Retail Investors About To Get Fleeced Again

Tyler Durden's picture


Submitted by Pater Tenebrarum via Acting-Man blog,

Mistiming the Market

As a small addendum to our previous post on the market situation, here is a chart recently posted by the “Short Side of Long”. It shows the cash allocation reported by AAII, which surveys retail investors. Not surprisingly, retail investors tend to be completely wrong in their positioning at major lows and major highs, while generally not doing too badly in the middle portion of trends. That latter remark has to be qualified by the fact that they tend to lose their gains from this portion of a trend by being wrongly positioned at its end.



Retail investor cash allocation reported by AAII, via the shortsideoflong – click to enlarge.



As Short Side of Long comments on the chart:

According to the recent AAII Asset Allocation Survey by retail investors, cash levels in July dropped to the lowest level since 1999 at only 15.8%. Just as this was happening, European markets like DAX 30 have started a free fall of 10% in only a few weeks, while S&P 500 is also experiencing the strongest sell off in months. It seems to be that the same old theme of buying very high and later down the track, most likely panic selling into an upcoming low, will once again be occurring.”

Of course the fact that retail investor cash allocations have sunk to the lowest level since 1999 is quite an astonishing and newsworthy datum, but we have seen the same thing happening in Rydex money market fund asset levels for quite some time already.

It should be pointed out that such data are not very useful as short term timing indicators, they do however have medium to long term significance. Certainly they show in this case how the average retail investor has once again been led astray by monetary pumping.


Chart by: Short Side of Long

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Sun, 08/10/2014 - 13:42 | 5072940 Terminus C
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"Certainly they show in this case how the average retail investor has once again been led astray by monetary pumping."


Isn't that the point of monetary pumping?

Sun, 08/10/2014 - 13:49 | 5072967 Oldwood
Oldwood's picture

To"incentivise" is to induce someone to do what they may normally not do through either fear or greed. In this case they have used both simultaneously telling us that they are knowingly manipulating us for our own good. Of course like how they sell foreign trade deals which are also supposed to benefit "Americans", they ultimately only benefit the select few while driving the rest of towards a cliff.

Sun, 08/10/2014 - 14:15 | 5073038 kliguy38
kliguy38's picture

I LOVE the taste of fresh mutton in the morning......

Sun, 08/10/2014 - 14:17 | 5073045 CheapBastard
CheapBastard's picture

I find the Eukenuba tastes alot better with Maple syrup on top.

Sun, 08/10/2014 - 16:12 | 5073369 max2205
max2205's picture

Let the fleecing begin..


The sooner the better

Mon, 08/11/2014 - 07:25 | 5075465 markmotive
markmotive's picture

And Marc Faber says to expect a drop by the fall...

Sun, 08/10/2014 - 14:46 | 5073106 ChartreuseDog
ChartreuseDog's picture

Don't you mean "fresh muppet in the morning?"

Sun, 08/10/2014 - 13:42 | 5072943 _ConanTheLibert...
_ConanTheLibertarian_'s picture

Look at Feb. '98: 11 %. All is just fine.


Sun, 08/10/2014 - 15:18 | 5073186 One World Mafia
One World Mafia's picture

Holy mackeral, look at the difference between the two curves then - or at any time actually - compared to today.

Sun, 08/10/2014 - 13:44 | 5072950 order66
order66's picture

John Mill's Market Locator

Credit Creation — The nurturing of a bubble. Just as fire can’t grow without oxygen, so a boom needs credit to feed on. Minsky argued that monetary expansion and credit creation are largely endogenous to the system. That is to say, not only can money be created by existing banks but also by the formation of new banks, the development of new credit instruments, and the expansion of personal credit outside the banking system. During this phase the rate of interest is almost uniformly low. Credit continues to grow more robust, enterprises increase and profits enlarge.
Euphoria — Everyone starts to buy into the new era. Prices are seen as only capable of always going up. Traditional valuation standards are abandoned, and new measures are introduced to justify the current price. A wave of over-optimism and overconfidence is unleashed, leading people to overestimate the gains, underestimate the risks, and generally think they can control the situation. The new era dominates discussions and Sir John Templeton’s four most dangerous words in investing, “This time is different,” reverberate around the market.

