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ICI Reports Ninth Sequential Equity Fund Outflow In A Row
ICI reports that topping off the underperforming H1 market action was yet another equity market outflow, this one to the tune of ($227) million. This represented the ninth sequential domestic equity mutual fund outflow in a row, and accounts for fund flows of over ($30) billion YTD. This follows on the heels of last week's once again deteriorating AMG/Lipper HY fund outflow report. Retail investors are not only not participating in the market, but are actively continuing to redeem capital out of any form of equity, transferring it into taxable bond funds. Mutual funds continue to not only be low on cash, but facing ongoing redemptions. Luckily, HFTs have none of these problems: all they need is to sniff out a major block bid from a dealer with discount window access, front run it while blowing up the NBBO via subpennying, accelerate the momentum, without needing any actual material capital, and end flat on the day. Mutual Funds will of course take the pick up in price levels and thank HFTs kindly, knowing full well they are unable to be marginal price setters any longer. So aside from the logistics of ramping the market on capital liquidations and margin calls, 4% market surges such as those seen in the past two days make perfect sense.
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So today's scam melt up was due, to cover up all the margin calls of all the funds being underwater the last few weeks. Now I see.
scam melt up? Its called a bear market rally JK. They happen all the time. Anyone who thinks markets move up or down in a straight line lack a basic understanding of how markets works. Short positions should have been closed out after the recent selloff. They were hugely profitable and investors betting on a straight line decline to S&P 900 are just being greedy / silly.
Amen HJ. Some of the largest one day rallies in history have happened during cyclical bear markets.
In a normal market, I would agree. A rally is one thing, but a 280 point move is ridiculous on the heels of yesterday's 50 point rise in the last 5 min, with futures opening lower this morning on top of it all, is nonsense at its finest. I don't care how anyone wants to label it, its not normal, and it is not healthy.
I actually placed transactions in my 401k to go long some this morning, but after a 280 point move, that is totally unsupported, I cancelled the transactions before 4pm. I actually felt the market was a little oversold from the last 2 weeks, but a 300+ point move in a span of two days, just put it well back in the overbought category IMO, and prime for another massive selloff if the data continues to be as poor as it has been. That is my view of it anyway. I already made my short on ES from 1112 to 1024 and cashed out. I know nothing goes straight down, but this market sure loves to go straight up for no reason. But, there is a reason, Benny just won't admit it publicly.
"Luckily, HFTs have none of these problems: all they need is to sniff out a major block bid from a dealer with discount window access, front run it while blowing up the NBBO via subpennying, accelerate the momentum, without needing any actual material capital, and end flat on the day. Mutual Funds will of course take the pick up in price levels and thank HFTs kindly, knowing full well they are unable to be marginal price setters any longer. So aside from the logistics of ramping the market on capital liquidations and margin calls, 4% market surges such as those seen in the past two days make perfect sense."
Yes!!!
Yes, yes, Equity markets are a joke. Thanks for reporting though TD.
Curious minds are wondering about the scope and scale of tomorrow's Trashury offerings...
What kinds of ultra low yields for how many bazillion in bonds, bills, and assorted debt ponzi paper?
http://www.treas.gov/offices/domestic-finance/debt-management/auctions/a...
http://mam.econoday.com/byweek.asp?cust=mam
Hmm absent any QE, I wonder how long this can continue...
Since you asked, what the hell I'll give you my guess. Second qtr earnings will probably be decent enough or "in line" to take the SPX back up to at least the 200 DMA which looks to be 1085 at the moment. That should take us well into Aug where we'll be deep into third qtr where everyone will realize "hey, this shit just ain't happening." But what the hell do I know, I thought the 1040 resistance would hold.
Well I'm with you on this prediction.
well, geithner is disgusting. among other things he says (with a smarmy smile) letting the Bush tax cuts expire is good because it will take us back to the same level as in the 90s and that was a great time.
"By God! Do you know what this means? It means that this damn thing doesn't work at all!"
--Dr Emmett Brown in "Back to The Future"
I can hear the bulltards now, "This is a contrary indicator. The dumb money is getting out at precisely the wrong moment." Well, to that I say, gobble 'em up and good luck.
Rasputin has officially thrown in the towel on his bear rantings over at WSB.
"This can't go on!" Not even one more nano-second!"...
Rasputin
- Wed, Jul 7, 2010 - 05:44 PM
...or so screeched a then-firebrand Ras, over the decades.
