This page has been archived and commenting is disabled.

Investors, Nostalgic For Logical Markets, Boycott New Centrally-Planned Normal

Tyler Durden's picture


One of the deepest mysteries related to the ongoing rally in U.S. equities is the persistent lack of retail investor involvement. QAs we have vociferously noted, U.S. equity mutual fund flows remain solidly negative and interest in single stock trading among individual investors is similarly moribund - while corporate bond volumes remain flat and Treasury volumes higher.  As Nick Colas, of ConvergEx group, notes, one missing link to explain this dichotomy must be the fundamental lack of financial literacy among U.S. retail investors, yet this relationship is seldom mentioned as a reason for this group’s ongoing apathy in the face of 4-year highs for domestic stocks.  The Securities and Exchange Commission’s recently released study of financial literacy among retail investors outlines just how little this group really knows about capital markets and highlights the underlying rationale behind many of their recent seemingly irrational behaviors.


Stock vs Corporate Bond vs Treasury trading volumes...

Nick Colas, ConvergEx: Retail Investors And Financial Literacy

If the U.S. equity market is such a good party, why is the dance floor so empty?  OK – that’s a bit of exaggeration, of course.  At the same time, it is hard to overlook declining volumes in stock trading or the persistent redemptions out of U.S. equity mutual funds.  A few points here:

  • The S&P 500 is up 14.3% year-to-date, but the funds dedicated to this asset class have yet to see a month where money flows are positive.
  • Over this year of above-trend performance, in fact, investors have redeemed just over $80 billion in assets from U.S. stock mutual funds, or $250 for every American man, woman and child.
  • Look further back, and this pattern hold true for the entire rally from the lows in March 2009.  American investors aren’t chasing performance; in fact, they are running from it.
  • A recent article on Bloomberg cited a 37% drop in trading volume on U.S. exchanges when comparing the first half of 2008 to the same period in 2012.  The August comparison, using data we compile at ConvergEx, shows that trading volumes for last month were down more like 45% from the same month in 2011.

While there are a host of reasons for the decline in U.S. volumes, the issue I would like to focus for the remainder of this note is retail investor knowledge and how this relates to their confidence in capital markets.  The connection between these two factors is straightforward: investors need more than a rising market to invest.  They need to feel that they understand it and enjoy some level of competence before they trade.  An academic paper, published in Management Science (Investor Competence, Trading Frequency, and Home Bias by Graham, Harvey and Huang, July 2009) performed a useful analysis defining this relationship.  A few points to summarize their work:

  • Using data from surveys conducted by UBS/Gallup, the researchers ranked retail investors by how “Competent” these market participants rated themselves at making their own investment decisions on a 1-5 scale.
  • Investors who ranked themselves as significantly more competent traded (4 or more on that 1-5 scale) much more frequently than those who ranked themselves lower.  Over half of this group traded at least once a month, versus 28% for the lower-ranked group, for example.
  • The research also established that men trade much more than women, with 43% trading once a month, versus just 25% for their female counterparts.  Relative youth also correlated with greater trading frequency, as did the level of household income.
  • Levels of educational achievement also correlate strongly with the frequency of trading.  A retail investor with a post-graduate degree trades stocks on a monthly basis much more frequently than one who did not finish college – 43% of the first group trades monthly, versus just 25% of the latter.

That last point, on education, got me wondering about how much U.S. retail investors really understand about modern capital markets.  As it happens, the U.S. Congress had a similar question in the wake of the Financial Crisis and asked the Securities and Exchange Commission to explore the topic as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.  Their study, released on August 30th, leverages a review of various literature on the topic done by the Library of Congress as well as the SEC’s own findings from focus groups and online surveys of retail investors.


The upshot of these analyses is bleak: “The studies demonstrate that investors have a weak grasp of elementary financial concepts and lack critical knowledge of ways to avoid investment fraud.”  Much of the +200 page SEC review is not actually about financial literacy, but rather describes how investors process information regarding financial disclosures in the face of this knowledge deficit.   The numerous direct quotes from survey and focus group respondents highlights that investors want simple, brief disclosures and explanations, despite their lack of understanding of how capital markets work.


