11th Consecutive Outflow From US Equity Mutual Funds Pulls Cash Levels To Record Lows

Tyler Durden's picture


We are unsure what is more notable in this week's most recent fund flow update: that in the week ended May 2, investors pulled out another whopping $6.6 billion out of domestic equity mutual funds, the 11th consecutive, and a total of $42 billion in 2012 (compared to $10 billion over the same period in 2011), or that as the chart below shows, the two identical S&P overlay arrows (identical in their length and angle) demonstrate just how comparable the effect of QE2 and Operation Twist, or QE3, have been. the two arrows also demonstrate without a doubt, that, as Goldman admitted last month, the "flow" effect at the long-end of the curve (thank you Chubby Checker) is what it was all about, which means that sterilized QE is bunk, and all that matters is of the Fed to be actively monetizing something, anything, in order for stocks to go higher. Regardless, the only question left now is not whether the same drift back lower by 200 S&P point that stocks experienced after the end of QE2 will happen, but when and how rapidly it will take place, just in time for QE4 (NOT Operation Twist-er) to be announced in June. And finally, for those wondering how it is possible that every month US investors can pull cash out of mutual funds without them running out of cash, we say: observe the distinct pattern in Chart 2, which shows that as of March mutual funds held a record low 3.3% in liquid assets on their books.

Weekly fund flows:

And mutual fund cash:

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Wed, 05/09/2012 - 17:21 | 2411371 fonzannoon
fonzannoon's picture

I know it has been asked but I never saw the answer. Is there an inflow into etf's and individual stocks going on? I know a lot of money is still going into bond funds but what about etf's and individual stocks?

Wed, 05/09/2012 - 18:09 | 2411500 xela2200
xela2200's picture

Most 401k only have Mutual Funds available as an option. It could be people loosing their jobs and cashing out or taking the hit for the penalty. Maybe to make mortgage payments? I don't believe that anybody trading their own account buys Mutual Funds anymore as ETF tend to be more atractive (efficiency, taxes).

Wed, 05/09/2012 - 18:23 | 2411531 veyron
veyron's picture

Its definitely the former, a truth that the MSM conveniently ignores.

Wed, 05/09/2012 - 20:41 | 2411806 Xkwisetly Paneful
Xkwisetly Paneful's picture

Is there an inflow into etf's and individual stocks going on?

the anemic volume and dismal liquidity screams from the rafters NO FUCKING WAY.



Wed, 05/09/2012 - 18:49 | 2411588 The trend is yo...
The trend is your friend's picture

"Money on the sidelines my ass...thats all i have to say about that"

Forest Gump

Wed, 05/09/2012 - 20:51 | 2411828 CrashisOptimistic
CrashisOptimistic's picture

The money on the sidelines is in stocks, waiting to enter bonds.

Wed, 05/09/2012 - 18:37 | 2411560 Iconoclast
Iconoclast's picture

Same question, are folk pulling out to spend on day to day stuff or piling into krugerands?

Wed, 05/09/2012 - 19:27 | 2411653 valley chick
valley chick's picture

Some having to and others woke up and pulled the retirement, paid the taxes for they would have to anyway...and with the devaluing of the dollar may break even on penalty then purhasing PM's from what i hear. :)

Wed, 05/09/2012 - 20:13 | 2411750 DosZap
DosZap's picture

Same question, are folk pulling out to spend on day to day stuff or piling into krugerands?

Not IMHO, they have been to this dance before, and got the shat kicked out of them 2x's if they were stupid, so they are taking profits before the EU meltdown, and  steals it YET AGAIN.

40% of Americas exports go to Europe................when they lose that base, guess where those stocks, and equites are headed?.......................as Archie used to say, the TERLIT.

Wed, 05/09/2012 - 17:22 | 2411372 Xkwisetly Paneful
Xkwisetly Paneful's picture

Buy metals!

Not enough evidence out there that retail money is nose deep in them while just about being completely out of the equity markets.

Wed, 05/09/2012 - 17:22 | 2411378 disabledvet
disabledvet's picture


Wed, 05/09/2012 - 17:29 | 2411391 Deadly
Deadly's picture


Wed, 05/09/2012 - 17:29 | 2411394 YesWeKahn
YesWeKahn's picture

It is SO OBVIOUS that the FED is buying equities.

Wed, 05/09/2012 - 17:46 | 2411446 Boilermaker
Boilermaker's picture

Well, by proxy, so it doesn't really count.  Kinda like playing "just the tip".

Wed, 05/09/2012 - 18:44 | 2411573 rocker
rocker's picture

Same as the POMO operation.  I my humble opioion. it is no different.

This is how the Banking Cartel, (the FED), operates.

The FED's sole purpose is to make Goldman Richer.

Goldman's sole purpose is to "Rule the Financial World" of all nations.

