Who's Buying, And Who's Selling ? The Great(est Fool) Rotation

We could yarn on for hundreds of words discussing the ins and outs of falling volumes and record-er highs in US equity markets as Treasury bond yields collapse, macro- and micro-fundamental data slumps, and the total nonsense with regard to 'cash on the balance sheets' when it is all levered to the max. Butwhen it comes to showing just who is buying the hope... and who is selling the hype, the following chart from BofAML sums it all up... institutional clients sold the most since January and the 4th most on record in the last week as retail clients continued their buying streak.

Institutional clients are dumping equities off to retail clients... thank you very much...

Last week, during which the S&P 500 was down 0.1%, BofAML clients were net sellers of $1.5bn of US stocks following a week of net buying.

Net sales were chiefly due to institutional clients, who have now sold stocks for the last five consecutive weeks and are the biggest net sellers year-to-date. Net sales by this group last week were their largest since January and the fourth-largest in our data history (since 2008).

Hedge funds were net buyers for the fourth consecutive week, and private clients also continued their net buying streak.

Source: BofAML

Gold price drops as holdings of top ETF fall to 5-year low

The gold price fell by more than $10 on Thursday after confidence in the US economy expressed by the Federal Reserve overshadowed the escalation of the conflict in Ukraine.

On the Comex division of the New York Mercantile Exchange, gold futures for June delivery last traded at $1,285.20 an ounce, near the lows of the day and down $11 from yesterday's close.

Gold's status as a hard asset and safe-haven during times of turmoil did not translate into buying despite news that Ukraine has re-instated military conscription after saying that it is in danger of losing the east of the country to pro-Russian forces.

The US central bank on Wednesday decided to continue to scale down its stimulus program following indications that growth in economic activity picked up recently after the weather-related slowdown in the first quarter saw GDP growth barely positive at 0.1%.

The news boosted the dollar and diminished gold's allure as a hedge against inflation and storer of wealth.

After an atrocious 2013 when GLD recorded only 17 days of inflows and 540 tonnes left the fund, the tide seemed to have turned in 2014

Investors also continued to pull money out of the SPDR Gold Trust (NYSEARCA:GLD), the world's largest physically-backed gold ETF accounting for over 40% of total holdings in the industry.

Holdings in GLD dropped more than 2 tonnes to 785.55 tonnes or 25.2 million ounces on Thursday, the lowest level since January 2009 and down 24 tonnes during April.

After an atrocious 2013 when GLD recorded only 17 days of inflows and almost 540 tonnes left the fund, the tide seemed to have turned early in 2014.

But after peaking at 821 tonnes in March, GLD became a one way bet again.

Buying of gold ETFs trust – fondly referred to as the people's central bank –  since 2003 when the first of its kind was launched in Australia played a huge part in gold's 12-year bull run.

Gold bullion holdings in global ETFs hit a record 2,632 tonnes or 93 million ounces in December 2012.

But last year the world's more than a 50 physically-backed exchange-traded gold funds and scores more gold futures-based trusts experienced net redemptions in excess of 800 tonnes collectively.

As gold declined 28% over the course of 2013 precious metals investment vehicles suffered depreciation in value of close to $80 billion.

Pentagon Admits "No Solution" To Replace Russian Rockets To Launch US Military Satellites

While the US is quick to demand the rest of the world turn its economic back on Russia - especially the Europeans, it appears they are discovering - just as Putin warned, the world is considerably more inter-dependent than they thought. Following Chuck Hagel's orders to review the Air Force reliance on Russian rocket engines used to launch US military satellites, Bloomberg reports the Pentagon admits it "has no great solution" to reduce its dependence on the Russian-made engine.

As Bloomberg reports,    

The Pentagon has no “great solution” to reduce its dependence on a Russian-made engine that powers the rocket used to launch U.S. military satellites, the Defense Department’s top weapons buyer said.

“We don’t have a great solution,” Frank Kendall, the undersecretary of defense for acquisition, said yesterday after testifying before a Senate committee. “We haven’t made any decisions yet.”

