“Too Much Tech” – The Growing Peril Of Passive Investing

“Too much of a good thing…” – That’s the message that many passive investors are unknowingly dealing with as they approach the year-end.
In 2012, FANG Stocks (Facebook, Amazon, Netflix, and Google) accounted for less than 3% of the market cap of the S&P 500.
At the end of 2017, those four stocks now account for over 8% of the S&P’s market cap…
And, as WSJ reports, this is not limited to a small handful of stocks, it is worldwide – investors who loaded up on U. S. and Asian stock-index funds might be surprised to learn just what they own now: technology stocks – a lot of them.
Led by Apple Inc., Facebook Inc. and their peers, the weighing of technology stocks in the S&P 500 index has climbed to 23.8% as of Dec. 26, from 20.8% at the end of last year, according to S&P Dow Jones Indices.

This post was published at Zero Hedge on Thu, 12/28/2017 –.

Jim Kunstler: “You Can See Where This Has Been Going…”

Lately, fund flow data has all the credibility of a NYT presidential poll two days before the Trump defeats Hillary. On one hand, you have Lipper reporting that investors pulled $16.2bn from U. S.-based equity funds in the past week, the largest withdrawals since December 2016. The same Lipper also reported that taxable-bond mutual funds and ETFs recorded $1.2bn in outflows, with U. S.-based high-yield junk bond funds posting outflows of $922 million. On the other hand, you have EPFR which looking at the same data, and the same time interval, concluded that there was $8.7bn inflows into equities, of which total flows into the US amounted to $7.8bn, the largest in 26 weeks.
How does any of this make sense? We are not sure, although it may be that while Lipper ignores ETF flows, EPFR includes these. Indeed, when breaking down the latest flow data, which still does not foot with the Lipper numbers, Bank of America notes that the $8.7bn in equity inflows is the result of a $31.4bn in ETF inflows – the second largest on record – offset by $22.7bn in mutual fund outflows, the 4th largest on record.
When looking at this staggering divergence, BofA’s Michael Hartnett put it best:
Passive hubris, active humiliation: 2nd largest week of inflows ($31.4bn) ever into equity ETFs vs 4th largest week ever of outflows from equity mutual funds (Chart 1)

This post was published at Zero Hedge on Dec 15, 2017.

Bank Of America: “This Is The First Sign That A Bubble Has Arrived”

Lately, fund flow data has all the credibility of a NYT presidential poll two days before the Trump defeats Hillary. On one hand, you have Lipper reporting that investors pulled $16.2bn from U. S.-based equity funds in the past week, the largest withdrawals since December 2016. The same Lipper also reported that taxable-bond mutual funds and ETFs recorded $1.2bn in outflows, with U. S.-based high-yield junk bond funds posting outflows of $922 million. On the other hand, you have EPFR which looking at the same data, and the same time interval, concluded that there was $8.7bn inflows into equities, of which total flows into the US amounted to $7.8bn, the largest in 26 weeks.
How does any of this make sense? We are not sure, although it may be that while Lipper ignores ETF flows, EPFR includes these. Indeed, when breaking down the latest flow data, which still does not foot with the Lipper numbers, Bank of America notes that the $8.7bn in equity inflows is the result of a $31.4bn in ETF inflows – the second largest on record – offset by $22.7bn in mutual fund outflows, the 4th largest on record.
When looking at this staggering divergence, BofA’s Michael Hartnett put it best:
Passive hubris, active humiliation: 2nd largest week of inflows ($31.4bn) ever into equity ETFs vs 4th largest week ever of outflows from equity mutual funds (Chart 1)

This post was published at Zero Hedge on Dec 15, 2017.