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$5.1 Billion In Outflows For Domestic Equity LT Mutual Funds Over Past Month
As CNBC guests will be so quick to admit, the money on the sidelines is indeed not sitting still: it is fleeing! Even as the market has gone up by 4% over the past month, flows in domestic long-term equity mutual funds have become increasingly more negative. The total amount withdrawn is over $5 billion, and last week alone saw a -$3.2 billion outflow, according to Investment Company Institute.
Not only does this refute claims of any presumed sidelines money stoking the rally, but it emphasizes the question mark over who it is that, with Swiss watch precision, keeps gunning the market at 3:30 pm sharp every day, while the volume keeps declining progressively (except of course for those days in which the market tanks such as last Tuesday - Chart 2).
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Then HTF does SPY keep rising?
HFT
Leveraged ETF robots would create this.
it's called "Smoke and Mirrors", as brought to you by the money changers, the market makers and your ever so trustworthy government.
Here's HTF!
1) Create a huge credit market.
2) Place bets that the people you lent money will go broke.
3) Call in their loans creating an instant cash flow crisis for the borrower.
4) Rub hands with glee as you watch your customer squirm as he tries to find the money to repay you, but you, being the banker, won't extend credit to him as he is now a risk.
5) Collect on the bets that you made against your own customers.
6) If the counter party to the bet can't pay up and the underwriter has to foot the bill, print some more money, call it TARP and bailout the underwriter (see AIG).
7) Print some more money and through the back door of open market operations, buy their assets.
8) Use your mates in government to pass laws that make the taxpayer the lender and then make it the taxpayer who pays the loan back to himself through taxes.
9) The Regulators, in on the act, let their mates run computer programs that front run the stock markets, (they pay to get a peek at your order before it reaches the exchange's trading floor. The trades essentially pass through a private trading platform first.)
10) Program the computers to "churn" trades between themselves, thus driving the markets higher and at huge profits for the trading platform (See Goldman Sachs' law suit against an ex employee, who they claim, stole their code for their trading platform. Goldman's lawyer stated that "in the wrong hands, this platform could influence the markets" No shit!
That's HTF. Welcome to the real world.
Where is the money "fleeing" to? It's not obvious to me so any insight will be appreciated.
I moved from equities to bond funds & took a loan against my 401K to pay down the 1st mortgage.
In the old days, this is called distribution. Are the retail investors sensing trouble ahead, thus becoming the "smart money?" Bonds are on fire with stocks rising on the "smoke" of bonds sensing deflation ahead. When this equity illusion ends, and everyone heads for the exits with stocks, it isn't going to be pretty.
Are the retail investors sensing trouble ahead
Excellent point LH... hopefully many a retiring boomer is realizing this is a get out of jail almost free card and is bailing.
And it'd be interesting to know the % of fleeing $$ directly tied to those loosing their trabajo and thus living off what little is left of their 401k's.
I think you nailed it!!!
this is BABY BOOMERS who are saying F- this....I'm pulling my money out after this shitstorm and rebound in 1 year. F this they are thinking!
Richard Kiyosaki has been talking about the demographic storm about to hit for years
you think vz, pg, mcd, jnj, etc are underpeforming now? These big cap/high div plays are over-owned by Baby Boomer and their parents/inheritances. There are many years of WILLFULL and forced distribution coming due to tax law among other things
Silly boys. The boomers are paralyzed. They're not looking at their statements and they're doing what their granfathers did. Leave it in the bank. The amount withdrawn from equity funds so far is puny (less than 2%).
Most think they're in for the long term, that the market is rigged against them (or their kids, actually), but they got into it as a casino gamble and they're going to hold 'em till they die, when it will be someone else's problem.
This is what behavioral economics is really all about. Human nature to gamble with other people's money, even if its your own kids.
65669, spot on. I wrote hopefully many a retiring boomer... the majority of my co-workers over 60 are indeed paralyzed. Never allotted the time to educate themselves like so many readers here.
Really, you think that the people who are holding their stocks in this market are the paralyzed morons. I really doubt it. The ones who have screwed up are those that panicked at (or near) the bottom, or have been short the market for the past month or so.
Educated or not, diversification has worked in this market.
Now if you were just so smart to have exited the market back in 2007 (or even mid 2008) then you probably didn't get educated HERE.
By the way, what is it that this education teaches you. If the Fed continues to flood the world with dollars, do you really want to own them, or are you better off owning valuable assets like JNJ. What exactly is the thesis of this website, and what does it imply.