Defense Secretary Chuck Hagel ordered the Air Force to review its reliance on the rocket engine after tensions over Russia’s takeover of Ukraine’s Crimea region prompted questions from lawmakers about that long-time supply connection.

United Launch Alliance LLC, a partnership of Lockheed Martin Corp. and Boeing Co., uses the Russian-made RD-180 engine on Atlas V rockets.

As Putin warned - apparently correctly...

“The US is certainly one of the world’s leaders. At some point it seemed that it was the only leader and a uni-polar system was in place. Today it appears that is not the case. Everything in the world is interdependent and once you try to punish someone, in the end you will cut off your nose to spite your face,” he said.

Best And Worst Performing Assets In April And 2014

As we noted on the last day of March, April was supposed to be the best month for stocks, with an average return since 1950 of over 2%. It wasn't.

In fact it barely managed to eek out a positive return, treading negative MTD performance until the last few days.

Still, nothing compares to the rout of the laughable Greek stock market, which after generating scorching returns in the first quarter, tumbled in April by nearly 8%, and cut its YTD gains by more than half. In fact, Greece, with its stock market where a few oddlots can move the market by more than 1%, performed worse than even Russia's stock market - the same Russia which none other than the White House speaker Jay Carney told everyone to short. Curiously, while there were no sanctions announced against Japan, the Nikkei was in danger of losing almost as much as Russian stocks in the past month.

But it wasn't all doom: among the better performers were the FTSE, the Bovespa, and a bevy of commodities such as Corn, Wheat and the broader CRB Index. Here is some additional color from Deutsche Bank:

April was a generally positive month across the board for global financial assets, although with a handful of major losers. No single asset class stood out although equities and commodities had a relatively strong month with the top performers including UK (FTSE 100, +3.1% - helped by M&A), Brazilian (Bovespa, +2.4%) and Spanish (IBEX 35, +1.6%) Equity and Corn (+2.4%), Wheat (+2.3%) and the broader Commodity index (CRB, +1.6%). YTD commodities have performed strongly with Corn (+22% YTD) and Wheat (+18% YTD) the two best performing assets and the broad CRB commodity index returning +10.5%. The rest of the 2014-so-far top 5 is made up by Peripheral European Equities with the FTSE-MIB and Portugal General returning +15% and +14% respectively.

Fixed income performance sat in the middle of the pack in April with EU Fin Sub bonds continuing to lead the way returning +1.4% on the month and +5% YTD. Other strong performers in fixed income this month were Italian and Spanish government bonds and US IG Non Fin and US Fin Sub all returning around +1% on the month. This stronger performance marks a continuation of trends seen through 2014 so far with returns on Spanish govvies at +7.1% YTD, BTP’s at +6.5% YTD and US IG Non-Fin and Fin Sub of around +4.5% YTD.

Sterling continued to perform in April with GBPUSD returning +1.3% this past month. GBPUSD returns now stand at +1.6% on the year, only being beaten in  the G7 FX space by JPYUSD at +2.6%. GBPUSD’s been on a bull run since early June last year and is now around its post-2008 highs.

April has seen a few notable losers with the Greek Athex down -7.8%, the Russian Micex down -4.6% and the Nikkei down -3.5%. The weak Micex and Nikkei are continuing themes this year, now returning -13.1% and -11.5% respectively. Geopolitical risks and sanctions are continuing to weigh on Russia with fatigue impacting the Japan reflation trade. April’s weak Athex performance on the other hand marks a sharp divergence from 2014 performance pre-April as the index has given back much of it’s strong performance YTD. When we last wrote this performance review at the end of March YTD Athex performance was +15%, after April it now stands at +6%. However it is up +28%% over the past 12 months.

The full April performance by asset class:

A different pictures emerges in the YTD chart,where corn, wheat and Italy are the best performers, while Russia, Japan, Copper, Hong Kong and China round out the tail end.

Jim Reid's conclusion: "So now April's over, will it be sell in May and go away? Or buy in May and make hay.. We just made that one up. We don't expect it to catch on!"

Nickel Supply Fears Overdone, Says Norilsk Billionaire Vladimir Potanin

The concerns that Nickel Supplies would be disrupted by sanctions against Russia over the Ukraine Crisis were overstated, said Vladimir Potanin, the billionaire who runs Russia’s OAO GMK Norilsk Nickel.

