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Investor Survey Explains Why Investors Remain "Side Lined"
Submitted by Lance Roberts of STA Wealth Management,
Each quarter I run a survey of investor attitudes, allocations and economic expectations to get a sense of actual "investor" behavior. In the financial markets it is easy to become "detached" from reality and assume that "everyone" is acting in a similar manner. The survey shows that this is far from being the case. What was not surprising was the makeup of survey participants.
I have often stated that the average investor has about 15 years to save for retirement. This is due to ability much more than desire. During the younger years of life there is little ability to save as wage scales tend to be lower as marriage, family and debt consume most of their income. As shown by the survey the majority of individuals are between the ages of 46-65. Furthermore, as would be expected, the majority of investors surveyed also have higher levels of education which tends to lead to higher incomes later in life.
Of course, when it comes to "saving for retirement" the most important question is whether an individual is saving enough? The survey shows that roughly half of those surveyed "think" they are saving enough for retirement with on 15% feeling as though they have more than enough.
However, much of the current "confidence" in savings has been the result of a surging stock market over the last few years. It is highly likely that when the next mean reverting event occurs that confidence will shift rather markedly.
The reason I suggest that will be the case is because of "where" the majority of investors are receiving their investment advice. As shown in the chart below the majority of investment "advice" is coming from newsletters and the internet.
This too is not surprising given the surge in the markets which tends to make individuals believe that they are "smarter than the average bear." Success breeds overconfidence in the markets which has a long history of poor outcomes.
One interesting sidenote is that television only made up 2% of the vote which confirms the plunge in ratings that CNBC has experienced in recent years.
Not So Forgetfull
It has often been stated by the media and Wall Street analysts that the current "bull market" cycle is "the most hated in history." The survey shows that this may indeed be the case as two nasty bear markets over the last 13 years have left an indelible stain on individuals memories and retirement accounts.
When asked what is most important to them the survey showed that, by a wide margin, the majority are more focused on loss avoidance rather than chasing stock market returns.
That mentality is reflected in their asset allocation models with the roughly on 44% invested in stocks and 48% in bonds and cash.
While the media and Wall Street chants that the markets have hit new nominal highs, the reality is far different for individuals who panic sold near the last market bottom and are only now wading back into the markets again. The loss of capital, due to both declines and inflation, combined with the loss of "available time" to save for retirement has crippled investor psychology on many levels.
The problem is that investors today have "seen this film" before and are fairly confident in how it ends. When asked about stocks the vast majority believe that stocks are current overvalued.
Conversely, most investors see bonds as part of their long term investment strategy to protect capital and create income.
It is interesting that most mainstream analysis is confused as to why individuals remain cautious despite the surge in asset prices. However, in addition to the massive beatings that investors took over the last decade, much of their caution is likely rooted in the massive divergence between Main Street and Wall Street.
"It's The Economy, Stupid"
Following the very weak economic performance in the first quarter of the year, most economists blamed the weakness on "cold weather." However, since we often experience "cold weather" during the winter, it is likely that the economic drag was more deeply rooted in consumer outlooks. When asked about their outlook for the second quarter of this year the response was decidedly negative with over 80% expecting the economy to perform the same or worse.
If the economic slowdown in the first quarter was indeed just weather related the attitudes for the second quarter should be showing improvement. The fact that they aren't suggests that individuals are currently being impacted by their personal economic environment which has shown only modest improvement since the financial crisis lows.
That assessment is also reflected in their belief that Janet Yellen should remain focused on increasing real economic growth which will be of direct benefit.
What has not been lost on individuals is that the Federal Reserve's monetary interventions have done little to improve the quality of their lives but have vastly benefitted Wall Street. This is why despite wanting her to focus on improving economic growth, they also want her to continue tapering the current Q.E. program.
Not Surprised
If you have been paying attention at all, what is happening in the world outside of "Wall Street" leaves little surprise in these survey results. For most, the recovery of wealth over the last few years has certainly made many individuals feel more secure about their current financial position. However, they also realize that they have only recovered most of what they lost and are unwilling, and many unable, to live through such an event again.
With the majority of individuals surveyed facing retirement in the very near future, the need to conserve principal has overtaken the desire to accumulate wealth.