<< You are here >>

Critical Stage — Financial distress. This is often characterized by insiders cashing out, and is rapidly followed by financial distress, in which the excess leverage that has been built up during the boom becomes a major problem. Fraud also often emerges during this stage of the bubble’s life. The unwinding of massive leverage now results in asset fire sales.

Final Stage — Revulsion. Investors are so scarred by the events in which they participated that they can no longer bring themselves to participate in the market at all. This results in bargain basement asset prices.

Sun, 08/10/2014 - 13:44 | 5072951 Yen Cross
Yen Cross's picture

  All you have to do is scan the comments at Bloomturd, Yahoo, MarketWatch, to see a whole new livery of Jackasses that think ,"It's different this time."

Sun, 08/10/2014 - 13:55 | 5072983 Oldwood
Oldwood's picture

I just committed another $40k towards new equipment this last week, even in the face of what I believe to be surely a disaster. As a business person (using the term loosely) I see no alternative but to continue on. While it makes me nervous to spend money I may well never see again, it earns nothing setting in the bank and I will NEVER invest in the "markets" again. If I myself am not good enough to invest in, rather than some other business who has my interests as their very last concern, then I will do nothing at all.

Sun, 08/10/2014 - 14:11 | 5073022 Oldwood
Oldwood's picture

I'm 61, but right there with them. I know inflation is eating away at my savings but I simply refuse to give the markets my money to gamble all of our futures with. And while there is an appeal to metals, I see our number one problem as government. Their power, their lack of accountability is the weight that will ultimately crush us, and while I'm fully weaponed up, I do not see that as any hedge against government power or malfeasance, simply a defense against potential collateral threats. The dollar, while absolutely as worthless as any stock, is still the law of the land, and will retain "some" value as long as our government is in power, which I see no end to in our near future. Gold or silver on the other hand, can be outlawed or taxed out of existence for any practical purpose short of absolute lawless collapse (and in that case I still believe lead will be the most precious of them all). Cash and real assets are the only relatively safe hedge from my perspective, but we each will make those choices individually.

Sun, 08/10/2014 - 14:34 | 5073084 logicalman
logicalman's picture

Similar in age, but approaching things differently.

Gold or silver CAN be outlawed, but if you have it and didn't leave a trail getting it, you are probably safe IF you are fortunate enough not to have bought a defective canoe.

If you have 'money' in the bank, it belongs to the bank until you withdraw it.

If you have money in the markets, I have a jacket for you with buckles up the back.

Fitness & skills are your best friends.

59 here - did 30 miles of trails on my mountain bike yesterday and about 20 on the road today.

Can shoot a rifle and a Bow better than most.

Give me a pre-electronic gizmo engine and I can make it run.

I'm not hopeful, and the world may decide I have no place in it, but then shit does happen.


Sun, 08/10/2014 - 15:17 | 5073191 drdolittle
drdolittle's picture

Little younger but still no spring chicken anymore. I would have to travel to find a coin shop so I did leave a trail but sold it at a loss privately some years back. Could use a little work on my longbow skills but could also just get a compound or crossbow-nothing like silent kills if shtf badly.

Also, don't think real estate is so safe, it can be taken by eminent domain or made too expensive by taxes. Still, I think it's a good hedge. Metals, base metals, real estate. Cash is trash and stawks are for suckers.

Like oldwood's investing in himself. Who else cares about your money so much?

Sun, 08/10/2014 - 18:00 | 5073755 Oldwood
Oldwood's picture

The problem with investing in yourself is it only works if you actually work at it. The whole point of investing in other people's business is the free ride. they do the work and you gain from their efforts, not your own. Easy money, the path to all our troubles....

Sun, 08/10/2014 - 18:50 | 5073994 WillyGroper
WillyGroper's picture



I'm impressed.  This may alter the prep lense.

Sun, 08/10/2014 - 13:44 | 5072953 Yancey Ward
Yancey Ward's picture

Once the retail investor is fully in, then the markets can be allowed to crash back down.

Sun, 08/10/2014 - 13:52 | 5072975 buzzsaw99
buzzsaw99's picture

it's everyone else that's getting fleeced

Sun, 08/10/2014 - 13:56 | 5072985 Seasmoke
Seasmoke's picture

How is the Tribe able to pull off the same scam at the same scene of the crime, over and over and over again !!!

