"Worst Case" Confirmed: Biggest Weekly Equity Fund Outflow In History

If it seems like it was just a few days ago  that we reported of the biggest ever inflow into equities, it's because that's precisely when it happened. It was then that according to BofA CIO Michael Hartnett, we observed a "non-stop euphoria cabaret" in which markets saw a record $33.2bn inflow to equity funds, record $12.2bn inflow to active funds, $1.5bn into gold (50-week high), as well as record inflows to tech & TIPS.

Incidentally, that was the day the S&P hit its all time high, and more importantly, the day BofA also said that its euphoria and panic-buying driven "sell signal" was just triggered for the first time in 5 years, and predicted a 12% selloff in the next three months.

In retrospect, it took just two weeks because that post marked the peak of the market, and it has been non-stop selling since.

But much more troubling than the selling, is the composition: after all, as we showed earlier, the "worst case scenario" according to both JPMorgan and Morgan Stanley is if the liquidation panic was not just systematic funds and various quants puking as a result of the surge in the VIX, but if ordinary retail investors had also joined in: that would be a nightmare outcome for the bulls, as it would mean that the sharp but concentrated relentless selloff, had spread to the broader investing world, and institutions would have no choice but to join.

Specifically, this is what JPM said over the weekend when observing the recent record fund inflows:

If these equity ETF flows start reversing, not only would the equity market retrench, but the resultant rise in bond-equity correlation would likely induce de-risking by risk parity funds and balanced mutual funds, magnifying the eventual equity market sell-off.

And then there was Morgan Stanley:

Today’s moves lower are likely not being driven by systematic supply – this appears to be more discretionary selling. Systematic supply from vol target strategies is largely out of the way now, while consensus trades are getting hit:  NDX is underperforming SPX, momentum is down 1%, and the Passive Factor is up, indicating actively held names are underperforming names better held by passive funds.

Well, we now have confirmation.

According to the just released EPFR weekly fund flow data, what was just two weeks ago a record equity inflow has become a record equity outflow, as the 10% drop in the US stock market has officially launched a selling panic.

As Citi writes tonight, "in the week of 2/7/2018, bond funds had an inflow of US$4.0bn and equity funds lost US$30.6bn to outflows. This was the largest outflow on record from equity funds, which just had their record high inflow of US$33.2bn only two weeks ago. The largest outflow had come from US funds which saw US$32.9bn of outflow. "

And charted from BofA:

Stated simply, this means that one no longer needs the VIX ETN, CTAs or risk pars to launch a liquidation panic: one has already begun, and retail is panicking, desperate to get out of stocks.

Which means that a full on bear market is now in the hands of just two players: institutions, and corporations. In other words, if hedge and mutual funds dont step up, and if companies don't unleash a buyback tsunami, it's about to turn very ugly.

Comments

junction Thu, 02/08/2018 - 21:51 Permalink

The real world - 

Reposted without permission. From WSJ:

Stephen J:

Lines? What kind of idiot wrote this nonsense?

[Unemployment Lines Are Really, Really Short. Surprisingly few people are filing jobless claims - https://blogs.wsj.com/moneybeat/2018/02/08/unemployment-lines-are-reall…]

There are MILLIONS of over-50 workers out of work, unemployment long run out, with zero income, surviving off of whatever savings and early 401k withdrawals can provide. I've lost my home, everything I've worked for, and have spent more than a year applying to jobs. Never have I seen the market so prejudiced against over 50 professionals. 

We even have job training facebook groups, just to share how to get around the technology that wipes 97% of our applications out of company HR systems. Ageism is real, it is pervasive, and as we've seen with Facebook job ads, it's standard practice.

More than 500 jobs applied to so far that I qualify for. 6 interviews, no job offers. More than 40 years of successful sales and sales management across multiple industries. 

So stuff your "no lines", there's no place to line up for anything other than minimum wage gigs, and companies refuse to even consider people of our age for those jobs. 

 

pods Anonymous (not verified) Fri, 02/09/2018 - 07:47 Permalink

As said further down thread, we are having a collective "Falling Down" moment.
Many are sick and tired of being told how great things are while we watch the water level rise. A man can only take so much before he breaks. I can see it all around, and my area is actually doing pretty well. Depressions are depressing.
pods

In reply to by Anonymous (not verified)

OverTheHedge Anonymous (not verified) Fri, 02/09/2018 - 00:04 Permalink

You are now in the position where you can go anywhere, do anything, be anyone you want to be. If this frightens you, because you no longer have everyone telling you what to do, and when to do it, then embrace the fear, and liberate yourself from the system.