However, even a die-hard doomer mad-monk was having his doubts over
FOUR YEARS AGO, in a post shown here:
4/16/2006 5:39:06 PM
Rasputin Grows Restless
I'm getting frustrated waiting for this so-called imminent collapse
I have been ranting about for twenty-five years now (but especially the
last five or so!).
I mean, really.
To wit:
-I have read no fewer than THREE-HUNDRED of Doug's excellent
"Credit Bubble Bulletins" since 1999.
-I have hung on every word of Bill Bonner and company at "Daily
Reckoning" AND have bought both of his and Addison Wiggin's books in the
last three years.
-I have listened to Stephen Roach scream "This can't go on!" for
years and years now.
-I have bought books by Rubino, Talbott, Truk, Duncan, Prechter,
Leeb, Simmons--you name it--ALL prediciting imminent stock market
crashes, oil shortages, housing busts, dollar collapses, and all manner
of mayhem.
-I have read virtually EVERYTHING Jimmy-Pup has written over at
"Financial Sense".
-Jim Willie too.
-Not to mention that I have spent literally YEARS learning how our
modern-day worldwide financial system (if you can call it that) works by
studying the BIS site and white papers, the IMF site and white papers,
the Federal Reserve writings, macro-economic textbooks, financial
textbooks, PowerPoint presentations, PDFs...
-And of course, I have had a "Fannie-Fetish" for a number of years,
ALSO studying how the MBS players create their particular brand of
chicanery. I have also purchased and read several times though Frank
Fabozzi's voluminous "Fixed Income Securities" tome.
-Oh, did I mention that I have read and studied everything I can
get my grubby little hands on regarding gold and silver, including
innumerable articles, PDFs, books, graphs Websites PowerPoints, and
other materials?
-I have also written a number of articles, short books, created
PowerPoint presentations, posted extensively here on Prudent Bear,
lectured my sheeple peers to the point of exhaustion (theirs AND mine!).
And all for what?
For nothing, that's what.
Now, I am at an impasse. How many more articles can I read
regarding the "imminent crash" before I catch on that it ain't gonna
happen?
How many more Websites can I visit that call for:
a. The demise of US dollar
b. The imminent stock market crash.
b1. Bond crash
b2. Housing crash
c. End of cheap oil
d. World War III
...before I get tired, bored and burnt out on "doom and gloom"?
I don't know, but I will state that I am getting close to
saturation here. In fact, I just recently threw out several hundred
file-folders stuffed with articles printed from the Web regarding the
above-listed subjects. I was getting tired of storing them, and in many
cases, the paper was yellowing to the point I was concerned that they
might spontaneously combust (making for my own disaster!). I have also
stopped buying "Doom and Gloom" books (I have passed up buying
Kunstler's "The Long Emergency", Leeb's "The Coming Economic Collapse",
and Talbot's "Sell Now!" books. I'm just fed up with these guys taking
my money and getting rich in fiat dollars while telling me that the
system is corrupt!)
So, at this point, I just don't know what to do. Should I just
"give in", and join the sheeple, uh, I mean human race?
Or should I hold out for ANOTHER five, ten, or even TWENTY years
before this whole thing finally plays out?
Or doesn't.
I'm sorry to have to say this gang, but I am beginning to believe
that being a bear is a terminal psychiatric condition--not conducive to
one's mental health.
Ras
"
(Ras Conclusion): See, bears? the doom-and-gloom case really IS a
hopeless one. And, as I stated yesterday, the ONLY reason I continue to
cling to my doomster-dumpster lifestyle is because I can't cut it in the
real, sheeple-tized, world.
But make no mistake about it; this little charade has, can, and
WILL go on long after our rotting corpses are buried six feet under.
LOL.
Being a permabear is conducive to depression! Anyone with even half an ounce of common sense knows the market is rigged heavily against them. The days of the corporation working for the shareholders were over long ago. If the management doesn't eat up the profits through options, Mr. Market will ensure that no morsel is left behind.
In this type of turbulent, immoral, cheating game... its best to sit this sucker out. Buy a couple of guns and a few months of food... after that, forget the worrying... live your life and store your earned income in gold for wealth preservation.
Endless worrying about WHEN the collapse is going to happen is quite retarded... Peak oil has come and gone... the clock started counting down five years ago. 2012 will see the supply dwindle at a breakneck pace. What does it matter if the market is 50,000 or 500 by the end of the year? Very few years from now, everyone will go back to square one and the rat race will start all over again.
Its best not to race with rats.
