This page has been archived and commenting is disabled.
Another Equity Outflow In Prior Week As Market Goes Parabolic, $3.6 Billion Taken Out Of Domestic Equities Since February Lows
For today's dose of Alice In Wonderland capital markets, ICI just reported that the week ending March 31 saw outflow, this time -$61 million. Year To Date domestic equity flows are ($3.6) bilion, the same as from the February lows. The S&P has gone parabolic with no retail participation, and in fact, with capital withdrawal by investors. We are confident the Federal Reserve has some good explanations for this rotation out of equities and ever more into bonds.
»
- 4730 reads
- Printer-friendly version
- Send to friend
- advertisements -
Benron would explain this as the retailers being the "dumb money."
What intervention? jk
If the market is rising on the back of outflows, just imagine how much it will go up once the inflows begin again.
The sheep are leading themselves to slaughter by chasing the mother of all bubbles, bonds, as opposed to chasing good quality stocks with growing earnings, particularly in the commodity sector.
Retail participation is no longer a prerequisite to market movement.
Maybe they are taking the money out because they need it to live on.. there will be no retail investor participation this time because they haven't anything much left to participate with...
Bingo. Maybe there will be no retail participation EVER.
Catch 22 is, when money stops flowing into bonds, rates go up and when rates go up, stocks become less attractive. In the rational world that doesn't seem to exist at least.
all the inflows appear to be going into AIG, also C is hot because the government selling will be so gentle that you will not even feel it
TD,
64 million outflows of dom. equity not 64 bln.
Further, what dataset did you use for the calculation of 3.6bln outflows? Using http://www.ici.org/pdf/flows_data_2010.pdf
the numbers do not add up.
Thx
As the baby boomers cash out, and, folks are hurting for funds, and have to cash out just to get by, the outflows will continue.
One other thing: I'm cashing out, paying the 10% penalty, because, going forward, taxes will be so high I don't want to trade off possible capital gains advantages in a retirement account against the risk of much higher tax rates next year or thereafter.
http://www.dailymarkets.com/economy/2009/09/04/us-stimulus-spending-to-reach-peak-in-early-2010-what-then/
This explains the recent economic optimism. Look at the decline starting in 2Q...further most of the stimulus in 1Q was those tax refunds which was viewed as free money by consumers and spend at retail which should not occur in 2Q. Lastly recall that govt accelerated those tax refund payments versus last year as reported by Zerohedge.
Ultimately all there are are retail investors. Corporations are just aggregations of retail investor funds. When the people start running out of money they will sell their ownership in the corporations to pay bills. Its only a matter of time before the market starts to descend due to overwhelming market forces.
"only a matter of time..." Agreed, but the inevitable is not necessarily imminent. For now, we have a no-volume melt-up in equities that, against all logic, appears to be headed higher. A huge wad of "money" is being forced through the markets like corn through a goose, and until that's been accomplished, a crash may be impossible.
Many people I talk to seem to have an image of the application of what is termed "rotation" between stock and bonds. However, the movement between equities and debt, I find so different that there is no easy "rotation".
The movement mechanics may be somewhat flexible in a nonpolorized market place, but the real problem is one of strategy. From a practical standpoint, the present "rotation" is only on the short end of Treasuries which has almost no return, and long term investment in sovereign debt is also a poor choice. There are other avenues to take for short term "parking" of your money.
Why assume the capital flows will "rotate" into bonds? and then when do you rotate back into equities?
----------
In the mainstream mis-information, I heard time after time about the benefits of asset allocation, and how the right mix would protect you from loss.
I called it the secret power of the pie chart.
But, once I looked at the assumptions, and then ran the numbers on how much it would cost, the approach made no sense to me. In basic terms, the expertise in investment vehicles seemed to focus on the ability to guage bond pricing or corporate financials. So if you were confident in you analysis, you would do what had the best chance at making money. So one may focus on specific stocks, or be fluent in Municipal bonds, for example. Your investments would follow your analysis and strategies to produce a return at minimum cost, and not a "PIE" chart.
I feel the same way when I here the term "rotation" as some directional golden rule for capital flows. This is not my mental image at all. Perhaps I do not think like a mutual fund manager?
Mark Beck