Investors Pull The Most Money From Domestic Mutual Funds Since September As Margin Debt Deleveraging Begins

Tyler Durden's picture

Two notable observations in market technicals: first, from the NYSE, May margin debt declined for the first time since the May 2010 flash crash, and after peaking at $320.7 billion in April, the May sell off saw hedge funds and other levered investors modestly contract their gross leverage to $315.4 billion. Additionally, net leverage, or total net credit aka investor net worth, increased modestly from an all time record low of ($75) billion to ($67) billion. Still, leverage is at very precarious level should the ongoing drop in asset prices be met with an actual cash outflow in the form of redemptions. Which brings us to the second observations: according to ICI, domestic equity mutual funds, saw an 8th straight week of outflows in the week ended June 15, with the mount hitting $6.9 billion, or the highest in not only 2011, but the highest since September of 2010. Year to date nearly $10 billion in redemption requests have hit funds, meaning the only saving grace to an all out liquidation would be an increase in asset prices, which however now that additional monetary easing is off the table, will be a very difficult accomplishment. Incidentally, since the beginning of 2010, equity mutual funds have seen total withdrawals to the tune of $108 billion: not a great amount in the grean scheme of centrally planned things, but quite substantial nonetheless.

NYSE Margin debt summary:

Domestic equity mutual funds flows:

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TruthInSunshine's picture

I've posted this in three other threads, but it's because it's truly must see TV for most of us who detest Bernanke and/or his policies (along with Paulson/Geithner), so my intentions are pure.

It's OT, so with that disclosure:


This is ex-Reagan Budget Director David Stockman on the Dylan Ratigan show today talking about failure of Bernanke, QE1 & 2, etc., and the Greatest Heist ever by Wall Street from Main Street, and is EPIC.

I ragged on Stockman a few weeks back, but there is nothing to disagree with in this clip, where he lays waste to The Federal Reserve & Bernanke, in particular.

Tyler - can you please make this a separate article with video?

km4's picture

+10 for Stockman one of the few that speaks truth to corrupt power

candyman's picture

Even though his wheels blew off years ago he seems to have stabilized. He was a disaster after Reagan and hated him but he is starting to make sense again, good for him. If anyone knows bankruptcy he does, gotta live it to know if its real.

PulauHantu29's picture

+10 TruthinSunshine. Thanks for sharing the video.

ZackLo's picture

heres a lecture in honor of henry hazzlitt on by stockman preety good!

treemagnet's picture

That was really good - thanks for the link. +1!

km4's picture

Good to see that more Americans are becoming aware of the ponzi scheme and pulling out $

mophead's picture

If "investors" are pulling money out then we know were things are headed. Rally bitchez.


Diogenes's picture

Maybe they are selling their mutual funds because they are BROKE.

A few months ago there was a comment on a similar thread, from an investment broker. He said most of the customers he knew who were selling or closing their accounts, needed the money for an emergency such as, losing their house or losing their job or helping a relative who was in trouble. This was unprecedented. In the past sure, he would lose clients but mostly because they were moving their account someplace else or because they died not because they were broke.

TruthInSunshine's picture

You got it.

This is also why a record number (30% - maybe as high as 40%) of Americans are tapping into retirement/401(k) plans for cash or in the form of loans against, penalties (and risk of non-repayment) be damned.

ebworthen's picture


I'm going to get mine out, don't trust those Sons of Bitches.

the not so mighty maximiza's picture

Politicians do this at their own peril in an election season.

Re-Discovery's picture

Recovery summer meet Bidless summer. 

And yes, you are now his bitch.

Tic tock's picture

It's a nice theory, let's wait until we see some real numbers behind it. $108B ytd could be dollar averse.

wannabe traitor's picture

cant decide  whether a short or long straddle would be appropriate....



PulauHantu29's picture

Only "dumb money" and banks (who get Free Money from the Fed) are buying equities right now to support the "suckers' rally." It's "sell the the small time Mon and Pop" suckers retail investors.


fiddler_on_the_roof's picture

Look what happened last time during septemeber 2010, Rally time aka risk on.

when retail gets out, it is rally time bitchez( I said bitchez first time...and I feel yuk )

Cassandra Syndrome's picture

So any guesses to where the outflows ended up?

