Putting The Near-Record Equity Inflow In Context

Tyler Durden's picture

There are some people who are very confused by last week's news of the "second highest inflow into equity funds on history." First and foremost, this is not "retail" capital reallocation, as EFSF/Lipper compile primarily institutional and ETF flow data. And indeed, as we reported earlier last week, the injection into the market, which also includes allocation to such vehicles as equity funds and ETFs by institutions, was driven primarily by a $220 billion surge in deposits in December, subsequently used by banks to reinvest said capital (most of which, ironically, coming from equity sales by retail investors as banks simply take the proceeds and reinvest into stocks). At the same time, retail investors [sic] continued to solidly pull money out of equity mutual funds. But while the source of funds was wrong, the use of funds was indeed accurate, and in the first week of the year there was a massive, $22 billion allocation to equities, second only to the $23 billion dumped into equity funds in the third week of September 2007. What happened the first time we such such an epic injection (whether it is from deposits, or from levered funding, or who knows what)? Brad Wishak of Newedge shows very clearly what happened then.

Will this comparable attempt to send stocks even higher and fool retail to be the dumb money bagholder once again succeed? Or will this time not be different? Of course, back in 2007 we actually had a market: now it is merely a place where the Fed parks $85 billion in freshly printed money each and every month.  So maybe this time will be different after all.

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HedgeAccordingly's picture

retail banging their chests about a "SURE THING APPLE SHORT" this morning.. things that make you go hmmm..

APPLE p/e is a 7 while AMZN is a 159 - http://hedge.ly/SxMofc

still thinking SPooz makes all time highs before cratering... its come this far already..

Stock Tips Investment's picture

It does not seem appropriate to anticipate, at this time, to market action. The stock market, in general, gives us the signs of the direction it is taking. Enter the market early or leaving early does not offer the greatest benefits. Surely we will see the media inundating us with information about the future behavior of the market as of now. Only let us confuse. Let's look at our charts and indicators and draw our market advantage. Whether the market goes up or down. Same thing. The important thing is that we are located on the right side.

GetZeeGold's picture



Yeah....but you can buy damn near anything from AMZN......just sayin.

Spastica Rex's picture

For less than just about anywhere else, and they shipped it to me for free (minus the yearly Amazon Prime fee, kind of like Costco, I guess).

Kinda weird.

AustriAnnie's picture

Because a great product justifies an exponentially increasing stock price, in perpetuity?

SmoothCoolSmoke's picture

Agree....I think the "Why this should not be going higher" business will continue to be a good one.

AccreditedEYE's picture

It's funny how people are trying to make a big deal out of this... like it matters 1 way or another. We KNOW the biased direction of stocks. They are manipulated to continue going higher and higher. To believe that anyone can make a difference or that some piece of news is going to change that is kidding yourself. If it did, we would have a REAL free market. 

Spastica Rex's picture

I've wondered if the European nobles and royals of old felt similarly as their power and privilege eroded. The rules of the game changed around them and there was nothing they could do about it.

fuu's picture

Just curious if you really believe their power and privilege eroded. We still have a Holy Roman Emperor, a King of France, and a Queen of England. It's like 1692 again.

MachoMan's picture

Kind of...  not to fellate american ingenuity, but one giant leap forward was what our founding fathers changed with the social contract...  I think it was near sighted to think that this was and will be uniquely an american experience.  The simple fact is that they were able to more particularly and closely articulate not only how most productive people inherently felt, but they also developed a governing system around it.  Is there likely to be a core group of rebels as intelligent and articulate that manages to succeed in its own rebellion?  Who knows...  but the precedent has been made.  For this reason, I don't believe it's 1692 again...  the cat is out of the bag and the information age will only exacerbate the issue.  How it ultimately manifests itself across the world is anyone's guess...

fuu's picture

We'll see I suppose. Good reply. Thanks.

Spastica Rex's picture

No, I agree: their power didn't go away, but it changed radically. The game changed, and I think it's changing back.

AldousHuxley's picture

they just refocused on what really mattered and outsourced everything else....political power to professional liars, economic power to banksters, militry to professional killers, entertainment to douchebag actor druggies....

royals got tired of all that shit....not worth the money or their time....

now they have privacy and still have power over culture.

MachoMan's picture

Your external locus of control and defeatism are fairly astounding... 

They never refocused or went away or anything else...  simply put, the reason they continually win, on a long enough time line, is that they better understand human nature and have positioned themselves to win if humans merely act human.  It's a no-brainer.  The only problem is that every once and a while, a band of folks gets together and throws a big wrench in the works...  just the same, that changed paradigm must continuously be fueled by persons of the same burning desire and intellect, with virtually all other constraints remaining constant.  Needless to say, rebellions, like all lives, tend to have a life cycle...  and we revert back to a more primal/natural state.  This is the inevitable conclusion of smaller cycles.  I do believe though, we are seeing permanent changes in the social contract (larger cycle; i.e. more monkey wrenches).

