Everyone Is Still Selling: Biggest Monthly Outflow From Global Stocks Since US Downgrade
By Tyler Durden
One recurring question over the past few weeks has been “who is buying” stocks in a world in which not only the smart money, but everyone else too is selling. The latest Lipper data will not provide the answer because as BofA reports, in the latest week there was another $7.4bn in outflows (the 5th straight week) driven by $4.8bn in mutual fund outflows and $2.7bn ETF outflows, leading to a $44bn equity exodus past 5 weeks, which as Michael Hartnett points out is the “largest redemption period since Aug’11”, or when the US downgrade sent US stocks into a bear market tailspin.
Digging into equity flows we find the following:
- Europe: $3.9bn outflows (14 straight weeks = longest streak since Feb’08)
- EM: $2.3bn outflows (largest in 16 weeks)
- Japan: ekes out $88mn inflows (ends 8 straight weeks of outflows)
- US: $2.2bn outflows (outflows in 4 of past 5 weeks)
By sector, 12 straight weeks of REITs inflows ($0.8bn); 4 straight weeks of tech outflows ($0.2bn); first outflows from financials in 4 weeks ($0.4bn)
Some other fund flow findings:
- Bonds: $3.5bn inflows (inflows in 10 of past 11 weeks)
- Precious metals: $1.0bn inflows (inflows in 17 of past 18 weeks)
- Money-markets: $10.9bn inflows (largest in 13 weeks)
Michael Hartnett summarizes the longer term flow trends: bonds & gold over stocks, IG over HY, TIPS & munis over Treasuries; Big $2.3bn EM equity outflow (largest in 16 weeks); accelerating outflows from Europe; 4th consecutive week of redemptions from tech funds, 12th week of inflows to REITs; Risk-off $10.9bn inflows to money market fund.
Trend from active to passive continues apace ($1.2tn to equity ETFs, $0.9tn from mutual funds since 2007 – Chart 1)
BofAML private client allocations to bond & equity ETF’s up from 3% of AUM in 2009 to 9% today
In conclusion, here is Michael Hartnett’s take on markets whilch “look” better than they “feel”
YTD returns: stocks 1%, bonds 7%, commodities 11%, US dollar -5%
YTD winners: oil, gold, Brazil, Russia, Canada (weak $ plays) & JGBs (deflation play)
YTD losers: US dollar & Italian & Chinese banks (despite ECB & PBoC credit stimuli)
Trading ranges set & holding: SPX 1850-2100; GT5 1.2-1.8%, VIX 12-20, DXY 92-100
But cross-asset price action deflationary: JGB’s, German bunds, Amazon, US utilities, US staples all at all-time highs…while key cyclical indices struggling: SOX, TRAN, DAX, OMX, NKY
Best tactical bull catalyst = policy success = new highs in High Yield (H0A0, HW00) …rotation to stocks…best played via oversold Europe/China banks & US tech Best tactical bear catalyst = policy failure = global PMI’s <50 & -ve EPS growth follows ECB/PBoC credit & Fed “weak dollar” stimuli…best played via bonds & volatility as global yields plunge toward zero.
BofA’s summary: “We stay cautious: Positioning = “grind higher”; Policy & Profits = “summer of shocks”.
The Necessity of Human Action
By Sprott Money
The Necessity of Human Action
Written by Jeff Thomas (CLICK FOR ORIGINAL)
In 1987, Levon Helm, a former cotton farmer from Arkansas, sat brooding in his yard, trying to describe why his apparent success had turned to near-bankruptcy:
“Well, it’s hard to put your finger on. You get behind financially and once you get behind financially, you seem to get behind spiritually. And your luck turns against you.”
Levon’s perception of his situation is a common one. He had become quite successful, but had never learned to understand more about economics than, “If you got it, spend it.” As a result, throughout his life, he repeatedly found himself in monetary difficulties. He habitually lived in the moment and didn’t invest much time analyzing what his actions would need to be to assure a sound economic future. Unfortunately, his approach to his future is, to a great extent, the approach of the vast majority of people.
