TrimTabs Says "Insatiable" ETF Buying Is Unlike It Has Anything Ever Seen, Issues A Warning

Tyler Durden's picture

On Fruday, while confirming that the meme of "Fake News" has officially gone too far, Goldman Sachs slammed the talk of a Great Rotation from bonds into stocks (yes, calling it fake news), and writing that "the political rotation occurring in Washington, D.C. will not be mirrored in financial portfolios: despite the sharp fall in bond values during the past six months and the prospect of further losses in 2017, Goldman expects minimal asset rotation away from debt and into equities for two reasons. i) Many categories of investors are restricted from allocating assets away from bonds; ii) Investors such as pension funds and households that have latitude to shift assets have debt allocations that are currently at the lowest level in 30 years. Mutual funds may see a migration of assets from bonds to stocks, but the pace and magnitude of any rotation will be limited."

For now, however, this particular piece of "fake news" appears all too real, at least as shown in a dramatic reversal in fund flows since the election.

Case in point: last week, TrimTabs Investment Research reported that U.S. equity exchange-traded funds issued a record $59.9 billion in December, easily surpassing the previous record of $50.7 billion in November.

“Investor appetite for U.S. equities is seemingly insatiable,” said David Santschi, chief executive officer of TrimTabs.  “U.S. equity ETFs have had inflows on all but six trading days since the U.S. presidential election, and the buying volume has been by far the strongest we’ve ever seen.”

In its note, TrimTabs explained that the inflow of $110.6 billion into U.S. equity ETFs in November and December combined is equal to a stunning 7.2% of these funds’ assets.  

TrimTabs also pointed out that last year’s fund flows reveal an overwhelming preference for passive U.S. equity products. U.S. equity mutual funds, most of which are actively managed, lost $233 billion in 2016, their third consecutive annual outflow.  U.S. equity ETFs, almost all of which are passively managed, issued $169 billion, their seventh consecutive annual inflow.

This was confirmed by BofA data over the weekend, which noted that of the $5.5 billion in global equity inflows in the first week of the year, $9.3 billion was to ETFs, while active managed funds saw another $3.7 billion in outflows. Still, as the previously noted chart from EPFR showed, the amount of capital allocation of US equities is simply stunning.

 

So while the record inflows into US stocks continues, bets against Treasuries keep hitting new all time highs. According to Deutsche Bank, speculators maintained their last week’s trend and added another $15.1 billion – in ten-year cash equivalents – to their net shorts in Treasury futures to $91.7 billion, a new record high since at least 2009. FV and TY net spec shorts marked new record highs of 411K (+74K) contracts and 345K (+4K) contracts, respectively. Specs also sold 17K contracts in TU and over 11K contracts in the two bond futures, in each. In addition, they increased net shorts in Eurodollar futures by 210K contracts to -2,116K contracts.

The unprecedented short bias in the Treasury market is shown in the charts below:

At some point these record short bets across the Treasury complex will reverse, leading to a violent short squeeze-driven rally, although - as always - the question is "when"?

Which takes us back to the equity flows and a warning by CEO Santschi, who said that “fund flows tend to be a good shorter-term contrary indicator, so the post-election buying spree bodes poorly for U.S. equities" and added that “selling that had been postponed late last year in anticipation of lower tax rates this year could put downward pressure on the market.”

For now the only pressure the market is facing is whether Friday's approach of Dow 20,000 to within less than a point may have signalled the top, or is just the start of the next move higher, which as even Goldman admits, would push the market even higher above the current level of 20.3x forward operating earnings.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
xythras's picture

They buy those like they're on drugs or something. One of these definitely:

http://dailywesterner.com/the-8-most-dangerous-medicines-on-earth-are-yo...

JRobby's picture

Why? Why post asinine crap?

JRobby's picture

One would almost think Goldman got "caught" holding too large of a bond position?

But you never know with liars. Pile on their misfortune?  Or it's a ruse?

Rotation is surely continuing. $USD continued rise is shorter term.

Bam_Man's picture

Talk about a "crowded trade"....

ebworthen's picture

I guess losing 60% in 2008-2009 wasn't enough to educate the retail crowd.

Hour long infomercial on the T.V.'s today for "online trading academy".

"Put it all on 30-1 for double-six's, I feel lucky!"

King Tut's picture

The slaughter will make 2008 look like child's play

SoilMyselfRotten's picture

The slaughter will make 2008 look like child's play

 

Leave Podesta outta this!

booboo's picture

No shit, unfortunately there won't be many safe assets left to sweep up, I guess LMT and KRFT? Guns and butter

Md4's picture

Indeed.

