This page has been archived and commenting is disabled.
Equity Mutual Fund Outflows Accelerate As Market Ramps Higher On Low Volume, Computerized Churning
The most recent data from ICI demonstrate that even as the market continues melting-up on low volume HFT churning, domestic equity mutual fund outflow have accelerated: the week of October 14 saw a quarter high ($5.3) billion withdrawn, and the cumulative ouflows since August have hit ($25) billion: a number that makes no logical sense when juxtaposed with the overall 7% market move higher during the period. What does explain it is the roughly $200 billion in USTs and MBS purchased by the Fed during the period. Yet, the take home message is that the money on the sidelines is not only not entering the market, it is getting bigger, despite endless attempts by CNBC to get everyone and the kitchen sink to open an E-trade account and fund their margin calls with Capital One 19.95% APR credit cards.
»
- 5446 reads
- Printer-friendly version
- Send to friend
- advertisements -
Well with 2 episodes of 50% capital destruction in stocks over the last 9 years, I'm surprised anybody has any capital left in equities. Oddly they all still hate gold for some reason, even though it has gone up for the past 9 years. Can you imagine what CNBC would be doing if the Dow was up 9 years in a row!
just from anecdotal many people I know in their 50s and 60s are done with the market, period. It could go up 300% from here. A - they don't have any more money to risk and B - they've been burned twice in a decade. And that does not include real estate bubble in between A and B.
We have an equity culture that is taken for granted. In Japan about 3% of people own stocks, its a rich man's game. Here its now a computerized man's game... funded by the peasants who are told put your money into the market. Which leads to 1 of the largest scam of all, 401ks.
I think US peaked at something like low to mid 40%s compared to Japan's now 3% (I have no idea what Japan peaked at in late 80s)
But so many of these people have $4500 here in a 401k or $2200 in an IRA
the myth that Main Street = Wall Street is just that. Median 401k is somewhere around $45K in value. Which should get a person with a house payment through about 2 years of retirement... if that.
Just imagine if Bush had succeeded in putting half of our IOUs of Social Security in the market mid decade....
But the Bushie's did put the Pension Trust bonds into equities at higher market levels than this I memory servers me.
A vote of no confidence is being issued.
You may be on to something.
Today's Rasmussen daily poll reports that a continuing 60% or more of us think we are going in the wrong direction. Meanwhile there is a report that the Senate Democrats are going to continue the trust building program by trying to sneak an amendent through to raise the debt ceiling without us noticing.
That the explains the 1 year downward trendline on the VIX without being broken. In essence, there is no market fear, because the machines are the only ones trading, and machines have no feelings. All the beings left and exited already. Now we have a mechanized trading platforms. Soon the wall street trading floors will be filled with trading robots from Honda.....
Cash in those 401K's while they're still worth something.
I would but I can't until I leave the company or the company fires me, which I expect they will do as soon as my 401k takes another 50% hit...
Meanwhile, one of the guys I work with came by to tell me that he is still adding to the AAPL position he started at $38 (I missed this one big)
That's unfortunate. I cashed mine in last year, and even though the leeches at the IRS took a huge chunk, I'm glad I did.
Put it in cash or something else more conservative. your company has a fiduciary responsibility to offer multiple risk options.
I kid you not, the most conservative thing they offer is a government bond fund that Bill Gross is familiar with.
Absolutely nothing that is insured is offered, and believe it or not, they don't even offer a money market or "cash" option.
Were it not a way to reduce my immediate taxable income, I doubt I would participate.
Looks like Karl Denniniger's Boycott is happening all by itself.
Who is taking their money out of mutual funds? Is in the 14 or so Too Big To Fail (TBTF) institutions who are withdrawing or is it smart money who are saying ... I don't trust any of you yahoos with my money".
When TBTF fail they won't be taking of any of my money with them and the FDIC won't have to pay me a cent.
The data shows the money is not flowing out of equity mutual funds to the sidelines, it's flowing into fixed income and hybrid mutual funds.
There are a lot of chairs being removed from the circle....the prop trading desks and mutal fund and pension fund PM's better hope the music keeps playing. Too bad its a 1980's boom box blaring "Can't Touch This" and running on 4 old "D" batteries held in place with duct tape...
Despite whatall the numerous statisitcs are screaming at us. Bert Dohmen's recent statement in today's post that 50-75% of all market volume today is HFT driven. Money flows (via ISI, Trim Tabs, or others) showing the massive money flows OUT of stock funds. Plus many others. Most traders and managers have very short memories and often remember only recent market action. Take a step back, think. If you're managing a large portfolio (or smaller personal ones), you have to be nervous, and you have to exercise great caution, prudence and discipline. These markets could implode at any time, for any one reason. Sure, do they go up each day? Yes. But, ask yourself, is it real, and is it based on a strong foundation? No. This is government induced ponzie paper coupled with perfomance chasing anxiety. We remember the '87 top, the AMR debacle, LTCM. The underlying fundamentals today are much weaker. Protect yourselves. And remember the old saying: Lost opportunities are easier to make up, than lost cash. Good luck everyone.
