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Even The Dumb Money Is Dumping Stocks Now

Tyler Durden's picture




 

Late in June, BofAML noted with some alarm that during the previous week, "clients were big net sellers of US stocks in the amount of $4.1bn, following four weeks of net buying." "Net sales were the largest since January 2008 and led by institutional clients—after three weeks of net buying, institutional clients’ net sales last week were the largest in our data history," the bank’s Jill Hall continued.

A little over a week later, Bloomberg reported that some two years after Leon Black’s "sell everything" call, "other private-equity firms are following suit - dumping stakes into the markets at a record clip."

Whether that particular bout of smart money dumping was simply an effort to get out ahead of what threatened to be a rather ugly conclusion to six months of bailout negotiations between Greece and creditors, or perhaps a knee-jerk reaction to the harrowing unwind that was unfolding in China’s half dozen backdoor margin lending channels we can’t say for sure, but what we do know is that not only is the smart money (still) selling, but now even the dumb money has joined the party for the second consecutive week.

From BofAML

 

Clients swing from pro-cyclical to anti-equity


Last week, during which the S&P 500 was down 1.3%, BofAML clients were net sellers of stocks for the third week, in the amount of $1.1bn. Net sales were led by hedge funds, which sold stocks for the fifth consecutive week; institutional clients and private clients were also net sellers for the fifth and second consecutive weeks, respectively. Net sales were entirely in large caps, while both mid- and small caps saw inflows. Buybacks by corporate clients picked up to their highest level since May, though, on a four-week average basis, they still remain below year-ago levels. Year-to-date, private clients remain net buyers for the first year post-crisis, while institutional and hedge fund clients remain net sellers, in part hurt by the continued rotation from active to passive management. 

 

In fact, not only was the dumb money selling, they were selling in droves as private client net sales were the highest in a year. And who was everyone selling to, you ask? 

Why, to corporate management teams of course.

The same corporate management teams whose equity-linked compensation benefits from myopic, EPS-inflating, debt-funded buybacks or, to put it in the more politically correct terminology recently employed by GMO's Ben Inkler, "these are asset owners for whom the expected returns of the assets they buy are not a primary consideration in their purchase decisions."

And as a reminder, these are also the asset owners whose purchases have for years served as the perpetual bid behind a stock market where everyone for whom expected returns are important, seems to be selling, on balance. Here's BofAML again:

Net sales by private clients last week were their largest in one year, led by sales of Staples and Energy stocks. Buybacks by corporate clients picked up to their highest level since May.

 


Spot the odd group out:

So with private clients now bailing for the first time in three weeks and with the smart money continuing to liquidate, the question, as we put it earlier this month, is this: "if price insensitive buyers (which, as you can see from the above, are all that are left) become sellers, will the entire market collapse"? 

 

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Tue, 08/11/2015 - 15:08 | 6415095 firstdivision
firstdivision's picture

Peter North approves of the Chart 3 name.

Tue, 08/11/2015 - 15:38 | 6415247 GMadScientist
GMadScientist's picture

You've got some cumulative developments on your chin.

Tue, 08/11/2015 - 16:06 | 6415363 AgentHarlequin
AgentHarlequin's picture

Why have people down-voted this comment?! It's exactly what we were all thinking....

Tue, 08/11/2015 - 16:30 | 6415460 Consuelo
Consuelo's picture

Don't forget Dick South...

 

 

Tue, 08/11/2015 - 16:51 | 6415532 reTARD
reTARD's picture

Yup. BofA's cum flow by client type. Obviously cum flows downward. I'm shocked!

Tue, 08/11/2015 - 15:07 | 6415097 jimfcarroll
jimfcarroll's picture

Time to go long

Tue, 08/11/2015 - 15:08 | 6415102 madcows
madcows's picture

Well, the FED can always start buying stocks, too.  hell, they've bought all the treasuries and MBS's.  Why not Stocks?

Tue, 08/11/2015 - 15:27 | 6415195 SmallerGovNow2
SmallerGovNow2's picture

it's already happening at minimum through the primary dealers...

Tue, 08/11/2015 - 15:12 | 6415117 f16hoser
f16hoser's picture

Hence the run on Gold/Silver. Simple really.

 

Tue, 08/11/2015 - 15:12 | 6415118 Soul Glow
Soul Glow's picture

A buddy of mine just cash his stocks and bought a house all cash.  $200k.  I told him he'll need some gold and he said he would look into it.  