The plebs are getting pretty uppity.  I don't really see entrenched power presently acting out of a complete confidence of control, but moreso as a scared animal desperately clinging to anything it can grasp to stay out of the void.  The truth is, control mechanisms are inherently fragile...  a few people can never tell the masses, at all times, what to do.  Eventually, the promises are broken and the tribute payments to the mob reneged.  Most likely, a few are simply replaced by a few and the process continues grinding along...  very, very rarely do the plebs ever dial the clock back and yield the power of the mob to something more keeping with their inherent notions of liberty and fairness.  At some point, it dawns on them that they've made a terrible bargain; usually about the time resource constraints hit and the promises and tribute payments run dry.  What happens after that is anyone's guess, but every once and a while the mob surprises everyone.

The other issue is larger trends...  are we not working towards something a bit different?  Did gunpowder/more common firearms not end feudalism?  abolishment of slavery...  you name it.  We're evolving away from parasitic leeches...  it might not seem like it at the present, but the leeches are eating one another because they have killed their hosts.  These things have a natural tendency to resolve themselves...  if the plebs cannot collectively bargain into a suitable position, then the system will eventually implode anyway...  Even if you believe the mob is largely apathetic and worthless, then all hope is not lost...  you might just find a willing suitor in some entrenched power jockeying for position.

In keeping with this point, the internet is a game changer as well...  while it might be completely monitored and sprinkled with disinformation and provocateurs, it has provided people the world over something that has never existed...  a collective voice and an organizational tool to assemble and find other like minded persons.  How was winston never able to practically effectuate change?  He could never divulge his inner beliefs to anyone...  too fearful of the iron fist.  The internet changed all that and we've already seen it work in other countries...  (the fact that they traded wolves for foxes is another issue and irrelevant to the point that the internet was used as a meaningful tool to effectuate change)...  this is also why entrenched power is desperate to monitor it and control it...  but that's another issue.

I see the world moving towards more liberty and not less...  although, this movement will be massively curtailed by resource constraints (and their capture->rationing).  The world now makes fun of dictators...  It's just a really, really slow process that lasts longer than our lifetimes, so we only get to see a very small picture of a much bigger trend.  You might classify it simply as entrenched power "deciding" to pick up its ball and go home from many areas, but I think the more accurate statement is that entrenched power was soundly defeated at the debate...  and had to retreat to more familiar pastures amidst the cover of night and, as a result, use more subtle means of control. 

We may get regressions along the way...  no doubt about that, but I think we're heading towards a more collective recognition of natural rights.  With this, I think the methods of control must become more and more subtle...  thereby, more and more precarious and subject to failure.   I hope huxley's vision was wrong...  and these more subtle methods of control are not bootstrapped with human nature and mob tendencies...  although, I do accept that as a possibility, I simply do not believe that it is capable of being a permanent mainstay...  (we might have actually outlived it already, or close thereto).

Spastica Rex's picture

In regards to increasing potential for liberty, I don't know that I disagree with you. However,  I think "liberty" looks a lot different than what many think it looks like. Given the choice of liberty and its alternatives, many appear to want something else. I think the world is willingly moving back to authoritarian "stewardship."

edit: Another observation: when the local authorities have armored vehicles, attack drones, and non-lethal crowd dispersal devices at their disposal, I don't know how AR-15s in the hands of the "patriots" are much different than pitchforks and scythes in the hands of the peasantry.

MachoMan's picture

I agree that many are hopelessly dependent upon the government (actually, dependent upon the productive, but we'll not digress) after, for the most part, making the decision that liberty was too costly and work intensive.  However, in the context of the last many centuries, we've experienced tremendous increases in our personal freedom.  This process isn't a straight line (what is?), but instead is more of a wax and wane...  sometimes there are periods of digression.  I think it's simply too early to tell if the present digression is the tipping point of a larger cycle or one of many routine digressions, however the trend for quite some time now has been to increase liberty among the entire world.  In large part, I think machiaveli was right regarding people who have experienced "freedom"...  and that once tasted, it is largely locked-in.  The possible digression then is range bound...  [and thereby must be subtle, which is why huxley got it right and orwell got it wrong]

There really isn't the possiblity of "increasing the potential for liberty"...  in different forms, the extent of liberty has been temporarily realized a few times here and there...  we'll probably temporarily bump into it again some time.  But I agree it does not look like what most people envision...  although, I believe more countries will get a taste of it as time goes on.  [I'm trying to describe world processes and not limit discussion to strictly american topics]

And yes, from a strictly second amendment perspective (i.e. as a check and balance against the goverment), I believe we are woefully underarmed...  the ar15/ak/et al represent the line in the sand if you will for effective defense against the government...  without these weapons, the second amendment would largely be neutered (already is, but still).  We're back to remington 700s, nagants, muzzleloaders, and bows.