The Library of Congress report, published in December 2011, contains even more chilling details about what U.S. investors actually know about capital markets.  The study, which reviews 8 different independent surveys, starts with a key finding of a 2009 FINRA report that “Americans lack basic financial literacy.”  The report includes the questions posed by the different surveys, a sample of which I include here, along with a few observations:

  • Question: If interest rates rise, what will typically happen to bond prices?  Only 21% of the 2009 FINRA National Financial Capability Study knew that the answer was “They will fall.”  The same question to a group of active U.S. military got only a 30% correct response rate.  In a 2010 Northwest Mutual survey, only 41% knew the relationship between interest rates and bond prices. This may go part of the way to explaining why fixed income products  - mutual funds and exchange traded funds, not to mention individual bonds – still enjoy strong money flows despite record low interest rates.  What happens to retail investor confidence in these investments when interest rates rise is, therefore, impossible to know.
  • Question: Buying a single company’s stock usually provides a safer return than a stock mutual fund?  Only 52% of respondents in the 2009 FINRA survey got this right, and a 2007 Moneytrak/IPT survey found that only 39% of respondents knew the definition of “Diversification.”
  • Question: What return would you expect from a broadly diversified U.S. stock mutual fund over the long term?  The “Correct” answer, according an SEC telephone survey held in 2008, is 10% and 53% of respondents answered as such.  Numerous other studies had similar questions about the long run potential of U.S. stocks and most respondents answered in the same vein.

Two points pop out from this line of questioning.  The first is that none of the surveys asked “How much volatility are you willing to stand in order to earn that 10%?”  That’s a critical variable, and it may well be that retail investors are anchoring their expectations of future volatility against the last 5 years.  Second, it might be the case that investors have downgraded their expectations of long-term returns with the paltry returns exhibited by stocks since 2000.

In summary, the data shows that retail investors do not generally have the knowledge necessary to make sense of modern capital markets.  Add the volatility of the Financial Crisis and the macro-policy driven stock markets of today, and you have a recipe for reduced confidence in their abilities to invest.  Against that backdrop, the asset moves out of stocks and into bonds makes sense.


You might argue that “It was always thus…” and that is a fair point.   American investors haven’t grown dumber on financial matters in the last decade; they never had the requisite knowledge to begin with.  But it does appear that the events of the last few years have caused some kind of “Tipping point” with regard to investors’ ability to process the world around them.  The only prescription to allay their concerns is, I think, time.  Time, and continued strong performance from U.S. stocks.


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Mon, 09/10/2012 - 18:24 | 2780035 Clint Liquor
Clint Liquor's picture

In summary, the data shows that retail investors do not generally have the knowledge necessary to make sense of modern capital markets. 

That's because 'Modern Capital Markets' don't make any sense. It's all manipulated and corrupt.

Mon, 09/10/2012 - 18:28 | 2780043 e-man
e-man's picture

...which is precisely the reason the government will need to convert your 401k/IRA to Treasurys. 

Mon, 09/10/2012 - 18:45 | 2780093 edifice
edifice's picture

And... It's gone.

Mon, 09/10/2012 - 22:24 | 2780590 illyia
illyia's picture

Because they know that they will be the bag-holders (through some sort of hidden elite machinations) they stay out.

And, they are right. They are the greater fool, and they know it.

Mon, 09/10/2012 - 22:50 | 2780640 Richard Chesler
Richard Chesler's picture

What's left of my 401K to equity sell side douchebags: you can shove 'em up your ass.


Tue, 09/11/2012 - 05:54 | 2780966 James
James's picture

Unless and until they prosecute FRAUD the Street has lost retail forever.

Market only moves positive if 'nanke prints.

And that is the only reason their even is a market.

Remember, what the CME did to those farmers resonated everywhere.Not just the farmers.Gensler should be behind bars.

It won't happen but ALL of the familiar faces need to never be seen again.

Dimon called before the Senate and treated like a rock star.