You have it right, AR. Flows OUT of domestic equities has been pretty substantial as TD reports, but it has been more than made up for with fund flows into bonds (a lot) and hybrids (a little). Even foreign equities are showing a net inflow over the last 4 weeks.
Bigger picture: The overall influx of funds into mutual funds is shrinking (but still positive), no matter what the category, down $10 billion from a month ago. Oops, it may be time to put that cash in the mattress (again)!
Lilguy
I'm one of the 401k captives. We have the option of moving our money from one bad choice to another. The "safest" is a money market, with dollar losing value every day, and the Fed proposing to pawn MBS off on money market funds.
When the music stops, the middle class will get screwed again. Look at today: equities flat or down, bonds down, commodities down. I guess we're supposed to be happy about the dollar temporarily taking one step forward after taking four steps back.
Tyler's focus on the middle class is the right one. As much as we're refusing to be handed the bag, we'll end up holding it any way.
This is a prime example of HFT and their mo-mo algorithms churning markets higher-- and distorting reality beyond all recognition. This really isn't liquidity providing at all...
When the trade goes the other direction (and it will), are the HFTs going to be there to provide liquidity in segments of the market that are sorely needed? Or just point the algos the other direction and churn the market (in this case, a collection of 5 or 6 stocks) well below what the fundamentals indicate?
Policy makers need to get it into their thick heads that this is the net effect of the HFT. As long term investors continue to pull out and remain on the sidelines, these nanosecond traders will become even more dominant over total trading volume.
19.95% interest? Wow that's cheap!
Most in the UK are now 25, 30 or even 45%!
Delete repeat
delete repeat
The remaining 'nest eggs' speaking broadly of the US middle class reside in 401(k)s and the agent-controlled pension and insurance investment pools. Equity and bond funds will tend to extinguish principal as volatility and underlying flat to negative returns cause bloodletting after bloodletting.
But what fund manager can just sit in cash/money market and charge fees higher than the return? So they keep trying.
It really is that bad. Roach motels are full, for now, but soon fresh traps will be lain. Just ignore the stench of rotting bodies, it's really a nice property...here's your stretch of cardboard and a nice sweet treat.
I for one am out of the market, cashed out the Roth, took the 401(k) on loan (while parked nominally in money market) and more debt to make the house bigger. If I stay employed, everyone wins. If not...everyone loses. All else equal I will be happier and no worse off compared to getting my nuts ripped off by Goldman squidputers.
Once all work is done, refinance totally to local credit unions and bye-bye to the Big Boys. They can go play with themselves.
You only keep what you save and the assets you own. Investing in digital markets is dead...and getting deader.
Don't worry guys, I'm sure that MCC will provide a rational explanation for all of this.
Don't worry guys, I'm sure that MCC will provide a rational explanation for all of this.
Don't worry guys, I'm sure that MCC will provide a rational explanation for all of this.
Can ETF inflows partially explain away this phenomenon? Even as open ended US funds lose money, ETFs and foreign funds are gaining mightily. I think it reflects lack of faith in the long term prospects of the US equities vis a vis the rest of the world rather than people abandoning all equities.
A well known guy is setting up a fund in Boston with 10million in capital. The banks are drooling over the biz, at 0.25 cents per share.
Why?
Levered 8 to 1 the guy promises 30million shares a day in trading.
That's 19million dollars a year in commish.
And people wonder why the markets can reverse in 2 minutes late in the day by 150bps, based on Dick Bovine's call on WFC???
This is not a stock market looking for an excuse to go down, or up. This is a market that has absolutely no clue, minute by minute. It's a bunch of guys
in Shelby Cobras in a circle playing chicken, waiting to see who flinches which way on each data point, with each player thinking he has faster reflexes than the other guy.
Have always kept my 401k in the MM/cash fund (GIC, whatever). Better than those crappy-ass mutual funds they offered. Do my real investing in my rollover. Have been moving most of my wad into intermediate-duration global bond funds this year. Anyhow, the point of this post is my [purely anecdotal] observation that there has been a relentless bid under everything and anything that seems to offer a reasonable and predictable bond-like return (preferably paid in cash as divi or distribution) with a minimum of perceived credit risk (certain bonds, Agencies and agency REITS, sovereigns, big MLPs like KMP, etc.). Slow and steady, no panic buying, very disciplined. Stock market? A manipulated sideshow in which computers play poker with each other all day. Fun to risk a little (like Vegas), but to paraphrase one of the characters in 'The Usual Suspects', "The greatest trick the Devil ever played was convincing us he didn't exist. The greatest trick Wall Street ever played was convincing us that stocks were a good way for J6P to save for retirement."
This is great news. Sober 50 year olds are now exiting in an orderly manner thanks to the HFT guys. I love it.