Where would it be fun to live? Not sure? then travel. The USA is not the only country in the world. Try volunteering (https://www.twoscotsabroad.com/workaway-and-helpx/), sell your skills, or exchange them for room and board, anywhere in the world. Yes, you can taken the wife and kids too.

Buy a plot of land and build your own house (building codes and laws are for wimps - what the government doesn't know about can't hurt it). Expand your horizons, laugh, have fun. Work is for wimps. The reason you are alive is to have fun. The reason to have a job is to support the avaricious, marauding government. Which sounds like a more sensible lifestyle?

Think outside the box - a job is just a box to constrain you. 

I used to work. I used to wear a suit, and claim to be a professional. I now work full, eight hour days, for no more than 20 days a year (and that includes a 2 hour lunch with wine). The rest of the year is just pottering, and going to the beach. Yesterday I sat in the sun, with all my neighbours, eating barbecued pig, because I now live in a country who believe that mid-February is the perfect time for an all-you-can-eat al fresco meat-fest, with extra wine, because why not? Who cares if the economy has tanked, there is no work, life is grim? Put another sausage on the bbq and drink until you are forced to do the stagger around in a circle, holding your mates up dance.

You could kill yourself, but you might miss out on all the fun you could be having, instead of working....

In reply to by Anonymous (not verified)

new game OverTheHedge Fri, 02/09/2018 - 06:33 Permalink

i have done as you say. eventually for me anyways, there comes the need for a new purpose or adventure.

just the way i'm wired, first off is resist authority, then do the right stuff, no debt and walla-tons of freedom...

right now i'm doing 1099 driving, and set my days working. about to come to an end as this summer is downsizing, get rid of shit year. planning to be mobile if need be. the shit is creeping downhill and i fear i might eventually be in it's path.. but, i still reserve the right to make mistakes and learn, lol...

 

In reply to by OverTheHedge

HRH of Aquitaine 2.0 Anonymous (not verified) Thu, 02/08/2018 - 22:16 Permalink

If you can write code, move! You sound smart, except for living in Seattle. I hear you, I live in the liberal NW, myself. For now. I consider it a temporary setback. Why not freelance? Create apps (FYI, John B. Wells needs his crappy app updated for Caravan-to-Midnight). I am not sure WTF a software engineer does, but certainly you could find work in Spokane or Boise or Missoula (I would think). Fuck, if you have to, move to fucking Budapest!

The fact that you are contemplating suicide speaks to deeper issues and I am not a fucking shrink. But don't waste your money on one, most of them are crazy too.

In reply to by Anonymous (not verified)

mendigo Anonymous (not verified) Thu, 02/08/2018 - 22:41 Permalink

Your job does not define you.

Time to have some fun.

Ive managed to avoid it so far but i think if all the unemployed and underemployed would organize they would be quite influential. They count on you to be depressed and sulk alone.

I had my home foreclosed. Tried to help them. Now they are after me for 90k in legal fees.

In reply to by Anonymous (not verified)

Utopia Planitia Anonymous (not verified) Thu, 02/08/2018 - 22:58 Permalink

Seattle has become the very sh%th0le that was recently in the news.  Do yourself a Big Favor and go find a job on the Eastside.  And move over there if you are living in Sh%th0le Central.

I have been offered lots of money to work for various well-known entities in Sh%th0le numerous times over the years and I have steadfastly refused.  There are plenty of excellent opportunities on the Eastside.  Especially if you are like me and enjoy the excitement of working for a startup. For me that is the very best. (I could give a crap if they go bust, there is another one right around the corner!)

The Eastside has been infected somewhat by the SJW garbage of Sh%th0le, but it is not nearly as oppressive.  Many places have little to no SJW influence.  Again you will do much better avoiding SJW by going to a startup or small company.

If your life's goal is to work for some large monstrosity that you think will take care of you once you retire then there probably is no hope for you. Cut the cord and go be a Man.