Jefferson county, Alabama

Alot of that reported european bailout was infact VERY pissed off people w/worthless MBS being redeemed.Was I not supposed to know that?

Are these investors not supposed to question the strength of municipalities, pension investments,even whole States?

This whole country?

Congress front running stocks?

Sorry Nick but they not only killed the proverbial goose but chose to shit where they sleep.


Disclaimer-I am the shoeshine boy.These fuckers ruined what I did for over 30 yrs. I slam down oak flooring and gut kitchens for remodeling. Even I can see what's going on and I've never played the Market.Good luck w/that!

One more thing Nick, The money I used to use for cashflow is now being used to buy Silver. I don't give a damn what the "Market" does to my metal. Ben could crash it tommorrow and I'll just back the truck up for more metal. In a few years I won't have to worry about "reserve currency" because the U.S. won't be the reserve anyway. And 'nanke won't be dictating shit

To date there are 140 countries that want NOTHING to do w/BennyBux.Ohs nos, I was'nt supposed to know that either!

Maybe someother time we can go over P/E.

And you insinuate that my peers, some seasoned, are'nt smart enough for this oh so sophisticated "market"? PFFFFT


Tue, 09/11/2012 - 11:08 | 2781792 FreedomGuy
FreedomGuy's picture

Which makes them the lesser fool by avoiding the market all together.

Mon, 09/10/2012 - 18:51 | 2780118 Stoploss
Stoploss's picture

Ha ha, "markets this" markets that", markets, markets markets.

Markets have natural true price discovery mechanisms.

What markets..

Tue, 09/11/2012 - 00:32 | 2780806 wee-weed up
wee-weed up's picture

There are no more "logical" markets. "They're ridin' dirty!" To use a quote from Obama's mentor and 20 yr pastor, Rev. Jeremiah Wright.

Tue, 09/11/2012 - 00:40 | 2780822 wee-weed up
wee-weed up's picture

Of course, if you believe the MSM... in 20 years, Obama never heard a single word "God Damn America!" Wright ever said.

Mon, 09/10/2012 - 20:07 | 2780299 smlbizman
smlbizman's picture

thats the new louder drum beat...i even heard this woman say that even the pros arnt competent enough to make financial guess who is competent enough?...retail no, professional money same people who have managed our country so me its for your own good....


and as a second point, i was smart enough to trade and invest in this market for 25 years...than i got fucking stupid and over  a 2yr. period closed out the iras, paid the tolls and bought silver and gold...the real kind...yep i am a moron...

Tue, 09/11/2012 - 06:56 | 2781024 Slightly Insane
Slightly Insane's picture

Retail Investors not "jumping in"?   Disposable income shredded,  this thing called High Frequency Trading, which has been known to lead to "flash crash", and quite possibly "the deer in the headlights" response to the absurd criminal activities of the guberment and the Fed.  I'm not surprised, at all.

Mon, 09/10/2012 - 18:25 | 2780038 Snakeeyes
Snakeeyes's picture

Mortgage debt is declining and even credit cards are contacting. M2 Money velocity is the worse it has even been. Bernanke is out of ammo but stocks keep rising.

Mon, 09/10/2012 - 18:25 | 2780040 spinone
spinone's picture

People understand that the stock market looks like its going up, but if you put your money in there you'll lose it.

Mon, 09/10/2012 - 18:29 | 2780049 Clint Liquor
Clint Liquor's picture

Agreed. It's like a boy being invited to his second camping trip with Jerry Sandusky. Thanks, but I'll sit this one out. (pun intended)

Mon, 09/10/2012 - 18:28 | 2780046 g speed
g speed's picture

the age of the average investor and them not wanting to "gamble" may have some bearing here.

Mon, 09/10/2012 - 18:34 | 2780047 ebworthen
ebworthen's picture

Besides needing the money from being laid off or for medical bills or underwater mortgages the skullduggery of Wall Street has not escaped those who have a choice.

Most are perfectly happy with 1-2% in Treasuries or TIPS because they aren't subject to the stock slot machine equities, despite Jim Cramer and investment "advisers" who say you are crazy not to invest in dividend paying stocks.

