Following 7 Weeks Of Market Topping Inflows, Retail Once Again Turns Its Back On Dropping Stocks With $3.1 Billion Outflow

Tyler Durden's picture

It was to be expected: after 7 consecutive weeks of inflows during which the market drifted aimlessly, while seeing insiders dump a few billion to witless retail hot potato chasers, forming what some are calling a quadruple top, not to mention various revolutions and now counter-revolutions in MENA, the retail investor has once again said enough and turned their back on stocks. The beneficiary: taxable bond funds, which saw a whopping $4.8 billion in inflows, despite attempts by everyone in the propaganda machine to dissuade investors (read Baby Boomers) from putting their money into fixed income and reroute capital to stocks. Well, in an age of immediate demanded gratification and POMO-adjusted Newtonian third laws, every future inflow better be met with a greater than expected spike in the market, or the resulting outflow in the next week will be vicious. Also those hoping that the ongoing outflow from munis will finally end, will have to wait at least one more week: the week ending March 3 saw $711 million in muni outflows. Of course, following today's spanking by Jeff Gundlach we wouldn't hold our breath on a massive resurgence in capital allocation to an asset class which one of the greatest fixed income minds is due for a 15-20% correction. Yet what truly boggles the mind, is Legg Mason's response on how the $672 billion asset manager plans to deal with billions in sudden redemption requests: "Those outflows will be largely offset by market appreciation," said Nachtwey, chief financial officer of Legg Mason." In other words, the Ponzi will continue... or else Legg Mason is dunzo.

And some more observations on how not only retail is pulling money, and what this means for mutual funds, now leveraged more than ever in the post-Lehman period:

Two mutual-fund management companies said Wednesday their assets were affected by outflows in February; the companies, Franklin Resources Inc. (BEN) and Legg Mason Inc. (LM), wouldn't say whether they had net outflows overall for the month.

Franklin Resources's assets under management were affected by $4 billion in redemptions by institutional investors in global equities in February, Ken Lewis, the company's finance chief, said at the Citigroup Inc. (C) Financial Services conference.

Shares of Franklin Resources closed down 2.5% at $123.98.

Still, "the quality of the flows in January and February has been improving," said Lewis.

The San Mateo, Calif., money manager reported Tuesday that assets under management totaled $693.7 billion last month, up from $681 billion in January and $556.3 billion a year earlier.

Also speaking at the conference was Peter Nachtwey, chief financial officer of Legg Mason. Factors affecting investment flows last month include a fixed-income outflow of $1 billion and another two dispositions of $2 billion each. One of these $2 billion outflows is related to an "Asian equity manager who bought their operation back," said a spokeswoman.

Those outflows will "be largely offset by market appreciation," said Nachtwey. In January, assets under management totaled $671.8 billion, little changed from a month earlier. The Baltimore fund manager will report assets under management, as of February, on Thursday.

And if, heaven forbid, market appreciation does not occur...

Then what?

h/t London Dude Trader

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collegepunk's picture

no surprise, flows aren't a leading indicator

AN0NYM0US's picture

as bob blackrock doll mused this morning on Bloomberg, the outflows two years ago(between 666 and 900 were gargantuan and according to him most of that money went into bonds many of which are underwater. He didn't mention Rosie by name.

zoogle's picture

Ahh, I remember these ICI charts being touted here while the outflows were negative but as soon as they turned into inflows they disappeared immediately. It looks like we're due for another cycle of negative outflows and full coverage of them once again.

Pool Shark's picture


True dat:

I'm as bearish on the main markets as most on this site, but I do appreciate some balance in reporting...


Ancona's picture

Wait until Uncle Bernank pulls his bid. All hell will break loose.

Get out of paper while you still can. Anyone else notice that the DOW has been stuck in a very very narrow range for quite some time. And that, on super thin volume. I can't wait for it to blow up.

Silver bitchez......Silver [the real kind]

John Law Lives's picture

More QE or no more QE.  We shall see.

Misean's picture

The game has taken an interesting turn or two in the last couple of weeks.

Vampyroteuthis infernalis's picture

My random guess would be an equity crash to justify QE3. QE forever!!

rocker's picture

Sounds like a plan to me. Not that they need a motive for QE3. But, they need a Motive. Doing God's work, as the squids say.

william the bastard's picture

The public is moving back into munis so they can get slaughtered there. Pick your poison. Every street corner in Hiroshima looked the same at the end.

Mad Mad Woman's picture

These outflows will be made up by market appreciation, so sez Legg Mason. They better start praying that it does, cause I don't see it happening. Bwahahahahahahahaha!!

Caviar Emptor's picture

Legg Mason: get out your barf bag. It's gonna be sickening. 

For those of you who haven't been around long, this pattern of outflows is unprecedented. By the end of the first year of a bull run money is usually pouring in. 

What you should realize is that in normal times the inflows never stop for long because people gainfully employed at jobs with retirement benefits keep adding money every month. In "the old days" that money went mostly to stocks. 

Can2001's picture

How we learned from mid 2010. Inflows are bullish. Outflows are bullisher...

apberusdisvet's picture

Icahn is no dummy folks; he has seen it all; if he is quitting, watch out below.

99er's picture


An AB=CD target of 1293 would have prices breaking down out of a Diamond Top as well as a long-standing rising channel. Bearish.

george's picture

Could one interpret this info as a confirmation of a belief that the markets are in fact not free?

asteroids's picture

Repeat after me... The stock market is not the economy.