Diogenes's picture

My guess is the small investors are cashing in their investments because they lost their job or because of some other financial calamity. I don't think they are going into other investments. If there is any sign of other investments booming on the flood of new money from small investors I would love to know where.

Goldenhands57's picture

Agree.. the reality is here. Many I speak with are offering rooms to Mom and Dad if they have them. I have no kin anymore but if my Parents were still alive I know for sure I would be taking them in. Zero doubt. I have the means..they never would prepare. Some upper Middle years now have 2 or 3 kids back in the house with Grandkids. Not what they expected being the Waltons...but there they are.

The only Boom you'll see is at the Food Bank lines. The needy just for food and nothing else are tripling every quarter in some areas.

 What I see is the 401K cashout going to float the credit cards, or lost insurance and a medical crisis hits. The Mortgage has not been paid in several years in some cases. Mastercard and Visa is where the 401K is going...desperate to keep the head above water while adding Lead to the shoes.  


XPolemic's picture

Soooo .... bullish on food/groceries, utilities, gas, ebay and repo-men, but bearish on everything else?


economast's picture

ETFs are +50 billion YTD.  HNW Advisors have been moving client assets out of funds into ETFs.  

Pensions have been moving further into hedge funds, probably bad timing.  Some of that flow has to come from mutual funds.

apberusdisvet's picture

Even the CBO says we are in the shitter and yet the banksters manage two gold raids.  Even the sheeple are wakening up to the blatant manipulation, especially as the Greeks are paying 120% of spot.

RobotTrader's picture

ES futures are imploding, New Zealand at new lows for the move.

ES at 1275

Lots of action for both bulls and bears the last 3 days.

Now the bears are control.


hamurobby's picture

Its fantastic, it plays right into my schizophrenia and mine too.

King_of_simpletons's picture

Get out of the stock market. Starve the beast.

Cdad's picture

That Average Joe is flowing out of the market is not surprising.  Even the least informed Dancin' with the Stars fan can see that the Fed, the Federal Government, and the equity and bond markets [via the actions of TBTF banks] have zero credibility.

I don't know anyone who thinks that the Fed printing money is a good thing.  And you don't need to be a ZH fan to have heard about this:

I don't know any people who think the insane debt issue in the US makes for a good investing thesis, and even a headline skimmer can see the results of such stupidity in Greece.  

As for the bankers, well, they are the only ones who believe in any of this crap...these fellows who destroyed the US housing market and cost millions of people their jobs.

Zero credibility will ultimately mean zero participation, or the lack of capital formation.  I know it is hard for bankers to understand, but this is not "unexpected."


Mitch Comestein's picture

Talk about dumb money.  The money flows did not turn positive until into January 2011 when the move was about over.  Now they will dump there positions and never return. 

I remember seeing a chart like this from the 70's.  I believe the net redemption pattern went on for 5-6 years.  So, we should at least expect that long.

Goldenhands57's picture

We were in a bind in the 70's, and no doubt it was a tuff scene..but NOTHIN like this is heading for.  Most Family's today are in a very bad corner. But I'd agree, Mitch, but bet the cash out is in less time. They won't want to cash out, but will have to. Already on the where else to go except the 401K/IRA.

 As Inflation (hyperprinting) pushes Prime percentages up quickly and hits 10% and then MUCH more, yet at the same time the Dollar is tanking every day in purchase power (or more; drops totally off the cliff) the "loot or buy anything and everything of any value with ever loosing value Dollars" will kick in (Argentina Syndrome).

 The 401K/IRA and such tax penalty and added "income" from the early redemptions will be meaningless. Brokerages will take a beating to say the least. Gen X and younger have NEVER seen 18% or 21% or higher like we have, and it's going to knock them right to their knees.

 Desperation and outright default of taxes of every kind possible follows as millions of younger families living paycheck to paycheck already, and floating debt on credit cards, throw in the towel. That is what I believe will be the trip events that will crash the Indexes. Any Babyboomers left standing in there with Equities in such "plans" (which I cashed out of long ago in 97 to buy physical PM in 98/99/00) and holding on as "advisors" lie saying "it's cheap BUY now!..values are better!..average down!"..ect. will end up with the shitty mess of anything left of what was their retirement hopes. Gen X is already toast... and when our Generation takes the hit, it's gonna make a lot of folk very pissed off in a very big hurry. So I'm giving the ZH people here a LOT more credit than the Sheepels. Its an obviously aware crowd here..but I speak with a lot of our own kin and age group of the VietNam era each day and most are totally clueless. Frozen..not knowing crap. Not WANTING to know. Fearful of the tax hit!  Ignorance while in the Markets (any Market).. is a 100% SURE way to get a very expensive education! Hunker's not going to be good when this party is over.  

