1 shareholder in 55 of those firms by the end of next year, according to Bloomberg. Meanwhile, BOJ Governor Haruhiko Kuroda almost doubled his annual ETF buying target last month.


Steiner: Market Risks Significantly Exceed Reward

Hedgeye Financials analyst Josh Steiner highlights the most significant economic threats right now and says that market risk is exceeding reward.

 

Cheers to the Grind...Receive 50% of any of our Mass Market products HERE!


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Hanesbrands: Best Idea Short Conference Call | $HBI

Editor's Note: Our Retail team is hosting a Best Idea short call on Hanesbrands with institutional investors today. Email sales@hedgeye.com for more info.

 

Hanesbrands: Best Idea Short Conference Call | $HBI - z hbi

SOME KEY DISCUSSION POINTS:

  • Hanes has top share in a slow growth category.
  • Feeling competitive pressure at high-end (Tommy John, Under Armour, Lululemon) and low-end (Gildan) = negative organic growth. The latter is particularly under-appreciated.
  • Capacity utilization at owned factories is at peak (90%+). People do not realize this as it is not readily disclosed.
  • Margins at peak 15.5% -- higher than Nike (not a direct competitor, but the comparison is telling). Trough margin  is 8-9%. It will see that level again.
  • As growth slows, doing deals at peak earnings and multiples to goose perceived/reported growth.
  • Latest deal is a non-scalable underwear company in Australia. They don't have our call that Australian economy faces a massive headwind as consumers run out of financial assets to draw upon to fuel consumption.
  • HBI takes more special charges than any company we've seen in retail. Strips out all investments to take up margins and get management paid.
  • Management selling/stepping down.
  • $5 upside, $15 downside.

[UNLOCKED] Fund Flow Survey | Foreign Funds In Major Drawdown Territory

Takeaway: Risk appetite gauged by international equity trends is bordering levels seen in major drawdowns in '11 and '08

Editor's Note: Below is a complimentary research note originally published last week by our Financials team. For more info on our institutional research email sales@hedgeye.com.

 

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Investment Company Institute Mutual Fund Data and ETF Money Flow:

In early March of this year, international equity mutual funds began to lose favor rapidly. Over that period, the category's 52-week moving average has collapsed from +$2.0 billion to -$112 million per week, including the most recent week's -$1.7 billion outflow. There are only two prior periods on record where the rolling 52 week moving average has gone negative in an indication of receding risk appetite, mid-2008 and early 2012. International equity funds have been a bedrock of diversification by financial advisors, as over the past 25 years, the best performing stock market annually has been outside of the U.S. We are extremely cautious on trends in the active management industry as International Equity is a high fee product and has been offsetting even weaker trends in domestic stock funds. 

 

In other categories, domestic equity funds lost another -$3.8 billion and total bond funds gained +$1.3 billion. In ETFs, equities gained +$320 million but were outpaced by fixed income's +$2.3 billion inflow. Finally, investors pulled -$11 billion from money market funds.

 

[UNLOCKED] Fund Flow Survey | Foreign Funds In Major Drawdown Territory - z chart baby


[UNLOCKED] Fund Flow Survey | Foreign Funds In Major Drawdown Territory - ICI1

 

In the most recent 5-day period ending August 31st, total equity mutual funds put up net outflows of -$5.5 billion, trailing the year-to-date weekly average outflow of -$4.1 billion and the 2015 average outflow of -$1.6 billion.

 

Fixed income mutual funds put up net inflows of +$1.3 billion, trailing the year-to-date weekly average inflow of +$3.0 billion but outpacing the 2015 average outflow of -$475 million.

