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Great Unrotation: Biggest Outflow From Equity Funds In 2015 Offset By Longest Treasury Inflow Streak In 4 Years
While the massive, $19.2 billion outflow in the week of the August 24 flash crash was understandable, as the market's record complacency was shaken by days of violent selling, as was the snap rebound inflow of $5.8 billion the following week resulting from oversold conditions, the fact that EPFR reported that in the week ended September 9 equity outflows once again surged, rising to a total of $19.4 billion - greater than two weeks prior, and the largest of 2015 - will cast doubt that the recent market correction is a one and done event, especially if the selling becomes a self-fulfilling prophecy.
This brings the total 4 week outflow to a massive $46 billion, with Bank of America adding that "stock outflows very large in 3 out of past 4 weeks, in stark contrast to relative calm in credit (e.g. modest vol pick-up and no contagious selling in HY/EM debt)."
The breakdown of the selling was as follows:
- EM: $4.5bn outflows (9 straight weeks)
- US: $15.9bn outflows ($13bn outflows via ETFs)
- Europe: $0.8bn inflows (inflows in 16 out of past 17 weeks)
- Japan: $1.8bn inflows (inflows in 27 out of past 29 weeks)
On a year to date basis, there has now been a total of $7.6 billion in equity outflows for 2015, driven by $109 billion in mutual fund selling offset by $101.5 billion in ETF inflows, most of which however can be attributed to short hedging.
By sector: REITs see largest outflows since Dec’13 ($1.2bn); financials one of only sectors to eke out inflows ($0.2bn)
Which again leads us to the topic of the great unrotation: "Flight-to-quality in fixed income: 10 straight weeks of inflows to Govt/Tsy bond funds… longest inflow streak in 4 years."
But while domestic equities have again fallen out of favor with investors, it was emerging markets that were hit the most: there has been $58 billion in EM outflows vs $142bn in EU/JP inflows YTD.
The focus was Brazil, whose downgrade comes at a time when LatAm had one of biggest fund outflows stories this year, with outflows annualizing 22% of AUM.
According to BofA divergence is explained by "market belief in stronger dollar and weaker China; the result - the past 4 weeks of outflows = 3.3% of AUM, biggest in more than 9 years."
And while massive equity outflows are a traditionally bullish signal, what isn't is the dramatic slowdown in Investment Grafe indlows as shown on the chart below.
As a reminer, without cheap debt, corporations can not buy back their stock, which puts a damper on the question of who will be the marginal buyer in the near future. Unless this category sees substantial inflows in the coming weeks, the record spree of corporate buybacks may be put on indefinite hiatus.
Finally, putting all major outflow categories over the past 7 years in context:
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everyone i know from 8 to 80 is in hedge funds, equities, speculative funds. i wish them well but i don't see how everyone is a winner all the time. even charities and pension funds are high rollers bitchez.
With all those pesky sellers outta the way it should be all up from here!
Obama might not need his MYRA option after all
Good luck with those treasuries
Uncle Sam is broke
Semi serious question
To how many people can you sell a single Treasury issue?
uh, uncle sam has a printing press bitchez
Correct buzzsaw99
And that deflates the purchasing power of Treasuries and ferns
On a long enough time frame.....................
the old joke: "i can't be broke i still have checks left" applies.
Treasurys are no risk investment products, sure they dont pay alot, but you can't lose.
If you purchased a Treasury in 1913/14.................you would have lost something like 98% of purchasing power
I know that a Treasury would have expired.......................but I am sure you get my point
+ 4.5 Trillion, (may not be worth that much, but it's the thought that counts.......ain't it?)
Oh that is absolutely false. Buying and holding treasuries *guarantees* that you loose the difference of real inflation and treasury yield, which is usually a very large number.
Take that premise and run that scenario over in a deflationary collapse. You will realize gains, good ones considering every other asset class is suffering.
But not out of ink!
From the fire to the frying pan!
Off topic but Obamarsehole about to get royally fucked by Michelle (& not pleasurably)
http://radaronline.com/photos/barack-obama-michelle-obama-secrets-lies/p...
Exact same fucking thing with every QE cycle. QE start gets priced in, Equities rally and Bonds dump. QE end gets priced in, Bonds rally and Equities tank.
So for all the dealer hype about "who will buy all those Treasuries if the Fed ever starts to unwind it's balance sheet?". Now you know. It's the people who think +2% is better than -20%.
+1 that and (-20%) is better than (-50%)
Treasury has unlimited margin and firepower.They are not under the Volker Rule.Concerns about China and Russia withdrawing money they need is a drop in the bucket.
This kind of looks like the FED trading desk needing funds to buy all those Treasuries getting dumped by China...possibility?
No one wants to discuss the “elephant in the room”- the underlying reasons why the stock market is experiencing so much “volatility”. The US economy (along with EU and Japan) is weak, characterized by high unemployment coupled with anemic job growth (> 90% of new “jobs” are temp positions- read low pay no benefits and no job security) and increasing deficits. Everywhere one looks, we see another gimmick to “sustain” the economy- insolvent backs being kept afloat with $ trillions from taxpayers (QE), auto sales propped up with sub-prime auto loans, while the stock market has been kept up with stock buy-backs by large corporations (reduces the number of outstanding shares driving prices higher) using ultra cheap money supplied by the FED (read US taxpayers). Now these same corporations are loaded up with more debt and stock which is declining in value. While these financial gimmicks work for a while, one cannot indefinitely continue flooding markets with cheap money, primarily used to fuel new financial bubbles. This is what is causing turbulence in the stock market. Those individual investors lucky enough to have money in stocks/mutual funds are scared of losing their savings and thus, unloading their stock and moving these funds into more stable investments, such as T bills. These net out-flows from equity markets are preventing the stock market from any sustained rally. I am shorting the Dow, SP and NASDAQ.
No, no... pretty sure everyone here discusses all of this...
on the other hand wsj headline reads "Investors on Stock-Market Swoon: What, Me Worry?" ... don;t have subscription so can't read the article but it seem to be saying exact opposite to baml.
whatever goldman tells you, bet on the opposite.