Nickel supplies have increased 31 percent this year after the ban on Indonesian exports of unprocessed ore. Potanin said that the medium-term outlook was for stable prices because Indonesia would start its own processed production of nickel within the next two years. This compensate for the shortfall of nickel supplies. According to him, Indonesia seems as the key nickel driver and the rest of factors had only minor effects.

Before the US charged sanctions on 7 Russian officials and 17 companies, Nickel attained the highest price level in almost fifteen months in London last day. Norilsk Billionaire said that Norilsk would continue to sign up long term nickel supply contracts with the European customers and also to maintain good customer relationship with US. The mining company has no issue in financial arrangements and agreed to $750 million of loans from an international lenders’ group this month, he added.

Potanin said that the Company also planned to increase the shipments to China, a serious driver of the world’s economy and this had nothing to do with the crisis in Ukraine. The company decided to ship 100,000 metric tons of nickel to China this year which was about 70,000 metric tons last year. This would be the maximum level for them at which their sales would be balanced between all places.

Copper, iron ore prices gap down again amid credit crackdown

The benchmark iron ore price was hammered again on Wednesday, capping an awful April which saw the steelmaking raw material lose almost 10% in value.

According to data from the The Steel Index, the import price of 62% iron ore fines at China's Tianjin port fell sharply to $105.40 per tonne, down 2.7% on the day amid worries about curbs on commodity-linked financing deals.

It's practice in credit-scarce China for commodity traders and industries to use metals as collateral for short-term financing deals.

Some estimates put the portion of iron ore inventories that is used for trade credit at 40%. This week stockpiles at the country's ports jumped to a record 110 million tonnes, up 25% since the start of the year.

Now that Beijing is cracking down on the practice and a weakening yuan – another deliberate move by authorities – push deals under water, much of that ore could find its way back onto the market creating a vicious circle.

Reports suggest new regulations aiming to tackle the county's vast shadow banking system and due to take effect after the Labour Day holidays starting tomorrow will raise deposit requirements on letters of
credit.

Iron ore clawed its way back from 18-month lows struck mid-March but remains 20% down year to date

The crackdown is also being blamed for the weakness in copper, which thanks to portability and ease of storage copper is even more widely used in these types of transactions.

July copper futures in New York were last trading at $3.022 a pound, down nearly 6 cents on the day and in fierce retreat since hitting seven-week highs on Monday.

China buys more than two-thirds of the world's seaborne ore and forges as much steel as the rest of the world combined, while the country is also responsible for 42% of global copper demand.

Iron ore clawed its way back from 18-month lows struck in mid-March but is now in danger of breaching those lows, and remains 20% lower than at the start of the year.

Copper has also recovered from near 4-year lows around the same time, but has declined more than 10% since the start of the year.

World Bank: China to overtake US as biggest economy THIS YEAR

A new study by the World Bank predicts that the US will lose its status as the world's largest economy later this year.

Previous studies forecast the US will only lose the top spot – which it took from the United Kingdom in 1872 – at the end of this decade at the soonest.

The report by the International Comparison Program at the World Bank estimates total economic output between countries by using purchasing power parity or PPP which takes into account the relative costs of goods and services and inflation rates, rather than simply using volatile exchange rates which give you nominal GDP figures.

The World Bank's updated methodology for PPP indicates that the gap of $3.4 trillion in 2012 (on a nominal basis that gap was closer to $8 trillion) has now shrunk dramatically.

In 2005, the ICP estimated China’s economy was less than half the size of the US, accounting for only 43.1% of the US total. That proportion grew to 86.9% in 2011.

That gap should disappear this year thanks to the rapid growth in China where the economy is thought to have grown roughly 24% since 2011 while the US economy's expected expansion through 2014 is pegged at less than 8%.

The new methodology also paints a very different picture of India, which leaps from 10th place in 2005 at 19% of the US size to 37% and 3rd in 2011, relegating Japan to fourth place.

Of course absolute size only tells part of the story. On a per capita basis, the gap between the developed economies and newly minted GDP giants remain wide: