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"We've Never Seen this Before – Such a Huge Rally, and the Little Guy Is Out"
Joseph Stiglitz says that Wall Street is hyping up the economy to sell more stock.
Has it worked?
Well, the stock market certainly has rocketed up from its March lows.
But many investors are still avoiding equities.
As Vincent Deluard - a strategist for TrimTabs Investment Research (25% of the top 50 hedge funds in the world use TrimTabs' research for market timing) - says:
We've never seen this before – such a huge rally, and the little guy is out.
In
other words, the stock market rally is due almost entirely to hedgies,
pension funds, banks and other institutional investors, and not every day investors.
It is even possible that the government itself has been propping up the stock market. And Bill Gross and Nouriel Roubini say that we have a Ponzi style economy.
TrimTabs
notes that small investors pulled out $14 billion net from stock mutual
funds from the beginning of last year through mid-December, on top of a
net $245 billion withdrawn in 2008.
Given that - as pointed out
by the above-linked article - individuals held 80% of the $19 trillion
in stock in U.S. companies, both private and public, at the end of
September - according to the Federal Reserve - recovery will not happen
so long as the little guys are sitting on the sidelines.
TrimTabs
notes that most of $592 billion taken out of money market mutual funds
last year has gone into bond and bond-hybrid funds instead.
No wonder David Rosenberg is saying:
- "People have been lured into two bubbles seven years apart, and for a lot of them it's over."
- "The bulls say if the market is up this much without retail investors, just watch when they come in, but it isn't going to happen."
- Investors who have not been spooked or angered by the market are probably too poor to buy anyway.
I'm a little guy and I cleared out of equities (except GLD) in 2007, and made 8% annualized for the past two years on the junk bonds that didn't go toes-up on me. But now I don't see <i>anything</i> I like and am sitting on cash at the moment. What a sucky market.
After the little guy gets in, who is there left to sell to?
If there's no one left to sell to, prices go which way?
I had my income chopped by 2/3rds after being unemployed for most of 2008. I am just starting to contribute to a 401K again this month but only the % of income that I get matched 100% by my employer. My previous 401Ks have all been liquidated after each change of job for dental bills/ car repairs / visiting family across the country for weddings/ funerals and the like. I assume this will happen again. I figure I have to contribute because even after the 10% early withdrawal tax penalty I'm still up. However the challenge is not loosing the rest of that company match before I'm laid-off and job searching again. Where the hell do you put your money in a 401K these days? Bond funds or mutual funds are the only choices. I've been saying for years that it's a fucking scam that to get all of your "compensation" (the match) they force you to invest in their bubbles.
And on a side note, why is that executives can put as much of their income as they'd like into "Deferred income" accounts and earn guaranteed interest on it, pull as much of it out when ever they want with no penalty while our only means to defer taxes is the 401K shit. Nobody ever talks about this. I don't get it??? I want to tax defer a portion of my income and get 5% interest on it...until I need it. I'm sick of paying those penalties.
Seriously, I still don't understand why anyone would consider gold or silver an investment anymore so you would consider paper an investment. You never hear anyone say I'm investing in USD or EURO, but the feeble masses insist on claiming gold is an investment. Investing in oil is another big joke. You speculate with gold, silver, or oil. That's it. You can park your money in gold or oil but please do not confuse that with investing or being a smart place to park your money. Gold is without question in a bubble right now, but that does not mean it can't double or triple from here thought the notion sounds ridiculous to me. If buy gold now, you are in fact speculating that the bubble will continue. But it's so damn volatile I'd rather leave it alone. Speculation is OK as long as that money is later put to productive use and not looking for another place to park. The rule of thumb: once people start suspecting we are in a bubble, at least with commodities three month's later it pops. So enjoy this short lived ride while it lasts. When Soro's gets in front of congress to explain how we are in a gold bubble with demand driven fundamentals superimposed, get the hell out.
In deflation all asset prices decline. Which contrary to popular believe means cash is king (at least for now).
I hate to say it, but your view of history, when it comes to precious metals, is somewhat myopic.
"Investors who have not been spooked or angered by the market are probably too poor to buy anyway."
________
In other words, there is no little guy. Most of those in Mutual Funds rode out the crash, and are still in. Those who got killed are banking what little they have left.
And, the new blood that Wall St. counts on every few years is too indebted to the banks vis a vis credit cards, student loans, car loans et al.
In summary, Wall St. killed its cow.
The little guy is fucking broke!
Since we're now trapped in a long term Japanese situation (because of the decision to forbid widespread bond haircuts), the real quandry for retail investors, and for institutional money managers, is to reconcile oneself with the idea that there is no longer any such thing as positive real returns for any major asset class.
Chew on that for a while. Like, twenty years.
The quandry only applies to passive or overwhelmed retail investors. Institutional money and HF's will be relatively fine. They don't need us, in the short term, anymore, as long as their options are not limited. They can bet against us. They are playing globally. They are playing with high-speed trading programs in "dark pools". And these options, in case you haven't noticed, are not going to be limited by the financial regulatory reform their lobbyists are helping to write in Washington. Our active participation has been irrelevant for some time, a testament to just how much money has been made. But they have really proved that power with the rally of the last year. That rally has been a team effort, to be sure, with government and Goldman on the same page. The narrative being drilled is one of systemic construct, and this is very informative. You got Geithner and Blankfein standing in the living room of a house that has been blown down by a tornado and yelling "Everything's fine! The house is fine, just need a little joint compound."
I was walking down the street in Times Square in the summer of 2008 and this enthusiastic yahoo from Fox Business News acosted me to do a live interview with people on the street about the credit crisis and what I was doing with my money. When the camera rolled, I started to go off about the OTC derivatives market, about the house of cards collapsing, about pulling all my money out, which I had already done. Needless to say, he freaked a bit and moved to the next person in line before too much got out.
The underpinning of faith, the foundation of the house, has been destroyed. Have you seen the bevy of commercials from banking institutions aimed directly at that faith? That's what they are afraid too many people have realized. So, a stock market rally was necessary. So was the ruthless message that NO OTHER CHOICE EXISTS. They are still drilling into our heads that for ALL of us to survive, the financial institutions and the mega-asset class must survive and profit FIRST.
If the commission looking into the economic crisis does any kind of a job, and the media covers it, things will get ugly fast. The belly of this beast is full of the entrails of little old ladies and our children's future hopes. They went after our pension and retirement funds and then shorted our future. It doesn't get any uglier than that.
Well, if "political connections" were an asset class, it would have positive real returns. Everything else, though, no.
RT is saying the retail investor is the canary in the coal mine for the market. The Retail investor is one who gets sacrificed by the tyranny of the current market strucure as they buy the overhyped, overmanipulated and overpriced stocks, they provide the exit strategy for the criminals, they close out the loop of the cycle. Just like the poor bastards in Apoclypto, waiting in line to get their heart pulled out and then head cut off...and they will be back because of the "dream".
You said: "In other words, the stock market rally is due almost entirely to hedgies, pension funds, banks and other institutional investors, and not every day investors."
I'll offer up some different logic. My belief is the same folks that you've noted as being the buyers now were the same folks that were the sellers that caused the crash. You can sell one share and change a stock price.
One of these days you guys are gonna figure out this crash was completely manufactured.
And the little guy? He was really just siting there watching himself get screwed...
So, when your money is in a 401k, where should it go now? You can't by metal in a 401k. The 401k system is structured to prop up the equity markets.
Fidelity has a broker-link feature in the 401k. Is that wide open? Can somebody own gold shares in that?
What mutual funds look good? All these people in bonds now, they're screwed when the printing stops, right, because their values will tank? Can't go into bonds, right?
Should I buy a TIPS backed fund? Should I buy energy mutual funds, esp oil? Are gold producers (such as in the Select Gold mutual fund) going to stick to the price of bullion, or fall with the rest of equities?