Wed, 05/09/2012 - 19:35 | 2411666 sof_hannibal
sof_hannibal's picture

To quote Berneke, "buy stocks...suckers"

Wed, 05/09/2012 - 17:30 | 2411395 max2205
max2205's picture

I seen this for, like 11 times...?!?

Wed, 05/09/2012 - 17:30 | 2411397 Id fight Gandhi
Id fight Gandhi's picture

Qe4 would have to be direct fed buying stocks or ETFs

Wed, 05/09/2012 - 18:16 | 2411509 xela2200
xela2200's picture

More likely Mortgage Backed Securities way before that. Look at the BOJ as they are leading the heard in that regard, and they just started buying stocks in earnest.

Wed, 05/09/2012 - 18:23 | 2411534 HelluvaEngineer
HelluvaEngineer's picture

Oh, so it started 3 years ago?

Wed, 05/09/2012 - 18:42 | 2411569 in4mayshun
in4mayshun's picture

QE4 will have to involve some sort of bailout component for Europe, or atleast an executable claus for when the time comes. Direct lending to Europe will be politically untenable before the election so it must be by proxy thru the banks. Perhaps the Fed will allow the banks to exchange foreign sovereign bonds for US bonds???

What do you think ZHers?

Wed, 05/09/2012 - 20:09 | 2411738 DosZap
DosZap's picture

Qe4 would have to be direct fed buying stocks or ETFs

Why wait till QE4, they already have been starting with QE2, and TWIST, not counting the under the table spending they have done, and continue to do.

The only people they are not bailing out is AMERICANS,and American small/mid sized businesses.

Hell, they are begging the banks for loans in the Mfg sector, but the banks WILL NOT loan to solvent, and uber profitable companies,so they can hire MORE help, expand, and increase their business bases.

Article after article of companies in the Mfg sectors trying to get loans( good ,solid,solvent companies.................NO WAY Jose'.

THIS IS A FACT...........................now WHY is that?.Isn't that what all that QE $$$$ was for??.

Instead of playing it 100% safe and dragging  a .25 basis point of their(our) stashes??.

Thu, 05/10/2012 - 11:07 | 2413146 xela2200
xela2200's picture

Banks owning companies that are in charge of producing our needs. That is scary. I hope the FED doesn't decide Twinkies are bad for the economy.

Of course they don't want to lend. They make more money from their trading desks. There is a reason that we've had the Glass Steagall act in this country for decades, but that genie is out now. Producing just doesn't pay as much anymore. Yeah this is going to end well.

Wed, 05/09/2012 - 17:32 | 2411403 fonzannoon
fonzannoon's picture

One argument says the fed needs everything to drop to justify more QE. The other argument says the fed is in there now propping up the market. Which is it?

Wed, 05/09/2012 - 17:36 | 2411416 Jacque Itch
Jacque Itch's picture

Whatever Obama tells them to do

Wed, 05/09/2012 - 19:36 | 2411670 sof_hannibal
sof_hannibal's picture

Taking are ques from BOJ or vice versa...

Wed, 05/09/2012 - 17:46 | 2411445 chdwlch1
chdwlch1's picture

It's a managed decline...they can't have it drop too fast and induce a panic sell-off.  From what I've seen, if the S&P 500 drops more than 2% on any given day, that's too fast for the Fed.  They try to keep it within the 2% parameter...if you see 3%-5%, look out!

Wed, 05/09/2012 - 17:31 | 2411404 EclecticParrot
EclecticParrot's picture

To twist around the state lottery saying:  "you can't play if you don't win."

Wed, 05/09/2012 - 17:32 | 2411406 mjk0259
mjk0259's picture

6.6 billion = $180 per american? How is that significant. That's less  than the monthly spending per capita at Chinamart+McDonalds.

Wed, 05/09/2012 - 17:51 | 2411452 LetThemEatRand
LetThemEatRand's picture

Most Americans don't own mutual funds.  Most of those who do have only a few thousand bucks worth.  So the per capita figure doesn't tell the story.

Wed, 05/09/2012 - 22:17 | 2411989 Tijuana Donkey Show
Tijuana Donkey Show's picture

Funny thing about that, almost as if that's where the money is going. I remember a day when this country had enough money for MallWort and WacDonalds, and could shove an eight-ball up their nose without touching their retirement. Now I'm trading APPL for a McRib? For shame, for shame. 

Thu, 05/10/2012 - 11:15 | 2413225 xela2200
xela2200's picture

You are not alone. Evaporation is the problem for those of us who have been financially responsible.

Wed, 05/09/2012 - 17:34 | 2411410 Rainman
Rainman's picture

Does this mean everybody's ignoring Larry ' 100% in ' Fink..??