It's either "give me the cash" or "give me government debt" because by the time the government defaults it will be after equities are six feet under (S&P below 666).

"Fool me once - shame on you.  Fool me twice - shame on me."

Tue, 09/11/2012 - 11:22 | 2781863 FreedomGuy
FreedomGuy's picture

Yeah, I held Pfizer stock as it dropped from high teens to $11 per share but the dividend was going to pay almost 11%. Then they cut the dividend in half and I dumped it. Jeff Kindler an Obama acolyte was the CEO. So, you can tell me all that dividend crap and I know under the right conditions...generally the very conditions where I woiuld want to own the stock, the rules will change against me without warning.

The problem is the game is rigged against the individual investor and things out of your control come in from nowhere. Even the stuff you see can throw you for a loop.  Something in the EU could drop the DOW a few thousand points in a week. Obama getting reelected will have an effect. The Fed rigs the interest rates. It is all out of your control. Add to that record sustained unemployment, underemployment and there is a general malaise that makes it hard to throw much into the market casino.

On the other hand, when I play the craps table in Vegas, I know very precisely what the odds of every play are. There are no pronouncements from the casino or crew at the table that change anything. There are no surprises. There is no Fed, prime minister or central banker screwing with the odds, the rules or the payouts. The casino does not change the dividend payment after someone hits a point.

The same people like me who will play the craps table where we know the odds are against us but the rules are concrete will not do much with the market where the rules and variables are against us.

Mon, 09/10/2012 - 18:29 | 2780050 Conrad Murray
Conrad Murray's picture

Modern Capital Markets:

Person A) I ain't got shit in the bitches. Gimmie that dollar or imma cut ya

Person B) I have no idea what I'm invested in. They take the money out of my check and I hope for the best.

Person C) I'm a super trading ninja with nightvision goggles and IBD. I own the markets. NO you can't see my P/L!

Squi D) That's right bitches, ya betta have my money.

Mon, 09/10/2012 - 19:21 | 2780150 Tippoo Sultan
Tippoo Sultan's picture

Persons A,B, and C/total portfolio return:

"Two in the hat.".


Mon, 09/10/2012 - 18:30 | 2780051 Meesohaawnee
Meesohaawnee's picture

retail has long figured out this is a rigged fraud. Unlike 00 with the internet boom, there are many other resources to understand what REALLY is going on rather than being sold what corporate/fed owned bubble vision is telling you. The game is up yahoo finance, cnbs. Youve been exposed as just outsourced ad firms of the fed and corporate insiders. Thats why retail is gone and longer this joke goes on the more difficult it will be to get them back.

Mon, 09/10/2012 - 18:30 | 2780055 Sam Clemons
Sam Clemons's picture

Why does knowing anything about "modern" capital markets matter when the only thing that matters is whether or not we are creating more fiat money?

Mon, 09/10/2012 - 18:35 | 2780069 Dexter Morgan
Dexter Morgan's picture

Absolutely true.  That is seriously the only thing that matters.

Mon, 09/10/2012 - 18:33 | 2780059 Dexter Morgan
Dexter Morgan's picture

I just made the decision last week to cash out my trading account.  I was a frequent trader and even dabbled in futures for the last 6 months.  However, I no longer want The Morgue holding any of my wealth.  Call me crazy but I was 70% invested in precious metals and I took my paper from my trading account and bought more so I am 90% invested in physical precious metals now.  It was a hard decision at first because trading is fun, but after what I saw trading gold futures I don't want any part of their shystem anymore. 

Mon, 09/10/2012 - 18:33 | 2780061 Things that go bump
Things that go bump's picture

Is he calling me stupid?  

Mon, 09/10/2012 - 18:34 | 2780063 Robslob
Robslob's picture

I would say 2 crashes within a 10 Year period was a great start.

Most accepted the "bubble in tech" but none, including myself, even heard about the "run on the banks" in 2008 then couple that with "housing bubble bursting" which we all were implicitly taught from generation after generation could never EVER happen because a "home is an asset".