Let’s take his comments one sentence at a time:
“Well, it’s hard to put your finger on.”
In this comment, Levon begins by stating that he doesn’t really understand what’s happened to him. As someone who hasn’t given much thought into the subject of economic study, his personal outcome is a mystery to him – impossible to fathom.
“You get behind financially and once you get behind financially, you seem to get behind spiritually.”
He then relates a basic truth – that a bi-product of financial decline is a spiritual decline. Morals are often compromised in order to survive the financial debacle and, frequently, a sense of emptiness and failure takes over.
“Your luck turns against you.”
In this last statement, he disavows any personal responsibility for either his monetary problems or any human action that he might have taken that could have corrected the situation, since the elusive and incomprehensible “bad luck” has taken control – a force that he believed he could not have overcome.
And so, Levon led a life of repeated success and loss, never learning that, from the outset, the course of his economic life was of his own making. Had he chosen to understand and anticipate economic events and adjust for them, he could have taken charge of his financial life. Instead, he became a casualty of those events.
Unfortunately, his entire problem could be defined as a lack of human action.
Recently, I was asked the question, “Once we know history, do we have any power to change it?” My answer is that, in a vast economic world, with hundreds of millions of players, some of whom hold exceedingly high levels of power, the odds of changing that history in any meaningful way is very slight. It can be likened to …read more
Source: The Necessity of Human Action
Are Chip Readers A ‘Clever’ Way For Visa And MasterCard To Increase Revenue?
By Tyler Durden
Ever since merchants changed out payment terminals last October in order to comply with new rules and accept chip cards, merchants are seeing expenses relating to debit transaction fees increasing, in some cases as much as 20%. The reason stems from transaction terminals being set up to steer transactions in such a way that will generate the most revenue for the data processing company.
As the Chicago Tribune explains
In the past year, many merchants changed their payment terminals so consumers could use the newfangled cards. The problem is that about two-thirds of the new readers at smaller retailers aren't set up right, according to Richard Crone, chief executive officer of the consulting firm. Their software tends to favor debit-payment networks from Visa and MasterCard Inc. over other systems, which can be cheaper for merchants on certain transactions, he said.
For example, when customers insert a chip-based debit card into a new terminal, they may be offered only Visa's network as the choice. Or they may see two options: “Visa debit” or “U.S. debit.” Since most consumers don't know what “U.S. debit” is — it's actually is a link to smaller networks like NYCE — they usually pick Visa.
Instead of being prompted to enter their PINs, shoppers are asked for a signature, and the merchant is charged from 1 percent to 2 percent per transaction when a card is issued by a smaller bank. About a third of all debit cards come from financial institutions with less than $10 billion in assets, whose fees aren't capped under an amendment to the U.S. Dodd-Frank Act.
By contrast, most PIN-based debit-card transactions, such as those over the NYCE network, have average fees of about 25 cents — and slightly more for cards issued by smaller banks. Visa and MasterCard have PIN-based debit networks too, but many of the new terminals are set up to favor their more expensive signature systems.
Such an expense can significantly impact small businesses who can't afford to absorb such losses. Not only are small businesses impacted, but so are large retailers such as Wal-Mart, who is actually suing Visa for allowing customers to verify chip-enabled debit card transactions with a signature instead of a PIN, thus making the transaction fees much larger.
The extra fees will add up to as much as $7,000 a year, Fillers said, a significant loss for a small business like his. More than 1 million retail locations in the U.S. can take chip cards, and more than two-thirds are small to midsize businesses, according to Visa.
Even the world's biggest retailer is affected by migration to chip cards. Wal-Mart filed a heavily redacted complaint in New York state court on Tuesday claiming that Visa USA wants it to verify transactions made via certain debit cards with signatures rather than the chip-and-PIN protocol, which is more secure and has lower interchange fees.
