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PREMIUM INSIGHT

[UNLOCKED] Fund Flow Survey | Domestic Stock Funds Printing the Worst Year on Record

[UNLOCKED] Fund Flow Survey | Domestic Stock Funds Printing the Worst Year on Record - dollar pic

This is a complimentary research note originally published September 15, 2016 by our Financials team. If you would like more info on how you can access our institutional research please email sales@hedgeye.com.


Daily Market Data Dump: Wednesday

Takeaway: A closer look at global macro market developments.

Editor's Note: Below are complimentary charts highlighting global equity market developments, S&P 500 sector performance, volume on U.S. stock exchanges, rates and bond spreads, key currency crosses, and commodities. It's on the house. For more information on how Hedgeye can help you better understand the markets and economy (and stay ahead of consensus) check out our array of investing products

 

CLICK TO ENLARGE

 

Daily Market Data Dump: Wednesday - equity markets

 

Daily Market Data Dump: Wednesday - sector performance

 

Daily Market Data Dump: Wednesday - volume

 

Daily Market Data Dump: Wednesday - rates and spreads

 

Daily Market Data Dump: Wednesday - currencies

 

Daily Market Data Dump: Wednesday - commodities


Big bang theories on what the BOJ “could do” vs. #GrowthSlowing trends = fun debate:

Client Talking Points

BOJ

Implements the “QQE with Yield Curve Control” plan (i.e. a -0.1% policy rate and a centrally planned 0.00% 10yr Yield rate); Q: what’s that going to do for the economy? A: nothing. No change to bullish TREND in Yen (vs. USD). Nikkei ramps +1.9% from oversold lows; 10yr JGB -0.04%. #riveting. 

Rates

Globally doing a big yawn post the BOJ event and we have to admit that some of the “rates are gonna rip” theories are quite clever at this point; not as P&L practical as simply getting #GrowthSlowing right in 2016, but definitely clever! UST 10yr Yield immediate-term risk range = 1.55-1.75%; we're a buyer of long-term bonds on any move > 1.70%.

Gold

Loves the idiocy of the clever central banker – after barely budging during the stock/bond selloff, back up to $1323/oz this morning = +24.5% YTD with immediate-term upside in my risk range to $1350-1360; we think we’ll see that on the next drop in UST 10yr towards 1.55%.

Asset Allocation

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
9/20/16 49% 4% 5% 11% 29% 2%
9/21/16 47% 4% 5% 12% 29% 3%

Asset Allocation as a % of Max Preferred Exposure

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
9/20/16 49% 12% 15% 33% 88% 6%
9/21/16 47% 12% 15% 36% 88% 9%
The maximum preferred exposure for cash is 100%. The maximum preferred exposure for each of the other assets classes is 33%.

Top Long Ideas

Company Ticker Sector Duration
GLD

On the inflation front, comps get much easier moving forward (we’ve been in a deflationary environment for 2 years!). Our GDP estimates for Q3 and Q4 are below the street and Central Bank forecasts. For the full-year, we’re well below at +1.2% Y/Y vs. the Fed at 2.0%. If these estimates converge, we expect it to be dovish on the margin when coupled with our bearish rates view.  The inflation comps effect and a policy catalyst are shaping our fundamental views of a longer term gold position (GLD). 

VYM

We continue to observe that growth is slowing in aggregate. We continue to like bonds (TLT, MUB) and bond proxies (VYM). 

TLT

See update on VYM.

Three for the Road

TWEET OF THE DAY

CHART OF THE DAY: Another Ugly Economic Indicator... Should The #Fed Raise Rates? app.hedgeye.com/insights/53961… via @KeithMcCullough pic.twitter.com/fEvmgg8Voy

@Hedgeye

QUOTE OF THE DAY

 “The road to success is always under construction.”

–Arnold Palmer

STAT OF THE DAY

DJ LeMahieu leads the MLB with a .349 BA.


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September 21, 2016

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  • Bullish Trend
  • Bearish Trend
  • Neutral

INDEX BUY TRADE SELL TRADE PREV. CLOSE
UST10Y
10-Year U.S. Treasury Yield
1.75 1.55 1.69
SPX
S&P 500
2,108 2,171 2,139
RUT
Russell 2000
1,200 1,254 1,228
COMPQ
NASDAQ Composite
5,119 5,262 5,241
XOP
SPDR S&P Oil & Gas Explore
34.40 37.26 35.53
RMZ
MSCI US REIT
1,145 1,210 1,185
NIKK
Nikkei 225 Index
16,292 17,002 16,492
DAX
German DAX Composite
10,200 10,609 10,393
VIX
Volatility Index
14.07 19.39 15.92
USD
U.S. Dollar Index
94.50 96.40 95.98
EURUSD
Euro
1.11 1.13 1.11
USDJPY
Japanese Yen
101.17 102.95 101.72
WTIC
Light Crude Oil Spot Price
42.05 47.46 44.05
NATGAS
Natural Gas Spot Price
2.70 3.08 3.05
GOLD
Gold Spot Price
1,305 1,350 1,318
COPPER
Copper Spot Price
2.06 2.19 2.16
AAPL
Apple Inc.
108.57 118.99 113.57
AMZN
Amazon.com Inc.
750 792 780
JPM
J.P. Morgan Chase & Co.
65.00 67.46 66.46
INTC
Intel Corp.
35.89 38.01 37.14
LVS
Las Vegas Sands Corp.
54.04 58.60 56.28
CMG
Chipotle Mexican Grill, Inc.
389 412 400

Hedgeye's Daily Trading Ranges are twenty immediate-term (TRADE) buy and sell levels, along with our intermediate-term (TREND) view.  Click HERE for a video from Hedgeye CEO Keith McCullough on how to use these risk ranges.