I think a possible end around would be for "free" states to enact their own militias...  naming every able bodied male with a residence in the state as a member (or being purely volunteer)...  and then having a cache of weaponry provided by the state.  The state provides training to its own militia...  effectively having everyone come in under a "law enforcement" exception to a gun ban or, alternatively, as a complete end around where federal jurisdiction does not lie (e.g. where some states allow you to manufacture your own firearm if it is not introduced into the stream of commerce/leave the state).  I think states are ultimately going to have to step up to the plate, similarly to the recent pot enactments...       

Hubbs's picture

Wait a minute. Equities were sold by retail investors to beat the projected higher capital gains tax in 2013? And then apparently did they not reinvest these? Did they said "screw it", take the money and leave?


Was the new money into stocks from gubmint to help fend off the shorts?

SheepDog-One's picture

I sure don't buy that this is all retail investor/local bank actions.

SheepDog-One's picture

People are totaly convinced (again) that the only place stawk indexes can possibly go is higher. Last time that happened this clownshow was at its last peak over 14,000 not much higher than now.

tooriskytoinvest's picture

A Massive Stock Market Crash Is Imminent: These Men Predicted Current Economic Crises. No One Listened, Well They’re Warning Us Again Video


Mercury's picture

 And indeed, as we reported earlier last week, the injection into the market, which also includes allocation to such vehicles as equity funds and ETFs by institutions, was driven primarily by a $220 billion surge in deposits in December, subsequently used by banks to reinvest said capital (most of which, ironically, coming from equity sales by retail investors as banks simply take the proceeds and reinvest into stocks).

That's possible, probably legal to some extent and even likely but what direct evidence is there for this assertion other than what is implied in a 1961 textbook and by JPM's recent hedge-gone-wild?

buzzsaw99's picture

since retail won't bite equities will keep rising ad infinitum

Boilermaker's picture

This is not good for my 'confidence'.

Can we go back to the bullshit? I'm much more comfortable there.


electricgorilla's picture

Fed subsidizing Margin Calls?

Downtoolong's picture

Soon the Fed will own all debt, the banks will own all the equity, and true investors will be sitting on cash. Then, when the whole system crashes the government will take all the cash to bail out the banking system again.

What a country.



mcl2177's picture

Tax payer funded stock market.



orangegeek's picture

Dow Jones weekly hasn't pushed up as much as the SP500 as of recent.




Q4 results happening this week.  Should be interesting.  Could be a quarter of misrepresentations followed by restatements in Q1.


Anything to keep these markets up.

Its_the_economy_stupid's picture

Investing in this market is easy! Just apply this logic......



TonyCoitus's picture

If the fed is "parking" $85 billion a month in equities to prop up markets, then who or what is paying for our deficit spending?  

Clayton Bigsby's picture

Last marginal buyers?  Ruh-roh Raggy....

DowTheorist's picture

Worrisome chart....it suggests that a top may be in the making. However, there are intermediate tops and "big time" tops. Thus, we must bear in mind two things:

a) the primary trend of the stock market is bullish. This means that, even though, a correction may be nearing (which is in itself healthy), the most likely outcome in the coming months are higher prices, not lower.


b) volume (in spite of the secular decline in volume which is greatly explained in PragCap blog: http://pragcap.com/the-disappearing-volume ) is supporting recent bullish price action.



So, personally, I would't short this market.

SAT 800's picture

Well, I'm already short from 1459; so they haven't get my pain threshold yet. But being Scottish, I have a high pain threshold. But I also hate the damned English and their damned Bank of England, and Jewish Bankers, and Negro Presidents, and Greek Politicians, and I don't think much of most other Scotsmen, either. So it's possible I have an attitude problem.

ebworthen's picture

Thanks for the clarification.

CNBC has been relentlessly reporting that retail investors are jumping back into stocks - when actually most of them are going to cash or cashing out because they need the money to survive.

So, the banks will take the deposits, gamble them in the equity casino, lose, then get bailed out again, right?

That seems to me to be the plan.

roadlust's picture

Yeah, but...  EVERYBODY knows that (except some smart guys around here).  So how can the market continue up when everybody "knows" it will go up?  Is there such a thing as "free money" after all?  Apparently.  There should be a quick short term correction, to fill the new year gap (at some point) but then we'll be off to the races again. 

The market will go down when the world's population goes down.  Until then, the Ponzi will continue.  It's as fundamental as gambling and prostitution.

random shots's picture

Failed to read...NM