“Visa nevertheless has demanded that we allow fraud-prone signature verification for debit transactions in our U.S. stores because Visa stands …read more
Source: Are Chip Readers A ‘Clever’ Way For Visa And MasterCard To Increase Revenue?
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First Canada, Now Ireland Offers "Hug & A Pint" To Americans Fleeing Trumptopia
By Tyler Durden
Submitted by Claire Bernish via TheAntiMedia.org,
A radio DJ from Canada’s Cape Breton Island first introduced the idea of havens for Americans seeking escape from a Donald Trump presidency – but now Ireland is joining in with its own offer for possible future expats.
Inishturk, a remote Irish Isle situated nine miles off County Mayo, has decided to court the potentially disillusioned segment of the United States populace with an open-armed offer to provide a safe place to live if the idea of a Trump presidency is too much to bear.
In the midst of a problematic population decline, Inishturk wants to ensure a thriving future, which community leaders feel could be accomplished by becoming a refuge for those escaping the tumultuous U.S. political system.
“I’ve heard there are quite a few people in America looking to move to Ireland and other countries if Donald Trump becomes president. I’d like them to know that we’d love to see them consider moving over here,” explained Mary Heanue, Inishturk’s development officer, as IrishCentral reported.
Inishturk has a vested interest in attracting new residents to become part of its now-tiny community.
“Our big concern is employment and trying to encourage families to move over here because the population is declining,” said Heanue.
“The island featured on an Irish TV documentary last year which gave us great publicity and a good few extra bookings. But we ended up having a terrible summer and a lot of people canceled.”
An influx of people would be more than welcome considering just 58 permanent residents now reside on the remote Irish outpost — and with only three students attending the island’s primary school, phenomenal student-teacher ratios could easily be a draw.
“They’d be given a huge welcome and they’d find this is a fantastic place to live and to bring up children,” Heanue continued.
“Their kids would probably get the best education anywhere in the country too, because the teacher to pupil ratio is nearly one-on-one.”
Inishturk isn’t all rainbows, blue skies, and unicorns, however. As Heanue cautioned, “Although winters can be hard and it’s the kind of life that wouldn’t necessarily suit everyone, they’d find it very peaceful here and they’d soon find out there’s nowhere as nice in the world on a summer’s day than here.”
Several Twitter users posted enticing pictures of the skies as seen from the Irish island, and IrishCentral published a “guide on moving to Ireland in case Donald Trump is elected,” detailing the steps necessary for obtaining visas or citizenship.
#sunset on #Inishturk from Cross beach #Louisburgh #Mayo #Galway #WildAtlanticWay #Irish #weather #sky pic.twitter.com/8olRqYeJpz
— killarybhoy (@killarybhoy) March 15, 2016
Looking out towards Inishturk tonight… good to be back in Mayo… pic.twitter.com/P6qO9wTuTs
— Seven Sunsets (@7_irishsunsets) March 13, 2016
It is worth noting Inishturk’s offer likely isn’t limited to Trump escapees – the island’s desire for new residents means it …read more
Source: First Canada, Now Ireland Offers "Hug & A Pint" To Americans Fleeing Trumptopia
Russia Completes Energy Bridge With Crimea, Warns Against Any Future Interference
By Tyler Durden
When Crimea's secession to Russia was accepted by Putin, the logical next phase of the process was to cut off Crimea's reliance on Ukraine for energy, and fully integrate it into Russia's supply network. That phase has now been completed, as the fourth and final line supplying electricity from mainland Russian to the Crimean peninsula has been completed according to RT…
The energy bridge connects the mainland with the peninsula with a series of undersea cables running across the Kerch Strait. The new line will provide Crimea with total power supply of 800 megawatts a day that aims to satisfy the peninsula's demand combined with its own capacity. The overall cost of the construction totaled 47.3 billion rubles ($720 million).
Crimea will have enough electricity to meet the holiday season, when tourists significantly boost the population and provide the peninsula with a major source of revenue, according to Russian Energy Minister Alexander Novak.