Sun, 08/10/2014 - 14:02 | 5072994 Oldwood
Oldwood's picture

We humans, taken as a whole, seem to be very predictable, and there are those who have spent a lifetime studying us. Like your pet dog, they have nothing better to do than watch us and learn, yet we are always surprised when they seem to know what we are going to do before we do it. And WE see them as "dumb animals".

Sun, 08/10/2014 - 14:12 | 5073028 813kml
813kml's picture

The same way that Vegas stays in business, lots of greedy Hopium.

Sun, 08/10/2014 - 16:22 | 5073398 Midnight Rider
Midnight Rider's picture

Good analogy that will probably continue to play out on the downside. As Lake Meade continues to evaporate, it will probably have the same effect on Vegas as the central banks eventual vaporware evaporation has on the world's economy. Both will blow away in the wind.

Sun, 08/10/2014 - 14:40 | 5073091 order66
order66's picture disaster is quickly forgotten. In further consequence, when the same or closely similar circumstances occur again, sometimes in a few years, they are hailed by a new, often youthful, and always supremely self-confident generation as a brilliantly innovative discovery in the financial and larger economic world. There can be few fields of human endeavor in which history counts for so little as in the world of finance.

John Galbraith

Sun, 08/10/2014 - 14:03 | 5072997 ekm1
ekm1's picture

Retail who?

Sun, 08/10/2014 - 14:10 | 5073004 fonzannoon
fonzannoon's picture

the however many trillions in 401k/IRA's for starters.

Sun, 08/10/2014 - 14:10 | 5073017 ekm1
ekm1's picture

That is institutional money. Not necessarily going to stocks and far far far far insufficient to cover $1.4 quadrillion of derivatives.


1.4 000,000,000,000,000 

Sun, 08/10/2014 - 14:14 | 5073034 fonzannoon
fonzannoon's picture

The money in 401(k)'s and IRA's get to choose between stock funds and bond funds. They are retail. That does not include the trillions in non qualified brokerage accounts and annuities. That is all retail.

don't sweat the derivatives. They all net each other out at the end of the day. Besides the banks know that they are not allowed to take anyone out anymore. Look at that banco espirito. That's the nice calm way to do it now.

Sun, 08/10/2014 - 14:17 | 5073044 ekm1
ekm1's picture


Yes. They netted at AIG also.


And yes with BES, until no one is bailed out.



Any idea will will provide energy, commodities and food to all these people who have """""saved"""?

Sun, 08/10/2014 - 15:25 | 5073212 Professorlocknload
Professorlocknload's picture

Might be;

The shortages come after the chopper drops result in price controls. We aren't there yet.

Looks like so far, excess printings are still being absorbed by balance sheet repairs, or are being parked (eroded?) in "safe" negative return instruments.

Aside from those funds going into the casinos that are equity "markets."

But they are manic depressive, after all, manic being the flavor of the day.

When they go depressive, the air drops begin, in as yet, unknown form. A year or three after that, wage and price controls are instituted. Shortly after, the shelves go bare.

Just reflecting on the stagflation of the 70's,,,only this time, more so. This time around though, market forces will be over ruled by executive order. This is not good.

On the dollar being displaced. By what? Developing nations being run by Marxists that out Marx our Marxists? I see it more along the lines of, all fiat being equal, all being displaced by things real.

Unfortunately, it takes decades for the nonsense of State Controlled commerce to run it's miserable course, and for common sense to once again prevail.

Sun, 08/10/2014 - 15:29 | 5073233 ekm1
ekm1's picture

We are talking about 300 million armed americans.

Not the same thing.

In other recent historical cases, the population was un-armed

Sun, 08/10/2014 - 15:37 | 5073255 fonzannoon
fonzannoon's picture

you keep missing the beauty of this collapse. it's one family at a time and the police state will keep everyone in check. besides americas next top piece of shit is coming on and you can text your vote in on your obamafone.

Sun, 08/10/2014 - 15:40 | 5073270 ekm1
ekm1's picture

Police are getting cut also.

Their pensions are getting gutted.