 

Equity ETFs had net subscriptions of +$5.8 billion, outpacing the year-to-date weekly average inflow of +$339 million and the 2015 average inflow of +$2.8 billion. Fixed income ETFs had net inflows of +$1.0 billion, trailing the year-to-date weekly average inflow of +$1.8 billion and the 2015 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 2015 and the weekly year-to-date average for 2016:

 

[UNLOCKED] Fund Flow Survey | Foreign Funds In Major Drawdown Territory - ICI2

 

[UNLOCKED] Fund Flow Survey | Foreign Funds In Major Drawdown Territory - ICI3 2

 

[UNLOCKED] Fund Flow Survey | Foreign Funds In Major Drawdown Territory - ICI4

 

[UNLOCKED] Fund Flow Survey | Foreign Funds In Major Drawdown Territory - ICI5

 

[UNLOCKED] Fund Flow Survey | Foreign Funds In Major Drawdown Territory - ICI6



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.

 

[UNLOCKED] Fund Flow Survey | Foreign Funds In Major Drawdown Territory - ICI12

 

[UNLOCKED] Fund Flow Survey | Foreign Funds In Major Drawdown Territory - ICI13

 

[UNLOCKED] Fund Flow Survey | Foreign Funds In Major Drawdown Territory - ICI14

 

[UNLOCKED] Fund Flow Survey | Foreign Funds In Major Drawdown Territory - ICI15

 

[UNLOCKED] Fund Flow Survey | Foreign Funds In Major Drawdown Territory - ICI16



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 2015, and the weekly year-to-date average for 2016. In the third table are the results of the weekly flows into and out of the major market and sector SPDRs:

 

[UNLOCKED] Fund Flow Survey | Foreign Funds In Major Drawdown Territory - ICI7

 

[UNLOCKED] Fund Flow Survey | Foreign Funds In Major Drawdown Territory - ICI8



Sector and Asset Class Weekly ETF and Year-to-Date Results: In sector SPDR callouts, investors redeemed -4% or -$308 million from the long duration treasury TLT ETF.

 

[UNLOCKED] Fund Flow Survey | Foreign Funds In Major Drawdown Territory - ICI9



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.

 

[UNLOCKED] Fund Flow Survey | Foreign Funds In Major Drawdown Territory - ICI17

 

[UNLOCKED] Fund Flow Survey | Foreign Funds In Major Drawdown Territory - ICI18



Net Results:

The net of total equity mutual fund and ETF flows against total bond mutual fund and ETF flows totaled a negative -$2.0 billion spread for the week (+$320 million 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 -$5.1 billion (negative numbers imply more positive money flow to bonds for the week) with a 52-week high of +$20.2 billion (more positive money flow to equities) and a 52-week low of -$19.0 billion (negative numbers imply more positive money flow to bonds for the week.)

  

[UNLOCKED] Fund Flow Survey | Foreign Funds In Major Drawdown Territory - ICI10

 


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:

 

[UNLOCKED] Fund Flow Survey | Foreign Funds In Major Drawdown Territory - ICI11 



Jonathan Casteleyn, CFA, CMT 

203-562-6500 

 

Joshua Steiner, CFA

203-562-6500

 

Patrick Staudt, CFA

203-562-6500







CHART OF THE DAY: America's Anti-Robin Hood Fed

Editor's Note: Below is an excerpt and chart from today's Early Look written by Hedgeye CEO Keith McCullough. Click here to subscribe.

 

As a refresher, our American Goldilocks Theme (i.e. both stocks and bonds go up, at the same time) works like this:

 

  1. US GDP growth slows from 3% (year-over-year) from its cycle-peak in 2015 to 1% year-over-year
  2. But it neither accelerates sequentially (quarter-over-quarter) > 2% , nor decelerates below 1%
  3. The Fed then pivots back to dovish (from currently hawkish), and all is well for the 10% of us

 

You didn’t get the memo? We’re all killing it because 10% of The People own 85% of financial assets geared to Dovish Fed Asset Reflation (see "Chart of the Day" below for details on that).

 

CHART OF THE DAY: America's Anti-Robin Hood Fed - z 09.13.16 EL Chart


Early Look

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