This will be a considerable relief following last November's disaster when local authorities had to declare a state of emergency after all four Ukrainian power lines providing electricity to the peninsula were blown up, leaving Crimea in total blackout.
Sevastopol Bay…
Russian President Vladmir Putin said, addressing workers and engineers from his Black Sea residence in Sochi, Russia….
Let me congratulate you all on the completion of this energy bridge linking Crimea to the rest of Russia.
The energy bridge across the Kerch Strait was a technically very difficult project and you used the very latest technologies in this work. The work itself proceeded at a truly rapid pace with the result that we have ended the energy blockade of Crimea in a very short time. I have no doubt that we would succeed in breaking through any kind of blockade, should anyone take it into their heads to test us.
I want to thank the engineers and the workers, everyone who took part in the project, for their dedicated labour and conscientious and highly responsible approach to the job. There is no need to tell you how important this task was for the country, and you have done an outstanding job of it.
* * *
A meeting on energy supplies to #Crimea: completing the construction of the energy bridge https://t.co/ziWvAT1a2u pic.twitter.com/oidzZlEGk2
— President of Russia (@KremlinRussia_E) May 11, 2016
* * *
The next phase to tie Crimea and Russia together will be a $3.2 billion project to build a road and rail bridge across the Kerch Strait. The 12 mile structure will be the longest of its kind in Europe, and is scheduled for completion at the end of 2019 according to Reuters.
While the complete absorption of Crimea into Russia continues, we once again remind everyone that along with Crimea, Russia inherited potentially significant offshore resources as well. The exploration of which is undoubtedly part of Putin's future plans once all of the infrastructure is complete.
Arizona Governor Ducey Vetoes Gold
by Keith Weiner
In my testimony in support of the gold legal tender bill this year, I discussed failing pension funds. Retirees who count on their pension checks are being told that their monthly check will be reduced by up to 60%. This is devastating to them, obviously. What isn’t obvious is the cause. In the news coverage of this, the angry pensioners are blaming the union, the fund manager, and Wall Street in general.
None of them point the finger where it needs to be pointed. The Fed has centrally planned our interest rate downwards, ever downwards, for 35 years. Now a 10-year bond pays a mere 1.7 percent interest. Pension funds are designed to invest and earn a real return on the money collected from workers’ paychecks. This breaks down when the interest rate collapses.
There is no cure for zero interest rates (and negative in Europe and Japan). The central banks have created a monster, a Frankenstein that is now ravaging the economy and especially those who depend on fixed income.
It is no longer possible to earn a yield on paper money, without taking undue risk of precisely the sort that retirement funds should not take.
The only antidote to zero yield on paper is a positive yield on gold.
I explained to the legislators that this bill would not fix the problem in itself. It is a necessary but not sufficient step.
I made a different argument to Governor Ducey. Most legislation creates winners and losers. Those who will be hurt by a new law of course lobby against it, and may become enemies of the governor for signing it. This bill created no losers. No one would be hurt by recognizing gold as money. It would have been good for the state, adding jobs, and even tax revenue.
Unpersuaded by either the plight of the pensioners or the prospect of business growth in Arizona, Ducey vetoed gold. This is his second time to shoot down gold.
I have just two points to make about this. One, let’s stop perpetuating the myth that Republicans—or even pro-business Republicans as Ducey brands himself—are for gold. This is a big reason cited by Democrats for why they are against gold.
Two, Governor Ducey knew he could get away with this veto because few people care. While our monetary system drowns under zero interest and runaway debt, people are worried about the Kardashians and the gender of Bruce-now-Caitlyn Jenner.
You had better start letting your government know that you want to start removing the roadblocks and start moving towards the only honest money: gold. No one knows how much time you have, but it is not that long.