Wed, 05/09/2012 - 22:18 | 2411993 Tijuana Donkey Show
Tijuana Donkey Show's picture

Just his tip

Wed, 05/09/2012 - 17:33 | 2411412 Cdad
Cdad's picture

Quick Mr. Bernanke, print more dollars...as the educated public is rejecting Wall Street and its assets.  We cannot allow failed banks to fail.  We cannot allow failed confidence to fail.  We cannot allow the market to price in the failure of Wall Street.  The market must not be allowed to work.

Wed, 05/09/2012 - 17:53 | 2411456 Cdad
Cdad's picture

Quick quick, criminal syndicate Wall Street bankers...unleash another 24 hours of BlowHorn [CNBC] programing focused 100% on what stocks average Joe should buy!  Yeah, that'll do it.  Pay no attention to the plunging ratings at your joke network...and for heaven's sake, do not deviate from the same, worn out, transparently stupid game plan of recommending long stock positions every single minute of every single day no matter where the market is or what is going on in the world.


[More banker pink slips, please.]

Wed, 05/09/2012 - 17:57 | 2411470 Cdad
Cdad's picture

Quick quick...hurry...members of the COMCAST board.  Insert more of the utterly unwatchable Jim Cramer into your broadcast day.  I'm sure little people everywhere will come running to buy stocks if they could only just see J. Cramer's face six times per day...instead of 4.  After all, J. Cramer is the defender of the people, and Ben Bernanke...so that has to be all money good, and the BlowHorn [CNBC] will fixed toot sweet.

Wed, 05/09/2012 - 17:35 | 2411413 buzzsaw99
buzzsaw99's picture

which means that sterilized QE is bunk


I knew it. Thank you.

Wed, 05/09/2012 - 17:43 | 2411437 machineh
machineh's picture

Only 3.3% cash sounds pretty bearish. But stock fund cash levels are somewhat correlated with interest rates. 

With short rates nearly zero, stock funds naturally try to avoid holding cash that earns nothing.

Stocks' outlook may be quite negative. But stock mutual fund cash isn't necessarily telling us much, one way or the other.

Wed, 05/09/2012 - 18:22 | 2411520 xela2200
xela2200's picture

Plus cash outflow. Investors are cashing out their mutual funds, low levels of cash means that they have been paying out. Hence the low levels of cash since it is leaving out the door in a hurry.

Level + Flow

Wed, 05/09/2012 - 17:52 | 2411453 skepticCarl
skepticCarl's picture

In April 2011, the Huffington Post ran an article, quoting the Gallup pollsters, who said...

"only 54 percent of Americans said they own "individual stock, a stock mutual fund or in a self-directed 401(k) or IRA." The percentage invested has steadily declined from 65 percent in 2007..."

I think that this datum is more telling than the fact that mutual funds are being replaced by ETF's, and hedge funds.  It really speaks to the fact that the trading is almost all done by the Big Boys, and their bots.

here's the link:


Wed, 05/09/2012 - 18:47 | 2411585 max2205
max2205's picture

So the 99% is a myth? Thought so

Wed, 05/09/2012 - 17:52 | 2411454 Sudden Debt
Sudden Debt's picture

And straight into simple saving accounts that return next to nothing.
It will do wonders for the credit markets

Wed, 05/09/2012 - 18:25 | 2411535 xela2200
xela2200's picture

Forget savings account. People are using the money to meet their debts or to live. I have also heard many people telling me that is impossible for them to get a job, so they took retirement instead. Have you been to the supermarket lately?

Wed, 05/09/2012 - 18:25 | 2411536 veyron
veyron's picture

next to nothing > -90% (ask those pre-2008 C investors about which they would prefer)

Wed, 05/09/2012 - 17:53 | 2411455 ebworthen
ebworthen's picture

People need the money, as in cash, to live.

Wall Street is dead, it just hasn't realized it yet.

Wed, 05/09/2012 - 17:52 | 2411458 junkyardjack
junkyardjack's picture

Looks like the dumb money only comes in at the peak

Wed, 05/09/2012 - 17:55 | 2411465 mrdenis
mrdenis's picture

Really now isn't the FED  all the people .....so

Wed, 05/09/2012 - 18:03 | 2411481 Rip van Wrinkle
Rip van Wrinkle's picture

'...which shows that as of March mutual funds held a record low 3.3% in liquid assets on their books'


Don't panic but makle sure you panic first.


Wed, 05/09/2012 - 18:15 | 2411515 divedivedive
divedivedive's picture

I'm going out on a limb here and assume that the data for this posting comes from the 'Investment Company Insitute' - found here;


They have a table there (I'd post it here but the format gets all screwed up) and they show that for the week of 4/18/12 - 8.6 bn was pulled out of 'domestic' equity and placed in 'world' equity. I find that a little hard to believe.


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