As I have continually reminded you, the "real economy" is far different from the "statistical economy" as reported in government data. While the costs of living continue to increase incomes have remained stagnant. With 1-3 Americans on some sort of government assistance, and nearly as many sitting outside the labor force, it is really on a handful of individuals that are actually invested in the financial markets to begin with.
As I stated recently in "Expect Low Returns:"
"Despite the media's commentary that "if an investor had 'bought' the bottom of the market..." the reality is that few, if any, actually did. The biggest drag on investor performance over time is allowing 'emotions' to dictate investment decisions. This is shown in the 2013 Dalbar Investor Study which showed 'psychological factors' accounted for between 45-55% of underperformance. From the study:
'Analysis of investor fund flows compared to market performance further supports the argument that investors are unsuccessful at timing the market. Market upswings rarely coincide with mutual fund inflows while market downturns do not coincide with mutual fund outflows.'
In other words, investors consistently bought the 'tops' and sold the 'bottoms.' The other two primary reasons of underperformance from the study related to a lack of capital to invest. This is also not surprising given the current economic environment."
While many dismiss the impact of the "baby boomer" generation moving into retirement, the reality is likely to be far different. If the current survey is representative of that particular group, the drag on the financial markets and economy over the next decade could be quite substantial.
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You sideline yourself when you miss out on Cheap C0inz!
Christ, just shut the fuck up. Why can't they ban your ass for trolling and derailing comment threads?
They're sidelined because THEY FIGURED OUT YOUR FOCHIN' GAME.......you SCUMBAGS!
Technically, the term "sidelined" means they are active participants in the game but just waiting their turn. I contend there are no people on the sidelines. We have either crony capitalists gaming and frontrunning the system, or we have people struggling to get by week to week.
Like someone worried about eating this month gives a shit about Twitter stock or BigC0in.
They should have had a category- Rigged and totally manipulated......
Fed manipulated 3 crashes since 2001 and now no one 'invests' anymore
Maybe two generations are lost and wall st will miss them at some point
Fuck the fed
Robert Kiyosaki predicted this phenomena over a decade ago.
And became the next George Soros trading his views. Oh wait, no he sells books.
I say fuck'em. I have been out since 2010 and have no plan to return. I'm taking my big .5% on my money market and living large. At this point I may well be stupid but I would rather eat dirt than give just one of these fucks a devalued dollar to gamble with. Its not that I worry about them making a lot of money or even that I am not. I feel they are using passive investors funds to basically burn the whole thing down. Kind of like a grass fire in the game hunt, burning it all down just to herd their prey into an environment not unlike shooting fish in a barrel. I know there are lots on this site who see nothing wrong with trying to profit from the "game", but just look around at the destruction you are enabling. Making money for nothing has always been the dream that has caused more destruction than about any other theme.
Jan '00 - '07 - Feb '14
$5.7 T --> $9 T --> $17.5 T (National debt = 305% increase )
$9.2 T --> $13.7 T --> $16.1 T (GDP = 75% increase);
6.6% ---> 5% ---> 2.4% (net interest rate on debt)
$300B -> $270B ---> $223B (net interest paid on national debt)
74% ---> 59% ---> 20% (% domestically held notes / bonds)
Jan '00 - '07 - Feb '14
Who's pushing the bond market to new global low yields???
$1 T ---> $1.6 T ---> $5.9 T (cumulative "foreign" held US Treasury debt)
25% ---> 40% ---> 55% (% of notes / bonds held by "foreigners")
1% ---> 1% ---> 25% (% Fed held notes / bonds...Fed primarily held Bills until '08)
Domestic holders of US Treasury Notes/Bonds have relatively collapsed, likely something to do with rationally determing not to allocate capital toward extremely low yielding assets when your plan assumes 7 o 8% annual returns...why would "foreigners" not be similarly concerned??? Particularly since US trade deficit fell in half since '08 (fewer dollars to be recycled)???
When this underpins everything...good luck with the con game.
Looky here...Domestic holdings of US Treasury Notes/ Bonds are almost unchanged since '00...while the bond issuance exploded.