Surely, being out of the market or short has not been the right play for the past 6 months.
but how many people and professionally managers
were really smart enough to get out of the market
in time to have the funds to get into it at the
bottom and how many really did get in it at the
bottom?....
the people who buy and hold have seen a sharp
loss of value regardless of the rally especially
those who bought before the run-up which would
have been oh maybe baby boomers....
market volume for this rally has been rather light
so stupid or smart not all that many people have
piled on....
inflation or currency debasement ruins the value
of your assets so holding some so-called valuable
asset is like tap dancing on quicksand....
and why does a website need a thesis?
the "retail" investor is so small that he is not
going to move markets....
the vast majority of stocks are professionally
managed in large funds, insurance, and other
institutional ownership....
It's what nobody wants to say. The government is buying and not selling equities in order to prop up the market.
What well funded government institution is unaudited and opaque enough to accomplish the feat of buying securities to prop up the market?
I was going to guess the SEC but Ms. Schapiro says they are underfunded. I'll have to think some more.
Sarcastic speculation (maybe) : NASA... the shuttle's been hauling HP e9180t's bought on sale at BBY to the ISS. Trading in zero gravity -- Newton's apple (and for that matter, Job's AAPL) can't fall. For now...
It's a shell game; try and find the pea under the walnut shell -
Ben(ito) Bernanke calls his designated contact at JPM and says "hello, it's Benito, $10 bn" ... (click)
JPM buys $10 bn of MBS, agencys and treasuries in the market
Ben(ito) Bernanke types 10.0 [enter], calls JPM and buys $10 bn of MBS/agencies/treasuries from JPM
JPM buys $10 bn of SPY
bonds up, stocks up, dollar down
case closed
Wasn't there was a rumour that it was STT?
there is no government agency except the cia
which fits the description and i can assure
you that they are involved in domestic
financial markets to say nothing of foreign....
the economy has been declared a security interest
and is thus an open field for the cia creeps..
(btw - the cia monitors the internet heavily so
speak at your own risk about these murderers)
however, the fourth branch of government is also
involved in market manipulation....
I'll take Helicopter Ben for 100 Alex.
Japan acknowledged it. We just haven't.
http://www.bloomberg.com/apps/news?pid=20601101&sid=aZtvEGw0xoH8&refer=j...
I think we have realized this, but the gov't is doing it buying via GS and others.
"with Swiss watch precision"
Good segue into probably where the money is fleeing to.
Despite bogus legislation which a proud and sovereign nation like Switzerland will never accept. UBS got squeezed by the thugs in DC and complied because they didn't want to pay.
As a result other Swiss banks are advising their clients to avoid the US - period.
Ramifications which we cannot comprehend at this point.
The rift and the lack of confidence or trust in the US is melting away.
Min. 50 years of Pax Americana are about to become history.
Money is fleeing alright but it sure as hell is not entering a bogus overpriced pump and dump stock market which has lost all credibility.
It looks like it is going into the 10yr
Euros, CDs, Pounds, Yen, Rennies, $Aus, Swiss Francs, gold, silver,and Shekels.
Just about anywhere but the mega-casino on Wall Street.
This would hold no interest to the SEC.
Probably matches up pretty nicely with other evidence of the smart money leaving the party, the insiders sell vs buy ratio, which looks pretty tilted the wrong way to me for a "recovery in progress", and increasingly so, just like this number.
How often is this number reported? Might be an interesting number to watch on a more frequent basis.
TD has been reporting on this recently....the wsj has it in every week. a great place to keep up on this is at Biderman's TrimTabs.. http://www.trimtabs.com/site/index.php
I have been watching schwab's monthly report on mutual fund transactions. For the past several months, money has been pouring out of money market funds into taxable bond funds.
Take a look for yourself and let me know what you think.
http://www.aboutschwab.com/media/pdf/july_2009_release.pdf
Schwab's people are encouraging the bond funds. Pimco gave away a managed bond service, or Schwab pays the fee for a 250 buy-in. Only the steel balls GA crowd are going to equities at this level, usually unadvised.
The big brokers lost a ton of HNW customers by advising them to stick around with equities last fall. They ain't stupid enough to try that again. Are they ?? Well, are they ??
retail brokers are selling LOTS of bonds and bond funds.
this always happens in low rate periods, particularly with the stock jockeys who work in your local bank.....grandma has 100k in her cd at .5% gets referred to stock jockey, tells her about 4, 5% yields on bonds. are they safe asks grandma?
you know the rest of the story.....
