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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.

 

 

 

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Thu, 07/22/2010 - 13:22 | 483895 NOTW777
NOTW777's picture

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

Thu, 07/22/2010 - 13:23 | 483896 Gromit
Gromit's picture

What about ETF inflows?

Thu, 07/22/2010 - 13:25 | 483903 traderjoe
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.  

Thu, 07/22/2010 - 13:33 | 483922 lieutenantjohnchard
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.

Thu, 07/22/2010 - 13:44 | 483950 Nolsgrad
Nolsgrad's picture

Highest two ETF inflows were SPY and GLD for June.

Thu, 07/22/2010 - 13:48 | 483959 DarkMath
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.

 

Thu, 07/22/2010 - 14:11 | 483999 hedgeless_horseman
hedgeless_horseman's picture

Beaker, I believe the root directory for MorningStar is found here:

http://www.investing_for_children_with_less_than_$50_liquid.org/

 

Thu, 07/22/2010 - 16:19 | 484270 PuppetRepubl1c
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.

 

Thu, 07/22/2010 - 13:27 | 483907 MGA_1
MGA_1's picture

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

Thu, 07/22/2010 - 13:29 | 483914 Commander Cody
Commander Cody's picture

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

Thu, 07/22/2010 - 13:35 | 483928 curbyourrisk
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!!!!

Thu, 07/22/2010 - 13:38 | 483934 Dr. Richard Head
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.

Thu, 07/22/2010 - 13:45 | 483952 Divided States ...
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.

Thu, 07/22/2010 - 13:44 | 483909 hedgeless_horseman
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?

Thu, 07/22/2010 - 13:50 | 483955 Cognitive Dissonance
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. :>)

Thu, 07/22/2010 - 14:16 | 484015 WineSorbet
WineSorbet's picture

+100000 for a Blade Runner reference.

I love this site!

Thu, 07/22/2010 - 13:32 | 483921 curbyourrisk
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!!!!

Thu, 07/22/2010 - 13:35 | 483927 cowdiddly
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.

Thu, 07/22/2010 - 13:40 | 483940 LePetomane
LePetomane's picture

Hey now,

 

I resemble that remark. ;-)

Thu, 07/22/2010 - 15:39 | 484169 Problem Is
Problem Is's picture

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

Today's new #1 Google search...

Thu, 07/22/2010 - 13:41 | 483941 HedgingInfinite...
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".

Thu, 07/22/2010 - 13:52 | 483964 lizzy36
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.

Thu, 07/22/2010 - 14:22 | 484025 CrockettAlmanac.com
CrockettAlmanac.com's picture

That's the way to refudiate a comment!

Thu, 07/22/2010 - 14:23 | 484028 Cognitive Dissonance
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. :>)

Thu, 07/22/2010 - 15:43 | 484179 Problem Is
Problem Is's picture

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

"I gots year."

BTW: Junked again Professor CD...

Thu, 07/22/2010 - 13:40 | 483942 pitz
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.

Thu, 07/22/2010 - 14:10 | 483998 Cynical Esquire
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."

Thu, 07/22/2010 - 15:49 | 484200 traderjoe
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...

Thu, 07/22/2010 - 13:43 | 483948 Noah Vail
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.

Thu, 07/22/2010 - 13:49 | 483960 unionbroker
unionbroker's picture

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

Thu, 07/22/2010 - 17:07 | 484384 JW n FL
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!

Thu, 07/22/2010 - 13:49 | 483962 HarryWanger
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.

Thu, 07/22/2010 - 14:04 | 483990 unionbroker
unionbroker's picture

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

Thu, 07/22/2010 - 14:13 | 484003 geminiRX
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...

Thu, 07/22/2010 - 16:04 | 484240 traderjoe
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.

Thu, 07/22/2010 - 13:58 | 483976 LePetomane
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.

Thu, 07/22/2010 - 14:03 | 483985 Whatta
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?

Thu, 07/22/2010 - 14:03 | 483986 JuicyTheAnimal
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. 

Thu, 07/22/2010 - 14:58 | 484087 knukles
knukles's picture

Where'd maybe come from? 

Thu, 07/22/2010 - 14:03 | 483987 jkruffin
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.