Common stock of a corporation can be a fine opportunity to own a piece of the equity economics of a profitable enterprise. To not like stocks at any price is to count on the complete collapse of the financial system. In my view history is full of doom-sayers sitting out life in fear.
So how is square one going to work? All industrious people will throw in the towel so you can appear from your shell and take the reins of corporate America. I own guns. I own gold. That is simple disaster insurance. But I think it "is quite retarded" to go all-in on "collapse." And I worry you might not be the couch potato to save us if it happens...
when collapse of the entire financial system is over 50% and the odds are only worsening, its not prudent to risk hard earned wealth for marginal returns.
ING warns of "EMU break-up risks global deflation shock that would dwarf lehman collapse" in the UK telegraph. A very good article on this very scenario. The article states that over 50% of central bankers are expecting atleast one eurozone member to withdraw and 25% expect complete collapse happening over the next two years. Seems smarter men than I are obviously worried.
I don't think that being a "couch potato" with my finances is wrong for me and mine.
"Markets can remain irrational far longer than you and I can remain solvent."
- J.M. Keynes
Conference Board Employment up the 11th consecutive month in a row,
up +10% yoy,
and equity mutual fund outflows for the 9th consecutive month,
(while debt funds are sucking up retail money like a sponge and SPX sitting on $1.7 Trillion in cash?)
Just shows to go lemmings may have no idea what they're doing or where they're going, unless it's ETFs...
http://www.conference-board.org/press/pressdetail.cfm?pressid=3952
Yes, the CBE is the key to everything. Great point. Or you can try and actually count the employed, unemployed and new unemployment insurance claims; but those numbers are cooked as well. Opinons are truly like ass-holes. But good luck being sure you know what you're doing, and where you are going. It is one humbling journey...
I guess the only way to send the markets down to where they belong and send Gold up to where it belongs is "Taking Pelham 123".
Can someone explain to me why the ICI data is not instead a contrarian indicator, since mutual fund investors tend to chase returns and positive inflows therefore signal overbought conditions, net outflows signalling oversold conditions?
I'll take a stab, and this is just my opinion. As opposed to a sentiment survey, which might indicate what people are planning on doing/or how they feel about the markets - the mutual fund data represents actual supply and demand information. All other things being equal (as economists say), if money is withdrawn from the mutual funds, stocks must have been sold. If withdrawals have occurred for several weeks/months in a row, it might indicate a secular (and opposed to a cyclical) withdrawal from stocks.
Reading a bit more into the data, there is some demographic and consumer confidence question as to whether individual investors (arguably one of the few meaningful groups able to provide net new flows into stocks - instead of just institutions trading amongst themselves) are simply no longer interested in stocks, or at the very least interest is declining. TD had an interesting article about how the viewership of CNBC was declining substantially last week.
Especially on a day when the market rockets 300 points, on no volume, with little fundamental news flow, and with a declining trend in mutual fund flows, the numbers suggest institutions are increasingly trading with each other, therefore creating a 'thinner' market more susceptible to large swings or perhaps even an outright crash, a la the "flash crash".
You can look around the website and the web to see if you subscribe to the belief that the Feds/GS/JPM/PPT/Liberty 33 are in cahoots to manipulate the markets on days like today.
All good points. But I would still be more comfortable if individuals weren't moving out of stocks. Individual investor flows have usually been contrary indicators in my career. But perhaps the fear of today's rigged markets is one of those, "the King has no clothes" moments?
I think you're on to something.
It was easier to rape and pillage retail investors when they had no clue about what was happening. Now there is access to information and every retail investor can get a better picture about a stock price.
The crash in 2008 was not caused by a bunch of Mom and Pop investors cashing in their chips. It was a liquidity event caused by major funds, maybe a handful of funds. Initially anyway and then followed by acceleration and selling of other funds. I still believe that the crash in 2008 served a purpose. It was a right before the election and it was to scare the people into voting for Obama and accepting the banks bailout. The banks were running out of other people's money and needed fresh cash.
Anyway, that's history. After that though, retail investors started paying much closer attention and if they were lucky enough to restore at least some of their portfolio, they probably pulled out over time. The market is manipulated and computer trading by major institutions to rig the prices upwards only to be able to offload stock when volume increases and stocks attract the retail investor. Eventually there are no suckers left. Not only that, the suckers are out of credit and access to liquidity. How many took out mortgages to play the market? Too bad we can't get a statistic on that but believe me, the DOW run to 14000 and S&P to 1500 had to be generated somehow.