You don't think pratically unlimited free money to firms like GS, BAC, etc. isn't proping up the market? China is helping out too, (oil & gold) and their own markets.That's the back-bone of this feeble rally. Of course, the carry trade doesn't hurt. Free or very cheap money is driving this market. Unfortunately, I don't have unlimted funds so as usual, the Fed continues to beat me.
When is that Euro shoe going to drop? How about CRE? What's going to be the catalyst to bring the market into some realistic value point? It seems as if all bad news has been white washed already; as in "unemployment is a trailing indicator", etc. The conditioning continues....I just think the downside may be a year or so away.
This article was linked on seekingalpha.com!
Pension fund money is coming in, slowly, but coming in. They were under invested for much of the rally and are now feeling performance anxiety and the weight of liability mismatch.
You all would be advised not to ignore this "technical" factor (fundamentals suck, and the fact is a lot of folks know it and yet they invest because they "have to"). Sure, HFT may be playing a role, but there is "real money" coming in. Ignore this at your own peril.
Economy and markets are NOT the same thing - markets ran up and continued to run up in 2003 despite every pundit out there proclaiming weak fundamentals and an over valued market - I know that things are far worse now and I am sitting out this rally too, but I wouldn't be too surprised if the rampant market cheerleading engenders a rise in markets that "forces" pension funds and the like to chase the market.
Things are very bad out there, but the market can ignore that and run for a lot longer (the easy liquidity started the run, and mutual funds followed and now pension funds are running to play catch up!).
wow, you are posting this today as if this is month 2-3 of the rally.
DUDE, its month 7!!!!!!! yes, 7 month of market going straight up!
and guess what, the market was overvalued in 2003, like it is now. and the market was way overvalued in 2004-2008 as we look back in hindsight on ponzi economics
Mark this post......loads of baby boomers retiring will have a huge and dramatic liquidation effect on the market and there is no pension money that will save it from falling
you've been warned.
This doesn't account for the secular move to ETFs, does it?
My thought, exactly. There are many leaving traditional mutual funds to get into ETFs for the low cost and flexibility. To get a true sense of fund flows, you need to add the flows into/out of both open end and exchange traded funds.
And the same data source shows that while it is outflow in domestic, it is inflow (linear) to foreign. So, Joe's making the bet ex-US.
Yes, more like re-allocation to non-USD equities:
"Equity funds in Europe, China and Japan saw robust inflows in the week to Sept. 9 as investors continued to move cash into riskier, higher-yielding assets, according to global fund tracker"
EPFR.http://money.cnn.com/2009/09/11/news/international/world_markets.reut/in...
Smart money thinks they can make what el Erien called "Just in time risk management." They'll try to wring the last drop out of this rally. Unlike Baruch, Morgan et al who " always left 20 pct for the next guy"
Desperately trying to rescue retirees money with their own money!!(lol). Only god knows what is the actual fed's balance sheet.
I've been thinking along these lines for a while:
If everyone is taking their money out of the market because they want to avoid another collapse or because they actually need the funds or they want to be in cash for other opportunities or because they aren't contributing to a 401k, etc... then this will cause the market to go higher.
No buyers now, means no sellers later and fewer and fewer players involved on a day to day basis, so the natural tendancy is for the market to go higher. This will eventually cause money to flow back in at much higher levels and that is the only time you will see real pull backs.
A market without players has to give the appearance that everyone in it is making money in order to attract new participants.
I could be, and might be way off here, but logical thinking hasn't really worked lately so maybe illogical thinking is the way to go.
Everyone should read the latest article in Forbes magazine that I just received this evening. It covers completely why this late day trading has taken place. Some company's that have been recently formed are structured to accomplish mega trading using some of the world's fastest computer systems known by the various exchanges. That is a large part of the run up we have seen in these markets within the last 60 days.
Everyone please read the latest issue of Forbes magazine that I just received this evening. It speaks to this very issue. There have been a number of corp's that have been formed to transact buy/sells at mega speeds using super computers not seen by the major markets still recently. These are unregulated firms that are conducting trades in various exchanges in this country as well as around the world. It speaks almost as another accident waiting to happen.
It tells me why this market is growing like crazy in spite of the consumer being 70% of the GDP who is still not out of the woods as to major problems.