Clintons are warring openly on Obama now.

Situation is changing weekly.

Sun, 08/10/2014 - 15:50 | 5073297 fonzannoon
fonzannoon's picture

dude u show me one link, just one, where a police pension got "gutted". show me one where they even got touched. TPTB will keep the police pensions long after chaos has set in. everyone else will go down in time but they will be last, and it ain't happening yet.

Sun, 08/10/2014 - 15:57 | 5073310 ekm1
Sun, 08/10/2014 - 16:08 | 5073354 fonzannoon
fonzannoon's picture

i'm on mobile now and trying to check, but i don't even see inthat article where the biggest disaster of them all, Detroit, cut police pensions.


Mon, 08/11/2014 - 11:05 | 5076238 One World Mafia
One World Mafia's picture

A big correction will send them flying back into the bond market.

Sun, 08/10/2014 - 14:07 | 5073006 CHX
CHX's picture

15% cash still... Quick, BTFD, BUY, BUY, BUY!!!

Sun, 08/10/2014 - 14:09 | 5073009 Absalon
Absalon's picture

Not sure how meaningful this is when the chart shows cash as a percentage of the total portfolio.  If the portfolio holds a fixed dollar amount of cash and an index fund then as the market goes up the percent in cash will go down and vice versa.

Sun, 08/10/2014 - 14:12 | 5073030 Oldwood
Oldwood's picture

The only meaningfull chart is one that illustrates how few there are left still making charts

Sun, 08/10/2014 - 14:15 | 5073040 CheapBastard
CheapBastard's picture



"Buy high and sell low," is for the Retail investor, the little peeples, my broker told me.


"Buy low and sell high," is for the Wall Street insiders.


Sun, 08/10/2014 - 14:32 | 5073079 buzzsaw99
buzzsaw99's picture

buy high and sell higher is the new paradigm

Sun, 08/10/2014 - 15:10 | 5073169 CheapBastard
CheapBastard's picture
Slump in Singapore prime property worst globally


Prime residential property prices in Singapore saw the sharpest decline over the past year out of the 32 cities profiled in residential and commercial property consultancy Knight Frank's latest Prime global Cities Index.



"No one saw this coming...."

Sun, 08/10/2014 - 14:30 | 5073076 Dividend
Dividend's picture

Cash is at the lowest level since 1999 but what will happen if it rises to "normal" levels? I don't like to image but I hold enough cash to hunt opportunities on the market. My latest acquisition was Target. The retailer is one of the worst performing stocks of the past year but one of the most solid dividend grower on the market.

Sun, 08/10/2014 - 15:04 | 5073149 I Write Code
I Write Code's picture

That chart doesn't look so bad to me, and Absalon makes a great point.

Small investors may also be cashing some winners and taking all cash out of the accounts, shrinking the accounts overall.  I don't know of anyone taking a second mortgage on the house (as if they could get one) and investing it in Facebook ... although I'm sure there are some, and if so they are looking good right now.

Sun, 08/10/2014 - 15:10 | 5073172 Long-John-Silver
Long-John-Silver's picture

Fool me once shame on you. Fool me 200 times makes me your typical Investor.

Sun, 08/10/2014 - 16:43 | 5073483 Caracalla
Caracalla's picture

I had been short up until early 2014 but then I realized the Fed will make sure this f*cker goes to the moon.  Got fully invested long U.S. stocks in July.  Don't buy the BS in this article, just BTFD.  Plenty more money to be made; the Fed will make sure of that.

Sun, 08/10/2014 - 16:49 | 5073504 Keltner Channel Surf
Keltner Channel Surf's picture

It might be "different this time":  cash balances might be low for retail investors because . . . they're finally running out of cash.  (For best results, shave at least thrice weekly with Occam's Razor.)

Sun, 08/10/2014 - 18:09 | 5073778 robnume
robnume's picture

FUCK THE RETAIL INVESTORS!! And the fucking horses they rode in on! As the French would say, "Damage"!! (Too Bad). LMAO. These scum deserve nothing. And that's just what they're gonna get. DOWN WITH CONSUMERISM!! btw, no offense meant to actual scum, as they have a biological purpose to be here. Unlike retail investors!

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