Lots of advice where not to be, but where should the money go?
I rode the market down the last time and hate myself for it. Now I'm barely back to where I was in late 2008 (thanks to contributions, not because of the recovery). Sure as hell won't ride it down twice but where do I park the money?
Yeah, I don't get Robot Trader's comment either. Looking at the chart, it doesn't make sense.
"Investors who have not been spooked or angered by the market are probably too poor to buy anyway."
Hit the nail on the head there. When the stock market loses half its value, people have taken a bath. Buying low and selling high is not in a retail speculator's nature.
Ponzi market!
"Investors who have not been spooked or angered by the market are probably too poor to buy anyway."
Hit the nail on the head there. When the stock market loses half its value, people have taken a bath. Buying low and selling high is not in a retail speculator's nature.
Ponzi market!
This is what freaks me out: the money is going into BOND FUNDS??????
I mean, equities are of course an insane hellride of squid perforations and manipulated quant jerking, but BOND FUNDS??????
Can someone at ZH please explain to the so-called 'world out there' that going into bond funds in a low rate environment is like unzipping your pants in front of a buzzsaw?
Holy crap.
Note that the one sane investment other than gold and money markets (a nose-holder yes but the 'safest' place for retail 401k to be) is actual, honest to God bond certificates, held in paper to maturity for the coupon yield only. That is a real corporate bond, say at 5%. Try to buy one. Go ahead, I dare you!
Here's a little hint, Chuckles: You can't. Not allowed for 'the little guy'.
Stay the fuck away from bond funds. Jesesmaryandjoseph. Seriously.
We cashed out all of our stocks about 6 years ago. Took the tens of thousands, ate the taxes and ran.
THANK. GOD.
Last time so many retail investors were "out", this is what happened....
They didn't start getting in until 1999.
That is interesting and the first thing that came to mind....however this time they may get back in alot later than now. But personally know a couple small investors that have gotten back into the market and themedia here has reported that small investors are back into mutual funds that are back into the market and they think that markets are going higher......so make of it what you will
RT,
WTF are you talking about? That is pure bunk.
Lots of new money was pouring into the market from 1995 to 1998. Many people got spooked out in the fall of 97 and again in the fall of 98, but the "buy the dip" mentality was becoming more & more ingrained and helped result in the massive speculative blowoff we experienced in late 99 to early 2000.
A marginal group of newbies entered the market in 1999 when it kept going up, but to say that's when all the "little guys" got in is absurd. They were already in......
RT,
I certainly mean no offense. However, I was working at Schwab during the period covered by this chart. Schwab underwent absolutely explosive growth during this period, largely through their retail operations. So, my experience is causing a disconnect with your statement above the chart.
I don't get it either. No indication on the chart that the market was flat until 1999
The overnight futures pumping seems to be back at work after taking a pause in December, when the "pump operators" were off to Bahamas or Bangkok to spend their bonuses. This year the T-auctions would be happening more frequently, so expect the pump to be two stroke action - overnight pump stock futures, European open pump fixed income, US open quiet, US close start stock futures pump again etc :)
True - the little guy is done with the Shills
I've been debating this issue with knowledgeable friends. I think it is not as simple as it might seem.
Reasons to get OUT:
insane p/e ratio
incredible ratio of insider selling over buying
real economy is clearly in bad shape and not improving
market seems to be heavily manipulated by PPT, TBTF banks, etc.
Hesitations:
if all the little guys get out, a handful of large investors will end up owning everything. Who knows that you'll be able to get back in (assuming you would want to, of course).
High inflation to hyperinflation seems very likely - stocks are likely to be far better than cash/bonds in that scenario. (Do you really want to be 100% in gold?)
Precious metals and commodities could be in a bubble too (I don't personally think that gold is, however)
Even if the supposed recovery right now is fake, what's to say that we don't transition to a genuine recovery 3-10 years from now, without an intervening market drop (perhaps due to continued, effective manipulation of the whole market) and perhaps stocks will actually be a good choice on a longer term basis, even from today.