Would some of this be due to money coming out of money market funds because the extended insurance is going to expire later this month? I think people are not ready to trust that their isn't the possibility to "break the buck." So, coming out of the market and going into another asset class deemed "safe."
Ya that money market insurance thing is worrying me. Makes me wonder if another crash is coming after 18th.
reading....excellent point. this is certainly a part of it but I suspect a small part, i.e. smart people who keep an eye out know this but the vast majority of retail folks don't pay attention. if the msm starts talking it up, watch out. I have always thought that this will be extended as this coin is what supports the commercial paper market.
i trade out of ML and all my accounts have the fdic insured option.....
I would have thought it would have been extended as well which is why I was shocked when our esteemed Treasury Sec said today that it was ending on the 18th...maybe they are testing the water (you know how they like to do that) to see if they get any negative indications before they actually lift the insurance.
Yup. Used to just do what they wanted now they check for backlash beforehand.
The Fed is keeping interest rates low. Normally the Fed would purchase securities from the primary dealers to inject money into the economy and lower the interest rates. This appears opposed to the Fed's recent selling of treasuries which reduces the money supply and should increase rates. So the Fed is doing both, but for rates to remain low, there must be net buying by the FED which in turn provides a steady stream of profit to the primary dealers.
Is the Fed buying stocks from the primary dealers? Are they buying SPY from JPM? Is the FED like a self-licking ice cream cone?
self-licking ice cream cone?
I knew it! Ben is the dog in the late George Carlin's routine, "...and the dog is licking his balls...!"
fed purchases of bonds from primary dealers is
the very definition of open market operations and
we know that they have been doing this all
year now....and of course the effect is to lower
interest rates on bonds...
i am not aware of fed selling treasuries and am
not exactly how that plays into the strategy
of lowering rates....maybe it's an element of the
exit strategy....
the primary dealers last i heard were sitting on
tons of unsold bonds and were in a huge world
of hurt so i cannot imagine what primary dealer
would want to buy more of the crap unless there
was a large discount involved...
but i have speculated that the pds might be buying stocks
with bond proceeds....
for an opposing of view regarding qe influence
on the market see
http://www.zerohedge.com/article/correlation-sp-500-performance-fed-mone...
And it gets even clearer the further back you look.
I went to the ICI LT equity data set (thanks for the link) and came up with this:
Net Dom equity fund outflows:
Since 1/31/07 -193.005 billion
since 8/31/08 -95.524 billion
(or pick your own time frame the data is easily dumped into an excel spreadsheet).
So it appears the buy side has been selling (although not that much (100b of 4.8t in assets is only 2%)). That explains the higher % of HFT trading activity we've seen recently (HFT is trading with itself). Basically, no one has been buying US equities. and the gunning up of the indexes inflates the marginal value of the index.
What are the implications of that? Clearly QE is not propping up the US equities markets, else we'd be seeing huge margin debt as evidence. Which we don't see.
this is interesting....i have believed that
qe was floating the market....if margin debt
is necessarily required evidence of such a
phenomenon then that theory goes out the window...
but is margin debt necessary for stock purchases?
could stock be purchased outright?
and yet the qe announcement and the take-off of
the market are so closely timed that it is difficult
to give up the theory...
on the other hand 401k money is always coming into
the market each week and that money would dwarf
any other source of money.....it seems reasonable
that after qe was announced that account managers
decided to unleash pent up money back into the
equities markets....but there is so little volume
to explain it and hft can explain about 70% of
exchange volume....
i would love to hear from more knowledgeable
forensics experts than me...
Let's see, I've lost my job, I'm underwater with my mortgage, but I still have my
401(k), although it's down 50% in the last year. So, where do I get money for
groceries, the mortgage and credit card payments?
Exactly.
That's the question I asked myself in 1991. I was underwater for the next 10 years (as were all my peers, we have short memories),and found a job, and plodded along. I'd still be plodding along if my buddy Greenspan hadn't come along and transformed my underwater mortgage into an ATM and propped up an industry where a clever, educated guy like you, could make a nice living.
I don't think that's going to happen again for this generation.
The top 10% own something like 60% of the wealth. Even if they are out of a job they are still wealthy. The poeple out of work probably have very little money int he market. The littel they have in a 401k is not and cannot be leveraged.
