US Households To Withdraw $430 Billion From Stocks In 2014 - Most Since Last Bubble

Tyler Durden's picture

When it comes to the conventional wisdom of who owns the bulk of corporate stock in the US equity market, the consensus is simple: at 36% of total, the answer is the US household. This is shown in the chart below.

As an aside we disagree from this simplistic analysis because as is well known, the "Household" category, which is pulled from the Fed's quarterly Flow of Funds report, is merely a placeholder plug, designed to balance out all the other member categories. What is less known is that entities such as hedge funds use extensive "off the books" leverage (just ask Citadel and its nearly 9x regulatory leverage) to hold far more equities than their capital allows them. Which means that in reality the US household owns far less stock than is believed.

But even if one takes the Fed's data at face value, what becomes clear is that having owned virtually the entire stock market in 1945, households are now down to nearly their lowest fractional ownership in history, with the rest alloted to mutual, pension and retirement funds.

And it is only going to get worse.

According to a recent analysis by Goldman, in 2014 the US household is on track to withdraw a whopping $430 billion from US corporate stocks. i.e., sell. This will be the biggest net outflow by the Household group, which has constantly withdrawn cash from equities over the past decade, since the last market peak.

It is understandable why: with baby boomers retiring in droves, and with interest income non-existent, investors are forced to liquidate positions in order to generate, well, liquidity.

Perhaps a more disturbing question is why is the household outflow not bigger? After all it surpassed $1 trillion during the last market peak. Could it be because households just don't have all that much equity left in a market which is now dominated by a mere tiny fraction of the entire US population?

But the biggest question is with household pulling cash out, who will provide the offsetting inflow into stocks? The answer: corporations of course - the same entity that injected a record $500 billion in stocks in the form of buybacks is set for another bumper year of net inflows, and according to Goldman companies are on par to match their 2013 buyback activity by buying back some $450 billion of their own stock in the coming year.

This also expains why for one more year, there will be no capex rise - quite simply in order to maintain the illusion of the stock market ponzi, corporations have to keep buying back ever greater amounts of their own stock in order to keep reducing the denominator in the EPS fraction and perpetuate the myth that Net Income is growing when in reality only the number of outsanding shares is declining. So for all those hoping for that so long overdue CapEx bounce, may we interest you in some 1000+ forward PE multiple stocks.

After all in a ponzi which has already likely passed its Minsky moment, the only "trade" that works is to bet on the greatest fool of all, the Fed.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
FieldingMellish's picture

Gotta pay for the FSA somehow.

Arius's picture


buy when there is blood on the street!

zaphod's picture

The big take away for me from that outflows chart, is that it says households have had only outflows for the past 10 years and never any inflows. 

So where is all this money coming from???

kliguy38's picture

hmmmmmmm....i can't imagine...hehehhhehe

yogibear's picture

He thinks he  will be forgotten for the mess he created,

Groundhog Day's picture

Does anyone believe a sociopath like Bernank gives a flying fuck about who blames him for what.  He probably has billions stashed away in lichtenstein or better yet, pleanty of gold buried somewhere with treasure map where X marks the know tradition

0z's picture

Does 'Households' mean 'real people', in their name, without shame and fraudulent concept of a Corpus which has no organic body. capacity of action and responsability?
That would mean most of the Stock market is held by Fraudsters! 

villainvomit's picture

My best guess is trying to just get by one more day.  They already have ample ammo and it is well known.  That's why it won't come for another generation.  The War of Govt Aggression.....that's what it will be called in the South.

Never go wrong buying more ammo, Captain!

villainvomit's picture

I meant Major.....sorry !!! 

snodgrass's picture

Need the money to shop at WalMart.

QQQBall's picture

Net after taxes and inflation?

Soul Glow's picture

Freedom costs a buck 'o nine.

I Write Code's picture

But the biggest question is with household pulling cash out, who will provide the offsetting inflow into stocks? The answer:

Da Fed.

Actually, it's not unreasonable for anyone to cash out now, at least there are some long-term capital gains to be had, and many may have long-term capital losses to balance.  Good time to get into gold.

Or bitcoin LOL.

And on the other other hand, why should anyone believe Goldman about anything?

Smegley Wanxalot's picture

No issue.  The fed will pump about a $ trillion in, so the net will be a $570 billion boon to the bankers.

Soul Glow's picture

Diminishing returns be damned!

Pee Wee's picture

Smegley beat me to it.


scubapro's picture

there is something missing with this chart.  its common knowledge that in 2013 there were net inflow to equity mutual funds, and outflows 08-12.  outflows in 2007??    something is not right.

Bunga Bunga's picture

Who they gonna sell to? Yellen?

drinkin koolaid's picture

I thought that the fabulous newsletter writer Dennis Fartman was the greatest fool.

new game's picture

lumping that loser with krugman. corzine ect.

ArmyofOne's picture

The central planners still have over $650 billion to print.


Next topic.

ebworthen's picture

Still $55 Billion per month, and ZIRP still in effect punishing savers.

Almost as if they were punishing responsible individuals while rewarding skullduggery on Wall Street.  Must be a conicidence as that would be the opposite of their "mandate".

new game's picture

are ceo's household share cropers too? if so that would make the ma and pop amt sig less.

Soul Glow's picture

Boomers gotta retire!

Georgia_Boy's picture

Which category does, say, Bill's shares in Microsoft fall into? On the face of it, I'd say households.  So how about this for an alternate explanation ... insiders are selling.  And they sold big in 2007, sensing things were going to get rough, and held in 2009, knowing things would probably return.

On the face of it, it doesn't look like we're going over the cliff just yet. I've probably got more time to prepare. It's going well so far, I'm about to finish off the last of my recourse debt this month and then it's time to fix the house and get the mortgage down a little more so I'm ready in case I should have to sell it and move. First mover advantage. Adding to the cash and PMs will have to wait a few more months.

Midnight Rider's picture

To buy $450 billion of their own stock at all time highs. That's one big waste of money.

Yen Cross's picture

   Meh (6) months of QE...Time to buy some moar cheap Chinese trinkets after that exports number.

game theory's picture

Net inflow never went negative over the last eight years? And households have been bailing for every year since 2006?


naughtius maximus's picture

WHAT?? This is not supposed to be happening.. I can't say this is bullish.. not like I say on every single thread in the last 3 weeks...

ebworthen's picture

I took out $3,000 yesterday to help pay the bills, I.R.S. got $300 for Ukraine.

The only good part was I was taking it out of the casino.

A_Nejad's picture

Watch out for that inflation coming at you next quarter..