11th Sequential (And Massive) Equity Outflow Reignites Speculation Market Terminally Broken

Tyler Durden's picture

ICI reports that the week ended July 14 saw another massive outflow from domestic equity mutual funds of $3.2 billion, bringing the July total to $7.3 billion, and year-to-date equity outflows to a stunning $37.5 billion. Yet neither liquidations, nor redemptions, nor mutual fund capitulation, nor lack of liquidity, nor lack of human traders, nor rumors that it is all one big scam, can tame the market's most recent bout of irrational exuberance: in a time when equity funds had to redeem over $7 billion in stocks, the stock market surged by 90 points! Just like last week, despite huge order blocks of selling pressure, the fact that volume is so light and liquidity so tight, the market succeeds in ramping ever higher, now that the few remaining carbon-based market participants have reverse engineered the key algo "predictive" frontrunning mechanisms, and manage to fool them that there is bid side interest, into which all domestic equity mutual funds manage to sell en masse. Soon enough there will be little left to sell, which will, paradoxically cause a much overdue market crash. (It is a bizarro market for a reason). And even as equity mutual funds are running on fumes (explains Bill Miller's call of desperation yesterday), all the money in the world continues to rush into credit funds: the past week saw inflows into every single bond category, with a total of $5.8 billion going into all taxable bond funds. We are gratified that behind the fake equity facade of "alliswellishness", everyone is pulling their money out of stocks with an increased sense of urgency. Retail has had it with this pathetic shitshow of a market: the computer can front run each other for all anyone cares. We are fairly confident that the Obama administration will not have a soft spot in its heart to bail out the quant community... unless, of course, Rahm Emanuel discovers some way to unionize algorithms and give them voting rights.

 

 

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
NOTW777's picture

with the little people out of the way, they can set the market to whatever they want like a thermostat

Gromit's picture

What about ETF inflows?

traderjoe's picture

I was going to ask this question too. How has the growth of ETF's changed this data. I would think one of the difficulties in measuring ETF flows is the huge disparity in types (bonds, stocks), kinds (1x, 2x, 3x), etc. And how much the ETF's have become a vehicle for the quants to simply day trade.  

lieutenantjohnchard's picture

look at the 10 and 90 day ave volume of uso, sds and sso. this will give you a window into participation. then take a look at these same volumes over the past few years.

Nolsgrad's picture

Highest two ETF inflows were SPY and GLD for June.

DarkMath's picture

Great question, I just looked and found this article on Morningstar which says June saw a net INFLOW of $13.5 Billion:

http://news.morningstar.com/newsnet/viewnews.aspx?article=/pr/20100715cg...

I'm so confused. I don't trust anything and it's just another reason why I'm all in Silver and Gold physical ETFs.

 

PuppetRepubl1c's picture

@DarkMath

you just need to dig a little deeper than the headlines:

 

Investors added $17.6 billion to taxable-bond funds in June, bringing the total inflows to $119.6 billion during the first two quarters of 2010. Municipal-bond funds took in nearly $2.0 billion in June and $19.5 billion for the year-to-date period.

...while domestic-stock funds experienced outflows of nearly $17.0 billion.

 

Alternative mutual funds, many of which were launched since the credit crisis, have recorded record inflows. PIMCO Fundamental Advantage Total Return has the led the way, taking in nearly $3.3 billion over the past 12 months through June.

 

In June, as well as for the year-to-date period and the trailing one-year period, taxable-bond ETFs led all ETF asset classes with more than $4.7 billion in net inflows.

 

SPDR Gold Shares GLD was the second-most popular ETF in June, with inflows of $2.1 billion. Gold ETFs experienced strong inflows during the month, while funds that provide exposure to energy markets by rolling one-month futures contracts led outflows for commodities ETFs. 

Retail investors are pouring out of Small Cap (and equities in general) and fleeing into bond funds and commodities.

 

MGA_1's picture

So, will the last remaining stock owners be Goldman Sachs and JP Morgan ?