Tue, 08/11/2015 - 15:25 | 6415183 SmallerGovNow2
SmallerGovNow2's picture

there have been a lot of all cash offers in our area as of late...

Tue, 08/11/2015 - 15:32 | 6415229 madcows
madcows's picture

yup.  time to convert the digital (make believe) assets into real, physical assets.

A house may lose 50% of the purcahse price, but he can still rent it and generate income, where as a stock may lose 100% of its value when the collapse happens.

Tue, 08/11/2015 - 15:14 | 6415124 davidalan1
davidalan1's picture

no worries Bill whats his name on cnbc just asked santelli "if the fed is going to have to recalibrate their rate hike...LMAO

Tue, 08/11/2015 - 15:26 | 6415126 KnuckleDragger-X
KnuckleDragger-X's picture

The herd is getting restless and it won't take much to start a stampede. Of course the question is off which cliff do they stampede over?

Tue, 08/11/2015 - 15:15 | 6415127 Archetype
Archetype's picture

Everybody is selling but stocks still remain at all time highs...

Tue, 08/11/2015 - 15:24 | 6415176 SmallerGovNow2
SmallerGovNow2's picture

How it do dat?

Tue, 08/11/2015 - 16:34 | 6415471 Wahooo
Wahooo's picture

It buy with the full faith and credit of your tax dollars and personal assets.

Tue, 08/11/2015 - 16:53 | 6415540 Mr. Bones
Mr. Bones's picture

That would be telling.

Tue, 08/11/2015 - 15:15 | 6415128 Kaiser Sousa
Kaiser Sousa's picture

they will not allow a 1% loss on the Dow for the day...

the last hour fraudulent ramp is underway...

Tue, 08/11/2015 - 15:16 | 6415137 Raoul_Luke
Raoul_Luke's picture

I thought you were talking about Gartman...

Tue, 08/11/2015 - 15:17 | 6415141 vq1
vq1's picture

Even Cramer be like - "dont hold onto stocks just because you dont want to get taxed on the way out"

When its time to go, its time to go.

Tue, 08/11/2015 - 15:27 | 6415200 insanelysane
insanelysane's picture

"You can sell stocks???"

-every talking head on CNBC and Bloomberg

Tue, 08/11/2015 - 15:34 | 6415236 Row Well Number 41
Row Well Number 41's picture

I'm a pretty firm believer in doing the opposite of what Cramer says.   His name might as well be "Muppet Hammer".

#41

Tue, 08/11/2015 - 15:35 | 6415149 Lumberjack
Lumberjack's picture

 

 

SunEdison Is Starting To Show Signs Of Strain

 

 

http://seekingalpha.com/article/3428786-sunedison-is-starting-to-show-si...

 

Summary
  • While SunEdison recorded record growth numbers during Q2, the company's losses were much greater than expected.
  • The downsides of SunEdison's rapid expansion business model are starting to become more evident.
  • While it is too early to tell if SunEdison's business model will be successful in the long-term, the risks associated with such an aggressive approach cannot be ignored.

SunEdison (NYSE:SUNE) has experienced a disastrous past month, with the stock price approximately halving during this time period. With a growing number of acquisitions and businesses, SunEdison is clearly making investors more wary of a possible overextension. SunEdison's recent Q2 earnings results only further stoked this sentiment, as the company reported a whopping $263M in net losses. Despite the fact that the company crushed its growth guidance, delivering 404 MWs of solar/wind projects during the quarter, losses are clearly becoming a focal point for investors.

With 8.1 GW of pipeline projects and a growing number of businesses, investors are right to be increasingly focused on losses. As debt has been one of the primary reasons for solar bankruptcies over the past decade, growth may become irrelevant if the company's losses keep piling up. With debt levels starting to surpass the double digit billions, SunEdison is clearly one of the riskier solar plays. While SunEdison is still likely undervalued at current valuations(especially after its recent drop), the risks associated with this stock are only rising. Some of the downsides of SunEdison's incredibly ambitious approach are finally started to show.

SunEdison has experienced a precipitous stock drop over the past month.

 

=============

I hope Nanex is watching these guys....