So we can have a big ralley even with high unemployment as the banker jobs were saved and thus they can still play the game.
the top 1% own 57% of the wealth....
i don't recall what the top decile captures in
income but i recall it being below 57% -
maybe in the high 40s...
You got it. James Quinn in “Living in Beverly Hills” said Sept. 9: “The consumer is tapped out. The median 401k balance in the U.S. is $26,000. Boomers realize they are 60 years old and have $50,000 of retirement savings and $30,000 of credit card debt.”
The implications are disastrous, says Quinn, for those dependent on a consumer spending society--retailers, restaurants, hotels, car makers, homebuilders...
Homeowner’s equity has plunged from 70% in 1980 to 45%, says Quinn. “The Federal Reserve created spiral in prices upward has trapped millions of late comers in houses that are worth 20% to 30% less than the mortgage debt that is strangling them. Over 16 million home occupiers (not homeowners) are underwater in their mortgage.”
Confounded by all the BMWs and Mercedes on the road compared with the number of people with enough income to own one, Quinn’s research found “the whole sordid story”--borrow today, live like a Beverly Hills hotshot, roll the loan... According to the Federal Reserve, says Quinn, “consumer non-revolving debt grew from $300 billion in 1980 to $1.6 trillion today. About $1 trillion of this is auto loans. The average automobile loan today is for 63 months, with some going as high as 84 months, compared with an average of less than 48 months in the early 1990s” The average loan amount is now $29,000; in 1997 it was $17,000.
"Easy money allows the poor to live like the rich," says Quinn, which explains why people in West Phillly are able to drive $50,000 one year old BMWs.
The average outstanding credit card debt for households with a credit card was $10,679 at the end of 2008.
Who’s benefiting from the Rising Debt Era? Says Quinn, The beneficiaries were Bank of America, Citicorp, Wells Fargo, JP Morgan and the other members of the cartel--those that received TARP relief "provided on the backs of the taxpaying middle class" after their debt knowingly issued to people who would never pay it back went bad. "The 10 biggest banks in the country control 48% of all deposits, 50% of the mortgage market, and 87% of the credit card market, supported and protected by the Federal Reserve and Treasury Department. The ‘too big to fail’ continue to get bigger, as the FCID will shutter 500 smaller banks in the next year.”
Quinn sees consumer credit debt as the stumbling block to economic recovery. “Consumer credit debt is $2.5 trillion… The pundits and economists predicting a strong economic recovery are blind to the truths of consumer debt. With actual unemployment exceeding 16.8%, 9 million people forced to work part-time wanting to work full-time, the work week at all time lows, and banks shutting down credit lines, consumers will be reducing or defaulting on their debt for years. With 70% of the economy dependent on consumer spending, there is absolutely no chance of a strong recovery.”
Quinn is a senior director of strategic planning for a major university.
http://www.financialsense.com/editorials/quinn/2009/0909.html
'If you eat the cake, you don't have the cake anymore".
Marc Faber.
I personally have lifted 75K from my 401k over the past 6 months to pay bills during and after my two businesses went bankrupt after 11 years in operation.
I would take a look at Beyond-trading.com since they called the sell off in FAS 81 to 67 as well as the rally since then. No spam. FED related
The President told us back in March to buy stocks.
He will tell us when to stop buying them, right???
Anyone who listened to Obama is minted with money right now.
I was long through March and made back a lot of my losses over the next couple of months but bailed out of most stocks to early sometime in May. Had I held on to those some of tripled even from there. I got back in to a lot of things in July/August but am still being cautious by slowly taking profits and just daytrading the incoming cash. Less and less is being locked up overnight. It is just scary that any real volume day we're seeing now is on down days.
This money aint goin into bond, at least not entirely, and not the less-than-5 years for sure. It's moving to emerging markets! where you can earn 18% in August jsut by buying the index!
p.s. are these captcha for 5th graders? coz those math questions are way too complicated for my head
The outflows you are seeing are Baby Boomers saying "enough is enough"
Richard Kiyosaki has warned about this demographic shift for a few years
Pension/401k/IRA laws will force Boomers to liquidate whether they want to or not for many years. Boomers and the money they inherited are overweight us common stocks.
Now that the market has sickly recovered so quickly you better believe the impetus is to liquidate after 2 general market crashes since 2000
You spend a lot of time discussing SPY volume...by know means am I trying to promote my own work here and I am legitimately wondering what your thoughts are on an article I recently wrote discussing SPY/S&P 500 volume divergences http://bit.ly/4GuCKy