TruthInSunshine's picture

The difference between the 70s and now, and it was a massive one, was structural unemployment.

People laid off in the 70s due to the energy/oil crisis and other genuinely temporary issues got their old jobs back or better jobs thereafter.

It's exactly the opposite now.

There was no 'trillions in new plants and productive facilities' being built in places like Mexico, China and India, not to mention the newly emerging places such as Singapore or Vietnam, back in the 70s, permanently draining good American jobs by the millions.

Multinationals do not build massive, expensive, sparkly new plants in China or Mexico without government assurances that they'll be able to use them for the long term.

Goldenhands57's picture argument here. We're totally up the creek now. Your correct we had a base to get our feet back under us back then. Corporate Bastards sold out the heart of America and shipped it over the Borders. I truely do worry over this..and I speak with the young family's I know; about as bad as it may seem, they may have little choice but to expat...IF they have a chance to do so. Breaks my heart to say that to them too. Some are looking into microvilliage. That could be an option if they can work it. All those University grads eaking out a life in Victory garden lives!  What a cluster! 

JR's picture

The following points were made by Edward Bernard, chairman of the Investment Company Institute, at ICC’s 53rd annual general membership meeting. They appeared in the article, Fund Industry Still Coping With Repercussions Of '08 Crisis by Daisy Maxey of Dow Jones Newswires, on May 4, 2011 in the WSJ:

“ICI research shows that 'across a wide spectrum of ages, investors have a reduced appetite for risk,’ Bernard said. Among households owning mutual funds, the share willing to take above-average or substantial financial risk in exchange for comparable returns has declined to 30% from 37% since 2008, he said.

“An ICI query last winter found that nearly three out of five American households with financial assets said they had increased their regular saving amount, delayed the age at which they will retire or shifted their investments to a more conservative mix, Bernard said.

“Such changes have impacted the fund industry. ‘Since the bear market, flows into domestic equity funds have been weaker than market history would predict,’ and flows into bond funds ‘have been stronger than expected,’ Bernard said. Reduced tolerance for risk has been particularly strong among those in their 30s, he said.

“The industry must reach out to investors, offer financial education to ‘foster that younger generation whipsawed by two bear markets’ and design new products and services to help investors achieve their goals, Bernard said. In addition, it must pursue policies that preserve and extend incentives to save and invest, which means demonstrating to policymakers that the tax incentives for 401(k) plans and individual retirement accounts ‘make our country stronger,’ he said.”

Goldenhands57's picture

Flows to Bonds..being "bought" by Timmy via handouts from Ben who is selling out the Generations to come a Trillion Dollars at a time. Therein is the music for 401K/IRA, which when it stops is the final blow. Realizing that innovation and manufacturing the worlds best products IS the goal, and to export the finest quality products ment everything is what we WERE and now not capable of to nearly the degree. We need, the concept of a stronger Country by providing "incentives"? This simply overlooks the core issue. We didn't need 401K plans because we had defined pension plans guaranteed for life at vestment! ERISA took "the Deal" I grew up with and that my kin worked entire lifetimes for away! That resource, our ability and commitment to the company we worked for  to provide that security BY LAW was sold out from under us. They then left totally uneducated "investors" by the Millons..corraled into Managed Mutual Fund accounts with all the fancy graphs and charts of how "we'd all be retired Millionaires by contributing the max" out in the cold. 

 .. almost forgot this one too.. Real Estate NEVER goes down in price.


JR's picture

You couldn't have said it better, and more succinctly. There it is.

ebworthen's picture


Let's see:

"Get it out before it is taxed to death."

"Get it out to pay the doctor to prescribe me antibiotics my tax dollars already paid for."

"Get it out to buy an iPad."

"Get it out to buy a good long rifle."

Yeah, like that.