Mar 17 2017

Another Week Of Huge Outflows From Active Managers, Huger Inflows To ETFs

Re-Posted from ZERO HEDGE Mar 17, 2017 9:53 AM

The highly compensated world of active fund managers continued to disintegrate before their eyes in the last week, when according to EPFR data even as overall cash continued to flood into equities for a total of $14.5 billion, the 11th consecutive week of inflows, this was entirely due to allocations to ETFs, which saw $19.7 billion in inflows, the highest weekly amount YTD, offset by $5.1 billion in outflows from actively managed funds.

Looking at what its private clients are doing, BofA notes that the top 3 ETF inflows past 4 weeks = Financials, Bank Loans, MLPs (page 3); Furthermore, despite all the talk of cash on the sidelines, private client asset allocation has hit 60% for stocks, just shy of all time highs, offset by bonds 23%, cash 11%.

At the current rate of “great rotation” from active to passive managers, the inflection point at which the two asset classes meet will hit far sooner than the previous forecast.

And speaking of great rotations, another notable feature from last week’s fund flow data was the bond outflows in 12 weeks ($0.1bn), led by largest HY bond redemptions more than 2 years ($5.7bn); contrast with strong inflows equities ($14.5bn this week). According to BofA, YTD equity inflows of $97 billion now substantially surpass bond inflows of $79bn. While it will come as no surprise, junk bond spreads and the eerie calm in the stock market continue to be highly correlated.

Some more fund flow details:

Fixed Income Flows

Largest HY bond fund outflows in more than 2 years ($5.7bn)
12 straight weeks of IG bond inflows ($3.1bn)
7 straight weeks of inflows to EM debt funds ($0.7bn)
18 straight weeks of inflows to bank loan funds ($0.9bn)
14 straight weeks of inflows to TIPS funds ($0.2bn)
First inflows to govt/tsy funds in 7 weeks ($0.1bn)

Equity Flows

EM: largest outflow in 11 weeks ($1bn)
US: largest inflow in 13 weeks ($12bn)
Japan: 10 straight weeks of inflows ($1.2bn)
Europe: modest $0.2bn outflow

By sector: largest inflows to US value funds in 16 weeks ($2.8bn) vs $0.3bn outflows from US growth funds; inflows to materials ($0.4bn, 9 of last 10 weeks), utilities ($0.4bn), tech ($0.3bn) and energy ($0.2bn); outflows from financials ($0.1bn), real estate ($1bn, largest in 11 weeks), consumer ($0.1bn), and healthcare ($0.2bn).

* * *

Finally, regarding the timing of BofA’ “Great Fall” market forecast, we are still in the “not yet” phase:

Fed & Humpty-Dumpty: “great fall” in risk assets, “great rise” in vol likely flagged by higher wage inflation (AHE>3%), hawkish Fed (yield curve bear flattens), EPS growth peak, financial “stress” via HY bond spreads (v correlated with VIX); spreads >400bps this week, but need to rise further 50-75bps to elicit cross-asset vo

Mar 17 2017

“We’ll Blow Your Mind”: Turkey Threatens Europe With “15,000 Refugees Per Month”

by Tyler Durden

Earlier this week, at the peak of the latest diplomatic scandal between Turkey and the Netherlands, Ankara’s deputy prime minister Numan Kurtulmus announced not only a round of sanctions aimed at the Dutch but exclaimed that since “Europe has not kept its promises on the migrant deal, for us that agreement has ended” to which we commented that “one year after it collected $3 billion for the migrant deal, Turkey has just voided the agreement, and the next step would be that Turkey is about to flood Europe with refugees currently held inside Turkish borders. And since by some estimates Turkey currently harbors over 2 million potential migrants, Europe’s refugee situation is about to get far worse, and as a corollary, support for anti-immigrant political organizations across the continent is about to take another step function higher.”

Today, Turkey put a tangible quantity to the warning, and as Turkey’s Hurriyet Daily News reports, Turkey’s Interior Minister Suleyman Soylu threatened to “blow the mind” of Europe by sending 15,000 refugees a month to EU territory, in an intensifying dispute with the bloc.The threat is also a confirmation that for Turkey, refugees are merely a form of “weaponized” leverage in the escalating war of words between the country and Europe.

As a reminder, one year ago, on March 18, 2016, Ankara and Brussels signed a landmark deal that has substantially lessened the flow of migrants from Turkey to Europe. But the accord is now hanging in the balance due to the diplomatic crisis over the blocking of Turkish ministers from holding rallies in Europe.

“If you want, we could open the way for 15,000 refugees that we don’t send each month and blow the mind” of Europe, Soylu said in a speech late Thursday, quoted by the Anadolu news agency. Soylu, a hardliner considered close to Erdogan, accused The Hague and Berlin of involvement in June 2013 anti-Erdogan protests, October 2014 pro-Kurdish riots and the July 15, 2016 failed coup attempt.

Turkish Interior Minister Süleyman Soylu

Foreign Minister Mevlut Cavusoglu has already indicated that Turkey could rip up the deal and said Turkey was no longer readmitting migrants who crossed into Greece. The crisis was sparked when the Netherlands and Germany refused to allow Turkish ministers to campaign in a April 16 referendum on expanding President Recep Tayyip Erdogan’s powers, prompting the Turkish strongman to compare them with Nazi Germany.

“They are trying to complete the work that they did not finish. Who is doing this work? It’s the Netherlands and Germany,” Soylu said. He accused Europe of failing to help Turkey enter the bloc and of not helping with its fight against terror.

“Europe, do you have that kind of courage…? Let us remind you that you cannot play games in this region and ignore Turkey,” he added.

Meanwhile, the European Union refuses to acknowledge the leverage Turkey has, and said it expects Turkey to continue implementing the deal, which drastically cut the numbers making the dangerous passage across the Aegean Sea. A key pillar of the deal were pledges by Turkey to boost border security and break people-smuggling networks, moves that analysts say slowed the migrant flow to a trickle.

Erdogan in November last year already threatened Europe with opening the frontiers of Turkey, which borders EU members Greece and Bulgaria.

Recall that the mass influx of migrants to Europe in 2015 was seen as boosting the support of the far-right on the continent. As a result of the over 1 million refugees who flooded Germany that year, Angela Merkel’s approval rating tumbled at the end of 2015 to the lowest in years, as migrants flooded Germany…

… and boosted support for the anti-immigrant AfD, resulting in a series of high profile local election losses for Merkel’s CDU party, as well as a surge in terrorist attacks on German soil perpetrated by radicalized Muslim refugees.

Should Turkey execute on its threat, it is likely that the anti-immigrant, populist wave that has swept Europe in 2015 and 2016, and which has subsided modestly in the subsequent period, will find a second, and very dangerous to the European establishment, wind.