So they scared us out of stocks (congrats banwads) and then you scare us out housing AND THEN you scare us away from Banks period.

Well played Elites, Bankers, PoliSHITins and Thank You SCOTUS for selling the balance away...well played?




Mon, 09/10/2012 - 18:34 | 2780066 buzzsaw99
buzzsaw99's picture

People who don't want to play in wall street's kitty box are stupid? That's what this article boils down to? It sounds to me like they know very well how to avoid financial fraud since they are cashing out of the corrupt stock market.

Mon, 09/10/2012 - 18:45 | 2780094 Things that go bump
Things that go bump's picture

They didn't expect to be left holding the bag.  Who is stupid now, Wall Street?

Mon, 09/10/2012 - 19:17 | 2780163 Bob
Bob's picture

WS had, and still has, implicit 401k and pension fund guarantees (sheer mass alone establishes a very, very firm floor for the well informed to scramble out on top of)  . . . of who will be holding the bag at the end. 

Fuk u, jo mdl cls. 

Mon, 09/10/2012 - 18:37 | 2780070 cowdiddly
cowdiddly's picture

Fuck Wallstreet

Mon, 09/10/2012 - 18:39 | 2780071 Hondo
Hondo's picture

I know of many so called sofisticated investors haven't the knowledge either. They certainly can't add alpha and even delivering beta is had for them. Most are stck in the old world saying just stick with me and the old world will return

Mon, 09/10/2012 - 18:43 | 2780079 Schmuck Raker
Schmuck Raker's picture

It surely has nothing to do with the average person's perception that everyone in the financial industry is crookeder than a Krazy Straw.


I think the fact investors are ignoring the market despite it's recent rise is proof of their intelligence. People who answer phone surveys are stupid, that's all.

Mon, 09/10/2012 - 19:35 | 2780115 obessoligarch
obessoligarch's picture

indeed market is a mystery,only those bold enough can see it's course.people who answer phone surveys is having the stupid idea that theyr opinion counts.



Mon, 09/10/2012 - 18:50 | 2780112 asteroids
asteroids's picture

No, it's simpler than that with 47million people on food stamps, and probably another 50million within shouting distance, and 150million with no hope of a reasonable reitirement, retail is BROKE!

Mon, 09/10/2012 - 19:00 | 2780138 A Lunatic
A Lunatic's picture

It will be close but I believe the DHS can still double tap them all without blowing the ammo budget........

Mon, 09/10/2012 - 18:50 | 2780114 1C3-N1N3
1C3-N1N3's picture

"41% knew the relationship between interest rates and bond prices."


10% knew the relationship, while 31% happened to guess correctly.

Mon, 09/10/2012 - 18:51 | 2780119 tickhound
tickhound's picture

We're 'sophisticated' if we play... unknowledgeable idiots if we don't.

These SEC, etc, studies read more like propaganda.  The casino never cares how 'knowledgeable' its players are... ONLY that they keep playing.

Markets are meant to be confusing and retail investors should be confused... ITS THE POINT.  This isn't a 'problem' in our system, its a vital cog.

Mon, 09/10/2012 - 18:55 | 2780126 buzzsaw99
buzzsaw99's picture

top 10 reasons not to play:


1) your money could be corzined at any moment.

2) HFTs will screw you coming and going on every trade.

3) 1 in 3 of your investment dollars goes directly to insiders.

4) I be broke already bitchez.

5) the eCONoME is in the shitter.

6) the fed hates my ever living guts

7) price manipulation

8) corruption from the president on down

9) the securities and exchange farcemission

10) the shyster mercatile exchange

Mon, 09/10/2012 - 20:45 | 2780392 Umh
Umh's picture

I guess I'm just luckier than that.

Mon, 09/10/2012 - 20:46 | 2780397 Quaderratic Probing
Quaderratic Probing's picture

“The studies demonstrate that investors have a weak grasp of elementary financial concepts and lack critical knowledge of ways to avoid investment fraud.” 

Sounds like are avoiding fraud...