Thu, 07/22/2010 - 15:40 | 484171 docj
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.

Thu, 07/22/2010 - 14:08 | 483992 hambone
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?!?

Thu, 07/22/2010 - 14:16 | 484014 SDRII
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

Thu, 07/22/2010 - 14:13 | 484005 Pladizow
Pladizow's picture

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

Thu, 07/22/2010 - 15:46 | 484192 WaterWings
WaterWings's picture

Porno-quote machine FTW!

Thu, 07/22/2010 - 14:30 | 484035 Fyodor Does DF Ski
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.

Thu, 07/22/2010 - 14:29 | 484036 batting500
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...

Thu, 07/22/2010 - 15:06 | 484103 pitz
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.

Thu, 07/22/2010 - 18:04 | 484499 Island_Dweller
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.

Fri, 07/23/2010 - 12:06 | 485451 pitz
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?

 

Thu, 07/22/2010 - 14:33 | 484040 orangedrinkandchips
orangedrinkandchips's picture

too fuking funny...it is one big shitshow for sure T!! fuck it all...."WHEN THE MUSIC'S OVER TURN OUT THE LIGHTS...."

 

Thu, 07/22/2010 - 14:34 | 484044 aaronb17
aaronb17's picture

I can't imagine how mutual fund customers could do anything but trail the markets.  They've got to be the slowest-moving equity investors out there. Using them as a leading indicator (i.e., "aren't we supposed to be seeing the market go DOWN now that the mutual fund customers have pulled out?") is like watching a snake's tail to see where it will go next.

I bet we'll see inflows or close to it in the report for this week, assuming there's no big flop on Friday.  That's because there will have been three weeks without a major new low.  Nothing out there to make the 401k owners worried on their lunchbreaks.

Thu, 07/22/2010 - 15:02 | 484094 Lord Peter Pipsqueak
Lord Peter Pipsqueak's picture

Probably asking a very stupid question here,but humour me.If the market is being manipulated up by the Fed, how come if the fundamentals are so poor the hedge funds just don't short the hell out of it?If most small investors have sold out going by all ther recent large redemption figures, who has bought all of it?

 

 

To carry this conspiracy to its logical conclusion would mean that those manipulating the market would end up owning it almost entirely.

Thu, 07/22/2010 - 15:12 | 484115 Quinvarius
Quinvarius's picture

Most 401ks don't have a cash option.  You are stuck in bonds or stocks.  Otherwise I am sure bond funds would be getting hit too.  Even if you have a money market option, that is just more debt based securities.  People are stuck between two frauds with no way out.  The best they can do is change jobs, roll the 401k over into an IRA they can control, and apply the proper gold/silver/cash ratio themselves. 

Thu, 07/22/2010 - 15:13 | 484119 iPood
iPood's picture

Are there any studies indicating that above-normal retail outflows from equity-based mutual funds (or retail in-flows into bond funds) are a contrarian indicator? Just wondering...

Thu, 07/22/2010 - 15:32 | 484161 Problem Is
Problem Is's picture

If those mama's boys Jamie and Lloyd are going to be dicks and cheat all the time...

Take your money and monopoly board and go home... and buy gold bitchez....

Thu, 07/22/2010 - 16:40 | 484326 wintermute
wintermute's picture
"... in a time when equity funds had to redeem over $7 billion in stocks, the stock market surged by 90 points"

This is explainable. Sideline money does not exist - for every dollar taken out of the stockmarket in sells there is a dollar bought in. (The only exception is for IPOs: new money in, or bankruptcies: money out).

If you use a wad of 1935 notes from your grandfather's attic and buy stocks - is this new money into the stockmarket? No, because the seller of the shares now has the same amount in his bank account.

The stockmarket moves up 90 points for reason of sentiment only. It is moving because of future expectations. Since March 2009 future expectations have been of dollar devaluation because the US Treasury and its agency (the Federal Reserve) have consistently said they will print dollars, perform QE to substitute monetary base lost through credit markets seizure and debt destruction.

When this wallpapering over the cracks exercise fails - then stockmarket sentiment will react to a stronger dollar and head the markets down.

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