Source: Arizona Governor Ducey Vetoes Gold
A Little Market Insight Into How The Game Is Played (Video)
By EconMatters
By EconMatters
Every Game involves learning the rules of the game in order to be successful, the financial markets are the ultimate 4 dimensional futuristic chess game. There are different levels operating within the financial markets, the Game within the Game if you will. The Power Players at the top of the Food Chain run the show all things being equal.
© EconMatters All Rights Reserved | Facebook | Twitter | YouTube | Email Digest | Kindle
Source: A Little Market Insight Into How The Game Is Played (Video)
Cuban: Trump’s candidacy is like Seinfeld
Mark Cuban said Hillary Clinton should tap a running mate who is “someone like me who would just throw bombs at Donald.” …read more
Source: Cuban: Trump’s candidacy is like Seinfeld
Apple pumps $1 billion into Uber’s China rival
Apple is plowing a whopping $1 billion into Uber’s big Chinese rival, Didi Chuxing, in a move that ups the stakes in the fierce battle between ride-hailing apps in the world’s most populous country.
…read more
Source: Apple pumps $1 billion into Uber’s China rival
OPEC Politics: Russian King, Iranian Crown Prince?
By Tyler Durden
Submitted by Eugen von Bohm-Bawek via Bawerk.net,
Another month, another OPEC meeting beckons for 2nd June. But unlike typical meetings on the Danube (let alone dust filled haze of Doha), the producer group might just have a new King in town. It comes in the form of Russia; the number one global producer that’s not even technically a member of the cartel. Confused? Don’t be. The argument is quite simple.
Unlike Doha where the outgoing Saudi Oil Minister, Ali Naimi was lining up a Saudi led deal to leave Iran outside the tent as the odd man out refusing to join the 17 country ‘freeze’, this time round, it’s very likely Russia will come back to the table with exactly the same deal, but one they’ve directly brokered with Iran, where the Islamic Republic is conveniently claiming they’ve already hit the magic 4mb/d production targets to bring a ‘freeze agreement’ back into play. Rest assured, if Russia and Iran are on the same page, everyone else will ‘sign on the line’ given their current fiscal difficulties where every petro-dollar counts for self-preservation purposes. That potentially leaves Saudi Arabia outside the ‘freezing tent’ as the latest renegade of the petro-state world – or worse still for Riyadh – signing up to a retro-engineered Russo-Iranian deal, where Saudi Arabia has conceded strategic leadership of the producer.
No matter how much Saudi screams and shouts their previous intransigence brought Iran to the table, this is no longer their deal to sell. If Putin goes in for the kill in Vienna, strategic control of the producer group has effectively passed to Moscow, at least on an interim basis. On all fronts, this is entirely up to the Kremlin how they want to spin things. Not only does a Russo-Iranian deal make sense for a ‘resurgent’ Moscow playing the OPEC ‘King’; giving Iran a geopolitical leg up to become the number one ‘cartel princeling’ makes sense for broader Russian geo-strategic interests. Iran remains the most vital co-ordinate on Mr. Putin’s post-Soviet map.
No doubt that will put a wry smile Mr. Naimi’s face given the Kingdom had its chance to remain the OPEC lynchpin in Doha, but opted to bump off the old man for internal power grabs instead. But we still need to be very careful to strip out what remain two totally separate debates here around OPEC political theatrics on the one hand vs. any actual market impact any so called freeze would have on the other. Unsurprisingly, we expect exactly the same Doha bluff to come through in Vienna, in what’s essentially a ‘license to pump’ agreement all round.
Kuwait will claim it can do 3.2mb/d; Iraq will keep pitching 4.8mb/d;
Venezuela will ‘hold firm’ at 2.6mb/d. All numbers grounded in political fantasies, not physical realities.
Most importantly, Iran’s probably not quite back at 4mb/d, which ironically reinforces why a June freeze agreement remains absolutely ‘no regrets’ for the Islamic Republic to game. Claim 4mb/d targets are hit; keep making incremental gains over the …read more
Source: OPEC Politics: Russian King, Iranian Crown Prince?
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