Commander Cody's picture

Probably a few others too.  Problem is: Who will they sell to?

curbyourrisk's picture

Each other.  Hey, you buy my shit and I will buy yours.  we can push this higher for ever!!!!!!!!!

 

Bonus time BITCHES!!!!

Dr. Richard Head's picture

Gerald Celente stated that 10 banks now own over 80% of the banking assets.  Seems like the game of limp biscuit will continue with 10 participants.  The question I have is who has to eat the biscuit?  I do hope it is Jamie Dimon.

Divided States of America's picture

Much like housing, to prevent stock prices from falling, the big banks will basically buy everything up (with the backing of the US government) and keep it in a 'shadow' inventory and entice the greedy sheeple remaining in the game. They will sell it them into strength slowly to not create a panic in the markets. Especially with most of the little guys basically out of the scene, they can drive these markets to extraordinary heights with much ease as they are controlling the liquidity out there (thus there is no liquidity for people outside the game, but plenty for people in the game, kinda like pressing the Nitro button when you need some instant juice). I am sure everyone notice that big up days have been on low volume, e.g. Up 200 points on 150mm SPY. But have anyone notice what happens when it goes down 200 points, and volume is around at least double (300mm SPY)? Honestly, we should be down a lot more than 200 points (at least 400) on double the volume. These are timed liquidty that is being generated when required, i.e. on down days only and none generated on up days.

hedgeless_horseman's picture

...unless, of course, Rahm Emanuel discovers some way to unionize algorithms and give them voting rights.

Deckard: She's an algo, isn't she?
Rahm: I'm impressed. How many trading days does it usually take to spot them?
Deckard: I don't get it, Rahm.
Rahm: How many trading days?
Deckard: Twenty, thirty, cross-referenced.
Rahm: It took more than a hundred for Rachael, didn't it?
Deckard: [realizing Rachael believes she's human] She doesn't know.
Rahm: She's beginning to suspect, I think.
Deckard: Suspect? How can it not know what it is?

Cognitive Dissonance's picture

"Deckard: Suspect? How can it not know what it is?"

I was considering a similar question while on the BP/GW threads this past week. How can the Zero Hedge BP/gas & oil industry trolls not know they are trolls?

BTW, with the tropical depression, soon to be tropical storm, about to enter the GOM which is causing all BP activity to shut down, looks like this agony will be drawn out for an extra 10 days to 2 weeks.

Now I bet that will make the ZH non-troll trolls happier than a pig in shit. Particularly if BP's ordered to open the well again full throttle. Now that will cause a firestorm of speculation the trolls will be attacking tooth and nail. :>)

WineSorbet's picture

+100000 for a Blade Runner reference.

I love this site!

curbyourrisk's picture

WOW....CNBS must be thinking with all those inflows....just imagine the rally we will see when people finally believe our bullshit!!!!

cowdiddly's picture

Only thing left to do is Goldman to install fiber optic cable directly to Niederaur's ass. nothing like a nanosecond edge when it comes to front running other machines. There will be methane circuit breakers installed of course just in case of gastronomic disturbance causing a flash gas crash.

LePetomane's picture

Hey now,

 

I resemble that remark. ;-)

Problem Is's picture

+11111...
For working in the "Goldman & Niederaur's ass" reference... 

Today's new #1 Google search...

HedgingInfiniteRiskIsNotPossible's picture

I nominate this as one of the most well written ZH posts ever, because of the use of the terms "shitshow" and "alliswellishness".

lizzy36's picture

You are new, so i will be gentle.

Search the ZH trademarked term "bidetesque".  Then come back with an opinion on the use of terms and well written posts.

CrockettAlmanac.com's picture

That's the way to refudiate a comment!

Cognitive Dissonance's picture

lizzy

Many men don't even know what a bidet is. Being the resident ZH Neanderthal (after outing myself this morning) I only learned after trying to sit on one and nearly destroying the family jewels and other "sensitive" areas. While my voice did rise a few octaves, I'm OK since they released me from intensive care. :>)

BTW I still can't get over males being sloppy seconds. I guess I need to sleep on it. Or actually be subjected to it. :>)

Problem Is's picture

Lizzy is just throwing around her old timer status...