In reply to by Anonymous (not verified)

HRH of Aquitaine 2.0 Anonymous (not verified) Fri, 02/09/2018 - 00:14 Permalink

I am a chick. My first business, after graduating from the UW with a degree in Philosophy, was a residential housecleaning business. I gave myself two months before I started handing out applications. I got a state business license, business insurance, a bond, and took out an advert in the local paper (this was in 1997, before Craigslist). I was fully booked in two months.

Where was my little business? In Burlington, WA, a little town near Mt. Vernon. I did fine. I showed up on time, was dressed for the job with shorts, clean tennis shoes, and a t-shirt, and had all of my documents copied and ready to hand out (driver's license, business license, and a copy of my bond / insurance). I also handed out a copy of Martha Stewart's article, "How to Hire a Housekeeper." No one didn't hire me. (Yes, I know I used a double negative so fuck off grammar nazis).

The problem was I had to learn how to screen prospective clients. Like the people that wanted me to clean windows with vinegar and newspaper (your hands end up covered with ink). Or the teacher that thought I could clean a trailer with Lime-away and CLR (the only solution was to burn the fucking thing to the ground). Those were basic life lessons for me. It taught me to stop being afraid. I learned that when I was doing a walkthrough of a potential client's home, not only were they screening me, I was screening them. And setting down my rules (they had to have paper towels and Windex, no fucking newspaper and vinegar to clean glass and windows). I did use vinegar for wood floors, that is different.

I have been self employed ever since and it has been nearly 20 years. I like reselling. I live in the burbs and it is a goldmine.

In reply to by Anonymous (not verified)

ebworthen junction Thu, 02/08/2018 - 21:59 Permalink

Yup, the "forgotten man".

I spent three years there, luckily got hired about 3 years ago but at 29 hours/week and CrapCare.

I'm certain people in MSM, Treasury, FED, and .gov think there will be legions of retirees with fat 401K's.

Nope!  Had to cash mine out to survive, after I sold the house like Stepehn J. 

15 Years of saving and paying down the mortgage down the Ponzi drain.

If TPTB don't think this will become a Bastille day event they're dopes.

In reply to by junction

amadeus39 divingengineer Fri, 02/09/2018 - 07:01 Permalink

Plumbers, electricians and carpenters aren't complaining. They have real knowledge, real skills and provide real service. They are valuable members of society. Too many others are just parasites. Sales people are good examples of parasites. They create no real value, and, in fact, through deception and outright lying, are detrimental to society. Advertising and sales are not productive pursuits.

  

In reply to by divingengineer

HRH of Aquitaine 2.0 junction Thu, 02/08/2018 - 22:26 Permalink

You have to make your own job. Face reality. I don't know what skills you have, or what your interests are, but you need to figure that the fuck out. Craigslist Hunter, a channel on Utube, has a crash course (free) on how to resell on EBay.

Dude, I lost my home back in 2009. It sucked. I was able to recover and bought a modest home in 2014. The price hasn't gone up that much but I was able to refi down to a 30-year fixed @ 2.875%. I couldn't rent a crappy apartment for the cost of my current PITI ($1020). I always overpay and if I had to could cut back a few hundred a month and still be able to make my note. (Do I have granite counters? No. Do I love my garden tub in the bathroom? No. Do I like my crappy builders carpet that is still in the living room / dining area? No. But the neighborhood is quiet, the taxes are not insane. It is safe enough that I don't have any security system other than a Mossberg in my bedroom.)

I have some young neighbor's, like me, ten years ago. Wife is a shopaholic. Shopping is a sport for her. I won't be surprised when I see the For Sale sign posted or the Foreclosure notice on the front door. I will have moved on as I plan on renting out my house and living in an RV (I hate my neighborhood, it is boring as fuck, and I have places to see and things to do).

Not sure if you have sold everything you can on Craigslist, but now is probably a good time to downsize your stuff. Fuck the corporate world. Be your own boss. The only way to live as a freeman.

In reply to by junction

HRH of Aquitaine 2.0 Archive_file Fri, 02/09/2018 - 00:23 Permalink

Wow! LIving the dream! Holy cow, thank you so much!

My house is only 12 years old and it isn't so perfect that I would hate to rent it. I was going to use a local property management company that handles $100K a month. They charge 10%. That sounds fair to me so they can do the screening, background/credit checks, and all right legal forms for my area. I hate paperwork.

In reply to by Archive_file