CHART OF THE DAY: Another Ugly Economic Indicator... Should The Fed Raise Rates?

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

 

"... Got the latest “transports” data?

  1. Class 8 new truck orders at the lowest level since August 2010 in both absolute and rate of change terms (-56% y/y)   
  2. NA total commodity carloads originated continues tracking down over -5% Y/Y since March 2015 – no bounce whatsoever
  3. Commodity carloads down -11% y/y. Largest commodity carload declines in Petroleum products (-22%) and Coal (-27%) which are obvious. Other areas of weakness are forest products (-7.5%), Metals (-6.1%), minerals (-3.6%), Farm/Food products (-3.4%)"

So maybe the Fed should “raise rates” today. That’s neither an empty nor a clever theory. That would just be dumb.

 

CHART OF THE DAY: Another Ugly Economic Indicator... Should The Fed Raise Rates? - 09.21.16 EL Chart


Empty Theories

“How empty is theory in the presence of fact.”

-Mark Twain

 

Twain had his own personal issues. Don’t we all? But I have no issue whatsoever with this quote. In fact, the further I find myself down this winding path of building Hedgeye, the closer I find myself to truths vs. empty theories.

 

Don’t get me wrong, differentiated theories can make your returns great again. That’s not going to happen taking short-cuts or coming up with clever ideas that have no trending data or facts to support them, however.

 

Trends trump theories. #GrowthSlowing is the mother of all Global Macro TRENDs that you can measure and map with real-time economic and market data. Theories, like “JGB Yields are gonna rip”, die on the sword of event-driven days like this.

 

Empty Theories - growth skeleton cartoon 08.29.2016

 

Back to the Global Macro Grind

 

My personal views fended off 2 super clever theories in exchange for confirmations of 2 bullish TRENDs overnight:

 

  1. Japanese Government Bond Yields didn’t crash to the upside
  2. Team USA couldn’t beat Team Canada (again) at the World Cup of Hockey

 

I get it. Every contrarian wants to make the counter-trend calls. But sometimes (most of the time actually), the trend is your friend. Not being Bullish Enough on JGBs for the last decade has been a widow-maker inasmuch as betting on USA over Canada for Gold has.

 

BREAKING NEWS:

 

  1. “OECD Cuts US GDP Growth Forecast” (again)
  2. “BOJ Opts For QQE With Yield Curve Control”

 

Of all the establishment economist teams in the League, after cutting their forecast (again) from 1.8% to 1.4%, the OECD is now closest to Hedgeye’s current 2016 year-over-year GDP growth forecast of +1.2%.

 

So that’s cool. Ex-Regional-Fed-Heads who have tried to become famous with “the economy is improving calls” in the last few months, consensus is actually getting Bearish Enough on US GDP growth, after it slowed.

 

That’s usually core to a lot of consensus hedgie-theories btw. After a move like we just had in bond yields, legions of theories emerge on why a short-term counter-TREND move can morph into a full blown Phase Transition.

 

And when they don’t, we reiterate the TREND.

 

What was it, precisely, that the Bank of Japan (BOJ) said overnight?

 

    • BoJ to change maximum scale of each ETF buying operation
    • BoJ to continue buying JGBs at ¥80T annually
    • BoJ to conduct policy to influence interest rates
    • BoJ to extend fixed-rate fund-providing operations to 10-yrs from 1-yr
    • BoJ to begin fixed-rate JGB buying operation
    • BoJ to increase monetary base until inflation goes above 2%
    • BoJ adopts inflation-overshooting commitment
    • BoJ scraps 7-12 year JGB buying duration period
    • BoJ to use QQE with yield curve control

 

#Riveting, eh? Yep. A whole lot of nothingness emerged from the latest central-market-plan to literally not let the Japanese 10yr Yield move from 0.00%. With a policy rate of -0.1%, you’re going to need a microscope to see that Bad Sushi Yield Spread.

 

Macro Market Reaction?

 

  1. FX: Yen does nothing, confirming its bullish intermediate-term TREND
  2. BONDS: 10yr JGB Yield moves to -0.04% within an immediate-term risk range of -0.09-0.00%
  3. STOCKS: Nikkei has yet another bear market bounce, +1.9% in a big relief rally on nothing clever paying out

 

Onto the next. I have a better theory than a JGB bond market blow-up day (i.e. one that’s complemented by both economic facts and markets confirming the TREND embedded therein): Double-Dip #Recession for global cyclicals.

 

Got the latest “transports” data?

 

  1. Class 8 new truck orders at the lowest level since August 2010 in both absolute and rate of change terms (-56% y/y)   
  2. NA total commodity carloads originated continues tracking down over -5% Y/Y since March 2015 – no bounce whatsoever
  3. Commodity carloads down -11% y/y. Largest commodity carload declines in Petroleum products (-22%) and Coal (-27%) which are obvious. Other areas of weakness are forest products (-7.5%), Metals (-6.1%), minerals (-3.6%), Farm/Food products (-3.4%)

 

So maybe the Fed should “raise rates” today. That’s neither an empty nor a clever theory. That would just be dumb.

 

Our immediate-term Global Macro Risk Ranges are now:

 

UST 10yr Yield 1.55-1.75%

SPX 2108-2171  

Nikkei 162

VIX 14.07-19.39
YEN 101.17-102.95
Oil (WTI) 42.05-47.46

Gold 1

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Empty Theories - 09.21.16 EL Chart


Daily Trading Ranges

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Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

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