"I gots year."

BTW: Junked again Professor CD...

pitz's picture

The stock market cannot make *everyone* rich, so it makes sense that the market is making big gains when people are fleeing.  Some of the biggest gains in the market occurred in the early 1980s when most people were struggling with high mortgage interest rates, for instance.

Cynical Esquire's picture

Excellent point pitz... it would make sense that at times of minimal participation by the unwashed masses big gains would be made in equities by the players... it is their game after all and only foolish peeps believe they have a fair shake at it. and why should they come to think of it? why should some 100k ameritrade account jagoff have the same juice and info and connections as someone running/managing billions? only brain addled simps believe they have a shot at the brass ring. it is one of the greatest accomplishments of our masters that they have convinced the average hump that he can make it. the sad fact is the average person in this country is born into, lives and dies in the same socio-economic strata. if there is any upward movement it is usually for an abbreviated time. the avergae simp has ZERO net worth now and at the hour of his death yet he has been convinced that he is a player and he has juice.. it is like some jizz chin driving around in a leased beemer acting as if he is a made man or some hump sitting in a home with 26 years left on his mortgage thinking he "owns" his home.. it is why the masses are so easily "played" by their betters or as PT Barnum said many moons ago, "there's a sucker born every minute."

traderjoe's picture

Kind of a random comment, but I used to run a used car lot. It was easier to sell a bare bones BMW 325 - no power seats, pleather, etc. - than a fully loaded Hyundai Azera. The BMW was about $5k more, has a better short term warranty (free maintenance), but Hyundai much better made.

Watching people flock to purchases simply because of the brand name was my first experience with the concept of the sheeple. Didn't know the word at the time, but now it all makes sense...

Noah Vail's picture

I've decided to make an appointment with the Red Queen for counseling. My reality seems out of sync with everyone else's. Time to reprogram the transistors and get with the program. Down the rabbit hole.

unionbroker's picture

I used to trade etfs quite often but i ran out of money and nobody would lend me any.

JW n FL's picture

You need a Bailout! can we get a ratings agency to rank you? AAA status gets you unimited funds @ 0%(ish)... risk soup of 60%, 20% and 20% high risk... screw it, might as well throw 20% or 11% heavy high risk out there as the money is free and you can always default if need be... but more likely be bailed out with the stupid tax paying sheepeople picking up the tab... no worries! we just need to get you rated and off you go!

HarryWanger's picture

I've gone from bullish through all the way through April to very bearish. Now, I must say, I'm pretty neutral on economic views and leaning slightly bullish on the markets. I thought we would be seeing much worse earnings reports than we're getting. Especially on outlooks from some major bellwethers. They're raising forecasts.

My thesis was we would see inline earnings and some downbeat guidance which would obviously bring down SPX p/e projections. That's not happening and we're seeing some major players guide higher moving forward.

Throw in another dose of Fed "we won't let this market ever fall" and it's very difficult to be short this market and seems easier to justify participating long.

unionbroker's picture

Ill let you know when i am bullish on the market since i am always 100% wrong

geminiRX's picture

The fed will throw the kitchen sink to ensure the S&P does not break resistance to the downside. I thought the following article was brilliant synopsis of what is playing out:

http://www.oftwominds.com/blogjuly10/stocks-election07-10.html

Get the S&P above 1110, and the bears will all puke. This market is so broken...

traderjoe's picture

Don't disagree about being short. There seems to be something keeping the markets up, be it PPT, HFT, hedge funds, QE2, whatever. The reporting of the MSM seems to have gotten more selective in their reporting. I haven't heard much of a peep today about the worse-then-expected jobless claims (could have been followed by a discussion of the seasonals and auto plants) or the bond auctions in Europe (German, Port. yesterday, Hungarian today).