1929.

Get away from the cities...

GooseShtepping Moron's picture

"Unlike it has anything ever seen"?

Could I prevail upon the editors of Zero Hedge to please fix the headline? It is kind of jarring to the mind to read it that way.

Hongcha's picture

Yes, the translation from Cyrillic was a little hurried...

yogibear's picture

Wake me up when it's Average PE is 50x earnings.

Otherwise, everyone keeps enjoying the record highs being broken every few days to weeks.

Climbing the wall of worry.

Mon T's picture

You know we say that laughingly but it could happen.  But that would just lead to an even more desperate sell off when it happens.

swampmanlives's picture

P/E is relative...Even so, this is a new era where EM populations are expected to be spending more, and the era of big data where businesses can make money off how many shits you take a day. Expectations are going to be higher...

Sizzurp's picture

When all the ZH comments are bullish, head for the hills.

Mon T's picture

There is probably some truth to that. 

HokumYTrader's picture

It is the blowtation trade

Mon T's picture

I was trying to stick up for you on the other conversation with the SW fans.  But seriously, if all you post is pornographic posts, all I can do is to suggest seeking some psychiatric help. 

LowerSlowerDelaware_LSD's picture

LOL!  Mon T is one of the SchlongWave spam accounts.  You can stop the bullshit, Mon T, trying to convince people that you aren't. 

Mon T  - ZH member 2 weeks 5 days.  Oddly, right when SchlongWave was signing up all of their spam accounts.

RonnieM's picture

What is Fruday?

buzzsaw99's picture

pick your meme:

<-- one does not simply sell gold and buy equities at the ath

<-- one does not simply sell us treasurys and buy equities at the ath

FreeShitter's picture

 The satanic banks are going to add another 10T (usury) during tumps admin to keep the shit floating on the surface. Nevermind the middle class, its going to be a planned two tier society once this toilet is finally flushed.

wisehiney's picture

Be right and sit tight.

Get paid to wait.

erk's picture

ETFs = fake gold

The are just database entries, not real things.

You try withdrawing your gold from them.

Try telling you spouse that you invested your life's savings in a database entry, see how well that goes over.

paint it red call it hell's picture

The question has occurred to me, what happens if a long ETF crashes, can the manager actually keep the ETF price in sync with the discharging of stock positions????

What if the ETF goes goes NO BID the decline outpaces stock liquidations??

Not something I would consider but what would be the ramifications of shorting a long ETF in a panicked market liquidation.

Mon T's picture

I am not saying it could not happen. But that is a big "what if" and is really irrelevant.  Fun to discuss though.

Bunga Bunga's picture

Looks like the central banks started buying.

BlussMann's picture

Stupid Bitch has no sense of humor - the  old "dish it out but can't take it".

Uncle Sugar's picture

What does Mr Gartman say?

Father ¢hristmas's picture

Whenever the muppets catch on to the algos and start puking, the Plunge Protection Team puts on its gold-plated kippas in preparation for a trip to the circuit breakers.

Then the muppets think the coast is clear and...

New all-time highs!

amadeus39's picture

For the same reason "news" must be reported. How does one fill the space and time required to keep persons in those fields employed.

 

cheech_wizard's picture

Lemmings was once a really cool game originally developed by DMA Design and first published by Psygnosis for the Amiga, Atari ST and PC in 1991.

Standard Disclaimer: They still went "splat" if you didn't manage to save the little critters.

amadeus39's picture

Jobs. Need to fill time and space.

 

Cluster_Frak's picture

Markets looks like a near term correction is due. I sold all of my dow position last week. I am ready for a 2000 point correction. 

wholy1's picture

Ah, the PAPER [origami] "bird[s] in the [hologram] bush".  "Easy come, easy [and . . . 'poof'] GO[ne]".

Dragon HAwk's picture

Anybody will buy your shit while it's going up..

  it's that fire sale stuff in an Empty room.. that makes you Pause.

razorthin's picture

Fuck TrimTabs, those diet pill charlatans.  They are pissed that more of us plebes have figured out how to trade 3X ETFs to beat their sorry ass (to assume we are buying and holding is foolish).  It is the only way I can hope to make up for 2008-09, and I've still a long way to go.  Now, I've just assured that they will all be outlawed!

McDuff71's picture

...fake news; fake markets; fake governments; fake societies - it's all freaking fake...so fake'n tired of all this fakery!!

McDuff71's picture

...fake news; fake markets; fake governments; fake societies - it's all freaking fake...so fake'n tired of all this fakery!!