$17.5 T in US Treasury debt
$5 T intra-gov holdings
$12.6 T Public debt
FED ($2.3T) Foreigner ($5.9T) Domestic ($4T non-Fed)
Bills ($1.65 T) $0 $600 B $1 T
TIPS ($1 T) $95 B $300 B $600 B
Notes ($8 T) $1.4 T $4.5 T $2.1 T
Bonds ($1.45 T) $750 B $400 B $300 B
These investors are all idiots. There is no sideline when you hold cash, stocks, bands, or cash instruments. You are actively putting your money into the Wall Street/DC crapshoot. Buy rental property, buy and hold PMs, or start a business or you are playing the house's game.
Every street has a retard, fonefucked is ZH's :\
I prefer MDB to represents us as our retard over fonefucked.
Touched by the Hand of Satoshi....
Christ, just shut the fuck up. Why can't they ban your ass for trolling and derailing comment threads?
Nice, suiting avatar "Slave". I guess you're like one of those thug morons with dollar sign tattoos all over, but no dollars? Zerobrains missed single digit BTC, missed double digit BTC and are now going to miss triple digit BTC. Keep losing, losers!
You parody yourself promoting that ponzi.
Another big problem is that the algos and HFTs have made stop loss orders too dangerous. If they see any stop loss orders (or shorts or many other things) they flood the market to pick those off - even if the move only lasts a few seconds. This fits in well with the survey that wants returns without risk of big losses. You simply cannot have any orders in the system or the algos will take your money.
Once you've been neutered by these thieves, over a over again you are not just "sidelined" you are put on the 'Injured Reserve' with permanent financial retirement coming up quickly...
But the zombies just love it and can't wait to get mauled once again.
Everybodys favorite douche-bag (Jim Cramer) is quite bullish...
http://money.msn.com/investing/investing-news.aspx?post=52de39a4-9552-4107-94ed-0bf9a4e28b9c
Can't bring up his name without this!!! https://www.youtube.com/watch?v=o3FVBKic5Ek
This article strikes me as a sales pitch for this financial advisors services. If you just listen to him, he'll tell you where to put your money... for a small monthly fee. Don't let your emotions get in the way. I'm emotionless, let me invest it for you.... I'll get you big returns. Don't worry about risk. That's an emotion. I know a great hedge fund that will make you millions.
FU we don't play your game anymore.
No financial advisor will tell you to get out of the markets...unless they have something else to sell you. They are salesmen. Like Goldman they are only interested in advising you to buy what they have for sale. How many advisors took the blame for the losses of 08? A high tide lifts all vessels but to run one aground is the pilot's fault.
Bitcoin is such a scam. You need to start selling Avon products.
We know it is a scam for one reason...no one is buying bitcoin for safety or even electronic commerce...they are in it to make a fast buck, speculation. That always ends badly for most involved. Buy for value or don't buy at all.
We don't need no stinkin' investors.
Not to mention people like me who lost their job over the last engineered crash who have had to cash out 15 years of saving just to survive.
Fucking Ponzi.
I tried to subscribe to Stansberry's newletter, but I couldn't figure out how. There's no "buy now" button or anything like that.
btw the simplest sell signal is a trailing stop. If you're down 20 or 25% from the peak, sell the stock and move on. I'm sure there are thousands of people who own shares of Twitter, and they will ride that bitch all the way to zero.
In Africa the natives use a technique to catch monkeys. They hollow out one end of a coconut and they put peanuts in there. The monkey puts his hand in the coconut and when he makes a fist to grab the peanuts, he's trapped. The natives will pull a string attached to the other end of the coconut and capture the monkey.
The shilly sit monkey just refuses to let go of them damn peanuts.
"It has often been stated by the media and Wall Street analysts that the current "bull market" cycle is "the most hated in history."
Not surprising, considering the still rampant massive financial fraud, which is holding the market up.
"It is interesting that most mainstream analysis is confused as to why individuals remain cautious despite the surge in asset prices"
They shouldn't be. People are sick and tired of the still ongoing massive financial fraud.
The term "the new normal" has not been used much as of late, but going forward it may be about to return. Many investors and the public at large may be about to realize that central banks can only do so much through printing money and lowering interest rates. Both these actions carry with them some very strong and nasty side effects.
Markets have become very distorted as money has flowed into risky assets in search of higher yields. It could be we are about to see the markets morph into a "realizing market", one that grinds slowly downward. Another possibility is that at some point the wisdom of buying every pullback changes and the market simply drops like a stone. More on what the future might hold in the article below.
http://brucewilds.blogspot.com/2013/06/realistic-expectations-for-econom...