Tue, 08/11/2015 - 15:22 | 6415160 Carl Menger
Carl Menger's picture

The error of the "beneficial mild inflation"

 

All inflation is so very dangerous precisely because many people, including many economists, regard a mild inflation as harmless and even beneficial. But there are few mistakes of policy with regard to which it is more important to heed the old maxim principiis obsta. 1 Apparently, and surprisingly, the self-accelerating mechanism of all engineered inflation is not yet understood even by some economists. The initial general stimulus which an increase of the quantity of money provides is chiefly due to the fact that prices and therefore profits turn out to be higher than expected. Every venture succeeds, including even some which ought to fail. But this can last only so long as the continuous rise of prices is not generally expected. Once people learn to count on it, even a continued rise of prices at the same rate will no longer exert the stimulus that it gave at first. Monetary policy is then faced with an unpleasant dilemma. In order to maintain the degree of activity it created by mild inflation, it will have to accelerate the rate of inflation, and will have to do so again and again at an ever increasing rate every time the prevailing rate ofinflation comes to be expected. If it fails to do so and either stops accelerating or ceases to inflate altogether, the economy will be in a much worse position than when the process started. Not only has inflation allowed the ordinary errors ofjudgement to accumulate which are normally promptly eliminated and will now all have to be liquidated at the same time. It will in addition have caused misdirection of production and drawn labour and other resources into activities which could be maintained only if the additional investment financed by the increase in the quantity of money could be maintained.

 

 

Friedrich Hayek - The denasionalisation of money - The argument refined- 1977  p. 95

Tue, 08/11/2015 - 15:59 | 6415327 froze25
froze25's picture

Well that is one from the Austrian school if I have ever read one.  Cheers.

Tue, 08/11/2015 - 15:23 | 6415170 SmallerGovNow2
SmallerGovNow2's picture

Buying frenzy into the close?

Tue, 08/11/2015 - 15:30 | 6415212 Soul Glow
Soul Glow's picture

Kevin Henry's job is at stake.

Tue, 08/11/2015 - 15:30 | 6415182 buzzsaw99
buzzsaw99's picture

it looks like they are selling crAAPL to me

in the words of the wsj: ...the Roach Motel will prove less formidable than assumed.

Tue, 08/11/2015 - 15:26 | 6415189 Imagery
Imagery's picture

the whole effing market has been derivatized and Off Balance Sheeted onto Fed Res and TBTF.  All Markets in US.

Tue, 08/11/2015 - 15:33 | 6415233 Badself
Badself's picture

You guys are too much.  The dow will end up at least 30% higher this year and every year until rates go up significantly.  There is so much money being created and floating around that it has no where else to go.  Hurry up and get all your cash in the market chicken little before it is too late and your 500,000 account will be nothing but a few nice vacations.     

Tue, 08/11/2015 - 16:48 | 6415528 Nobody For President
Nobody For President's picture

Yep, looks good. You go first.

(Old paraglider adage when you are waiting around on a mountain launch with iffy weather conditions...)

Tue, 08/11/2015 - 16:48 | 6415525 Funny Money
Funny Money's picture

If the dumb money is selling then back up the truck.  There's no more bullish sign than that.

Tue, 08/11/2015 - 17:17 | 6415642 KingOfMilwaukee
KingOfMilwaukee's picture

On thing I question (based on history) is that the current drop in commodities is bad for stocks. Since when? The opposite is historically true.

The entire period between 1982-1999 was one of dropping commodities. What did the stock market do? Go up. 2000-2010 was one of rising commodities. What did stocks do? Go down. 1968-1982 was one of rising commdities. What did stocks do? Go down. 1941-1968 had dropping commodities. What did stocks do? Go up. 

The fact commodities are dropping is probably a sign the market is going to 20,000+. At least if history is what counts. Economic history is where HARD and PAPER assets trade leadership as cash flows from one to another. Money has to go... somewhere. Commodities and stocks do not go up or down together for very long. A year or two? Sometimes. But over decades, they are inversely correlated due to cash flows. And that is a fact any of you can find by just investigating it.

Wed, 08/12/2015 - 20:02 | 6420434 JoWazzoo
JoWazzoo's picture

Well - after a day like Wesnesday, just who the EFF is buying this shit?  Stock buybacks and PPT?  This IS getting rediculous.

Fri, 08/14/2015 - 07:52 | 6425379 Omega
Omega's picture

The money funding sphere is with difficult laws and conditions. People can invest money and develop their business, but they have to consider all difficulties and foresee possible changes. Sometime it’s necessary to take Canada payday loans available for any credit to solve any problems and financial emergencies. Today the economical sphere can change every day due to the unstable political situation and problems in the EU. Also there is no protection from growing interest rates and taxes that will definitely change this year.

 

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