I hope to hear some interesting comments in reply.
Here's what I would say about the recovery. At its peak last year, the credit default swaps market stood at $60 trillion. It is now around $40 trillion. Over 30% lower. That's quite a drop.
On the other hand, that market barely existed prior to 2004. What's the % rise when something goes from nothing to 40 trillion? And 50% of those contracts reach maturity in 1-5 years. What that means is that big investors are still betting on a massive scale, over the counter, in private, that we are only 1/3 of the way through the credit default crisis. That's why Obama and legislators are being told they can't regulate the CDS market yet. It's still too big and dangerous.
Smoke 'em , if you got 'em. Or, as Blankein might say, "Smoke on this. I'm doing God's work."
I agree Max Mad and am personally all in this market on margin with biotech and miners. You cant short this market without the rules being changed in the middle of the game so I am long precious metal miners which IMO are like shorting banks/dollar with less downside risk. I think shorting is suicidal since the government will continue to print and some of that paper will continue to be used to goose the market higher. Cash and bonds are very risky since yeild is non existant and it is likely that at some point in the near future inflation will kick in. I think residental real estate is also dead money since the persisitantly high unemployment means that rentals income in tenuous at best leaving you with repairs and increasing property taxes and large legal bills for evicting folk.
1. there is no inflation, its a deflation, see japan.
2. The comprehensive insurance from the fed side is not working, because this time is not different.
3.GLD owners will lose all the money, because the fed
will take all the gold for a list price.
3. And the bodyscanner ??
Its because they don t want that you bring
away your money or gold ( to switzerland )
2 gigantic, retirement-fund-robbing bubbles in 7 years, combined with a stratospheric P/E ratios and microscopic dividend yields would tend to make people a bit hesitant.
+1
The market ? which market , since we know now that from auto sales to christmas sales and of course the stock market, the us government is controlling everything. And don't worry, the time will come when the mainsream idiots will explain you that stocks deserve a p/e of 50 and at 30 p/e, it's a bargain. Expect s&p to rise to 1400 before the ponzi scheme blows up !
The TV pump and dump sales folks are talking up bank stocks as if they are about to double. I wish I could run my business and not include ALL my liabilities like the financials are doing so their balance sheets look better thanever. The U.S. used to have an accounting system that was the envy of the world now it is just a joke!
The main stream investing press/the administration/other know-it-alls can't have it both ways when they speak about this.
They say two directly contradicting things concerning this: 1. They say the huge equity rally has enriched the public, and thusly will increase consumer spending, cause inventory restocking, yada, yada, yada,....All is great.
and 2. They say the dumbass little guy is so stupid, as usual, sitting over on the sidelines in cash like a dope while equities blow through the roof. (Which means they didn't benefit at all)
I guess traditionally now we are in the 'mock the little guy until he buys our shares high from us' point? Seen a lot of that drivel coming from mutual fund spokespeople types lately.
As long as you argue both sides, you'll never be wrong. As long as you lie tell the biggest one possible, because who would believe you have the audacity to tell such a boldfaced lie.
Tell the people it's a recovery, but you won't get a job, but the j
obs are coming, but the jobs that are lost are never coming back, but things are looking up now that the banks are healthier, but the banks are loaning any money, but that's good because we don't want inflation to get out of hand if the money gets in the economy, but we'll send you bigger unemployment checks, but don't be mad when the bonus checks of the bankers are obscene in comparison to their actual contribution to society, but these fat cat bankers have got to stop this, but the entire economic policy team is composed of fat cat bankers, but...
See, it's really easy when you get the hang of it.
Gold and silver will be the only thing left standing. Silver in particular seems to have so much upside, especially when JP is forced to cover their market manipulating short position---
Fasten your seatbelts kids.
The day JP will be forced to cover will indeed be a super day.
Fraud, fraud, fraud.