The last drop that was so stupidly organized with a symbolic flash crash would have flushed out the most ardent of retail investors. They're out and they're not coming back. What are they supposed to buy? And the whole "panic buying" argument is complete and utter bullshit.
The data is out. The stats aren't going to improve. There's no feedback loop from increased earnings into increased employment. The pubcos. cleaned their balance sheets to please the large share holders. They laid off millions to show profits. Now that's done, what are they going to do? Invent ipads or other nonsense that is manufactured in China for $35 and sold at multiple times that to the stupid Apple worshipping community around the world.
What else? Looked at car sales recently. Not so sexy. Looked at furniture or appliances or dare i say, new and existing homes? All down down down.
There is NOTHING POSITIVE to report and there is NO MARKET.
The emperor has no clothes. The banks can drive the market up S&P 2,000 and I guarantee that only few retail investors will have made a profit. That's how their game works. NOBODY outside their circle is supposed to get rich.
There was a time when retail investors could get rich in the market. They bought IPOs during the dot.com and sold at the top. Or they were employees with stock options. That hasn't been repeated other than perhaps in the gold sector this past year where I personally had a good run. But I was in cash since early 2008 and had the money to play with. Didn't trust anything but solid gold miners with cash in the bank. Served me well.
IPOs.. not so hot this time around either. Tesla anyone? Lots of IPOs have been postponed. Why? Because there are no retail investors and the banks aren't interested into putting more deadbeats in their portfolio.
There is but one obvious choice to put money now and that is gold, physical gold. Don't care what it's worth relating to Dollars. The ponzi is a ponzi and it will have to collapse. That's how a ponzi works. There are no new suckers. Remember that.
I think the existence of blogs like this are one reason. I would have never known about "flash" trading, front-running, etc. from the MSM. But the more that was revealed here, and other places, the more I realized that Wall St. was rigged against Joe 6P and his dinky 401k/IRA. Bond prices may go up and down, but if you hold them till maturity, you know what you're getting.
It's one thing to go to a casino where you know the house has the hedge. Depending on your game, it's 1-3%, and you might get lucky and beat it in the short term. But when the person you trust is telling you to buy/sell something, while meanwhile guys in the same firm, with more money, better data, and better execution are taking positions directly opposite you, helped along with a sneak peak at your trades - I think you're a fool if you stay in that game. Gold, commodities and bonds might be manipulated as well, but that is not so clearly obvious to me.
I no longer own any equities.
Ok, i've decided i can't put it off any longer - here it is ...
Scary DOW monthly chart.
http://stockmarket618.wordpress.com
Trader, Bobby, walkure Kevin....incredible replies and I thank you.
I'm rather an isolated individual socially and don't have much sense of what folks are doing with their money...no water cooler or yard party stock chat. However, one index I do trust is the behavior of stock information services like IBD/Barrons and the online trading platforms.....want 3 mos free? Just try cancelling your service. In fact IBD took it so far as to call my home phone and talk my wife into renewing. That tells me that no, folks are no longer interested in stocks. They want to keep their jobs and their homes and try to save some cash. And why should they be interested in stocks? The ZH articles recent posted on correlation tell us we will not outperform no matter how smart we may be. As far as the MAy 6 crash, I personally went to cash at that point mostly b/c during that particular moment I had the sense that the market was basically OK with what was happening---everyone seemed to be waiting for the other shoe to drop anyway, equities propped up on stilts.
The only remaining question to me is whether foreign investors will still be attracted to US equities as the only game left in town...
The number nine, the number nine, the number nine...
Kevin, Walkure et. al., From my perspective, your reasoning is correct. I have participated in the stock market for approximately thirty years. Many of those people nearing retirement have been frightened away from the stock market. They can still remember the stories of the Great Depression. Also, these usually are the small individual investors with the larger portfolios. If sheer fear were not enough, simple financial calculations indicate departure. All investors expect a certain return/risk profile on an investment. Today, in the stock market, the combination of volatility and low returns tells a person to go elsewhere with their money. Just as an aside, but interesting, everybody should calculate the rate of return on their 401k cash flows. It's a bit deceptive, because many people keep adding each year and the rate of return is not obvious. When I went to do the calculations, I realized that the 401k administrators do not make it easy to to this. When people realize that from 2003 to pre 2008 crash, the return on a well balanced portfolio (60/40 equities/bonds) purchased during that time frame was around 2%, what would one expect them to do?
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