Against the long side, it's a slow moving train wreck when it comes to the economy. Muni's are the disaster waiting to happen. Furloughs, budget cuts, tax increases, fee increases, etc. And we seem to be one headline out of Europe (like a run on a bank) away from a liquidity event.

In general - all pretty confusing to me but the long-term outlook seems downright gloomy.

LePetomane's picture

For what it's worth,

 

The CBOE P/C Ratio looks to be forming a cup and handle.  Short-Term bullish. Today's guess, 0.89 on 4M volume.

Whatta's picture

Since the shitheel FED killed interest rates so the financial Oligarchy might survive - We The People have to chase the credit markets, bond munis, interest ETF's, MLP's etc...to survive our golden years, and for many the earlier years as well.

But at least we have higher tax rates to look forward to next year to take away whatever rates we have managed to find..Thank You, zerObama.

Is there any good news left out there? Anywhere?

JuicyTheAnimal's picture

Maybe the rich are so rich now that the rest of the "consumers" don't really matter.  It's a private party and they can spike the punch if they wish. 

knukles's picture

Where'd maybe come from? 

jkruffin's picture

Straight from the horse's mouth:

"I absolutely agree with you that unemployment is the most important problem that we have right now," Bernanke said. "What we can do is make financial conditions as supportive of growth as we can and we certainly are doing that."

 

In short, yes we are manipulating the markets, and we will continue to do so.  How this idiot ever got re-nominated and accepted is a clear case of Congress being even dumber than we could ever imagine.

docj's picture

Bingo.  They are going to gun this pig as far as they can for as long as they can.

The day they can't - 1-month?  6-months?  6-years?  WHO KNOWS?? - it's going to fall through the floor.  But until then it's nothing but up up up for this carnival freakshow.

hambone's picture

Funny - last night couldn't sleep and watching a movie w/ futures in PIP...was amazing to watch at 2 or 2:30am (PST) the move from teetering up / down to a massive gun of futures (and Euro equities from flat to big up) in 15min time.  Eur/Dol shot to the moon and US futures were up 1%+. 

What (who) the hell was that?  No news, no rumors, just a moonshot.  I've seen jumps on news or rumors or something...but never just an ignition on nothing for a 100 Dow pts in minutes?!?

SDRII's picture

The gun had to happen; can't release the stress tests and have a down day. This pump will continue; it has been decreed

Pladizow's picture

Lying and kicking the can down the road only turns a simple can in to a nuclear device.

WaterWings's picture

Porno-quote machine FTW!

Fyodor Does DF Ski's picture

Thanks to the powers that be, it's one gigantic scam wagon. Everyone knows, sees, or feels this truth in their gut. No one can stop the madness. The wheels on the bus go round and round, but the lug nuts are loose and will eventually come off and send the whole rotten mess crashing into a ditch. The sooner that happens, the better. In the meantime, we scratch our heads witnessing, waiting, and marveling at the tragic mess our planet in the clutches of irreversible turmoil has become.

batting500's picture

Hmm...thinking this should be a contrarian indicator.  Regular Folks are redeeming their shares in mutual funds, so there are huge amounts of mutual funds selling shares to handle the redemptions.  Aren't the masses ussually doing exactly the wrong things at exactly the wrong time? 

Good luck all...

pitz's picture

Exactly!  And the 'regular folks' are buying up cash and bonds like crazy. 

Since we know that volatility and returns are related, it logically follows that since we have experienced a period of extremely high volatility, that we will see a period of extremely high returns going forward.  And with the 'dumb' money out of the market, such returns will accrue to a relatively limited group of people, to wit:  those who are not underwater on houses, those who aren't living unsustainable lifestyles, etc., etc.

Island_Dweller's picture

Aren't the masses ussually doing exactly the wrong things at exactly the wrong time?

Getting out of a casino with money in your pocket is never a bad move.

pitz's picture

What's "money", and whats "the casino"?

Maybe the "money" is "the casino"?

What's better?  FRNs in your pocket, or claims to the ownership of actual and real industrial production, in your pocket?