The rest are only suckers in the casino formerly known as the Republic.
I don't even own a pitch fork but I sure as hell don't want to purchase anything in this rigged system for the bailed out failures.
I hope Government Sachs is listening.
My cash is in my mattress. The gold and silver I put into a chest and buried deep in the Colorado wilderness. Now if I can only find that damn map...
sideline money
lmfao
cnbc is for the retards, i mean bulltards
"The little guy is out"??
Au contraire, Little Benny, that wee fraction of a man, is all in ,baby, all in.
ROTFFL!! Gold.
Do you realy believe GLD will pay you out, when the Gov
is bankrupt??? LOL what joke.
As well people SHOULD be yanking their funds out of this market. Just watch out for the "automatic" 401K funds where you work. They are rife, after so many people have exited the market.
Many companies, including the one I am at now, are incented to make their 401K funds automatic now-- they send you a letter that looks like junk mail, and hoping you don't notice--to let you know they are automatically withdrawing a portion of your paycheck each month, and putting it into the fund of their choice!!
Can you freaking believe this??!! I will put my money where I CHOOSE to, thank you very much Fidel@#$!! They probably don't like the fact that money is going into the mattress and into precious metals right now, so it looks like they have decided to outright TAKE it, with no explicit permission...
Watch out folks--the financial banditos are getting desperate.
+100
Millions are still contributing through the work place. I don't get it.
I've been out since August 08.
It is truly ridiculous the way things are going. Why aren't retail Christmas sales being reported? In years past, retailers knew if the season was good or bad by 12/31. Why nothing or very sparse from this year? Because things are really bad out there and the powers that be want to hide the extent. We are no better off than we were 1 year ago. Banks took the TARP monies and used increased fees to pretend their balance sheets look good. Bad loans are still being kept on the books at high, unrealistic values. Its a joke the eway banks are able to fake out true accounting principles with fantasy transactions. why would anyone be foolish enough to buy a house now when prices only have one way to go and that it down. The younger generations are told to get in now because prices will again be going up. What a lie!!!!
America needs not only total political change , but also a change back to the ideals and attitudes of our parent's generation. The 1950's and early 60's were the best of times for America and we need to return to the ideals and lifestyles of that age - a place were production was valued and everyone was able to have a job with sustainable wages and health insurance benefits.
Perhaps this is why (I had to hunt around, but finally found some figures at Seekingalpha
http://seekingalpha.com/article/181553-december-chain-store-sales-the-go...
Granted, these are versus 2007, not 2008.
December 2009 SSS vs December 2007:
Neiman Marcus (NMG) -24% Saks (SKS) -12% Abercrombie & Fitch -38% Aeropostale 23% Gap (GPS) -12% The Limited -12% Dillard -12% J.C. Penney -12% Macy's (M) -3% Target (TGT) -2% BJs ex fuel (BJ) 9% Costco (US ex fuel) (COST) 6% TJX 8%Here's some overall info from ICSC http://www.icsc.org/homepage/research_article.php?id=87
"Jan 7: December U.S. Chain-Store Sales Rise 2.8% to Lift Holiday Season SalesDecember Sales Up 2.8%--Season Up 1.8%
December 2009 U.S. comparable-store sales spurted by a near-expected 2.8% compared with the same month of 2008, based on a tally of 33 retail-chain stores compiled by the International Council of Shopping Centers. The two-month (November-December) traditional holiday season posted a gain of 1.8% compared with a hefty record 5.6% drop in 2008. The 2009 holiday season pace was the strongest since 2006 (the last non-recession holiday season) when sales grew by a hefty 4.4%."
these numbers make sense and seekingalpha spells it out, "Of course, the december 2008 comp was the easiest of the year". Everyone thought the world was ending in december 2008. in robust recovery dec 2009 should have seen a record increase over prior year.
Well,
I guess that is one way to put positive spin on "half our competition dropped dead this year, and thankfully we managed to see a minuscule increase in sales as a result..."