Mon, 09/10/2012 - 18:55 | 2780127 sosoome
sosoome's picture

Whether or not one possesses a college degree, a skunk still smells like a skunk.

Mon, 09/10/2012 - 18:56 | 2780129 Racer
Racer's picture

When you are up against an uber fast high shooting HFT gunner you give up as a mere mortal..... you know you are out gunned and run for the hills

Mon, 09/10/2012 - 19:08 | 2780158 buzzsaw99
buzzsaw99's picture

he who cashes and runs away lives to eat another day

Mon, 09/10/2012 - 18:58 | 2780132 A Lunatic
A Lunatic's picture

My algo understands this market just fine............

Mon, 09/10/2012 - 18:59 | 2780137 benbushiii
benbushiii's picture

How can a market go up with people heading for exits?  Manipulation through arbed buy programs and the FED’s S&P targeting!

Mon, 09/10/2012 - 19:02 | 2780143 ekm
ekm's picture

I didn't know education was required to play in the casino.

Does anybody know what is the average education level of Las Vegas casino players?


Mon, 09/10/2012 - 19:57 | 2780287 AurorusBorealus
AurorusBorealus's picture

I can tell you what the average education of a poker player is... about the average for men in America.  Poker players come from all walks of life: mafiosos, drug-dealers, stock-brokers, doctors, delivery-truck drivers, plumbers, professional athletes, union electricians, college kids playing with loan money.  I can also tell you that formal education has little or no bearing on how well a man plays poker.  And poker is every bit as complex as any "financial analysis" or creating an investment strategy.  It's also not just smarts that makes a man good; it's a willingness to take risks tempered by caution at the first sign of danger.

Mon, 09/10/2012 - 20:49 | 2780403 Umh
Umh's picture

In every poker game I've been in there are 1 to 3 good players, 2 to 4 terrible players and the rest are just treading water which actually sounds like most investors that I've talked to.

Mon, 09/10/2012 - 19:02 | 2780145 roadsnbridges
roadsnbridges's picture

"fundamental lack of financial literacy"

We know it's rigged, well, except for my neighbor who has been in for 30yrs just for the dividends.

He doesn't care about the price as long as those divis keep rolling in.  He's now 87.

Mon, 09/10/2012 - 19:04 | 2780148 endicott glacier
endicott glacier's picture

Hmm! that logic does not cut it and not fair to retail investor. Even though a layman may not understand the physics/mechanics of what happens when he/she jumps from the 100th floor to the ground they would know it is bad for them and would not do it based on seeing the consequences in evening news or past experiences of others. It would be incorrect to conlude that he/she is not jumping because they did not understand the physical phenomeon that takes place after the jump. Its a learned behavior, they have seen what wall street has done, have no confidence in it, and just avoid it. 

Mon, 09/10/2012 - 19:04 | 2780149 Black Markets
Black Markets's picture


It's the baby boomers, they retire, sell their stock and buy annuities.


Who would have thought that 65 years after WWII ended we would be rocked by those events once more?



Mon, 09/10/2012 - 19:14 | 2780177 chump666
chump666's picture

Oh for f*cks sake kick Spain out!  I mean awesome country, good food, women, gin, wine...


 "Rajoy says he does not believe EU should tell Spain exactly what budget cuts to make" (Reuters News)

Mon, 09/10/2012 - 19:14 | 2780178 Implicit simplicit
Implicit simplicit's picture

80% of those with PHds probably think the nine eleven buildings collapsed because of the planes that hit them. Just because they have an education, it doesn't mean they can't be deluded.

Tue, 09/11/2012 - 02:18 | 2780729 New World Chaos
New World Chaos's picture

Indeed.  I have found that the more educated people are, the more likely they are to believe in the system- literally everything from 9/11 to finance to socialism to the police state.  There are many reasons for this:

  • Give someone a piece of paper telling him he's smart, and he's less likely to think the system has conned him in subtle ways.
  • Ph.D.s can be persuaded by theories that look great on paper but have no bearing on reality.
  • Ph.D.s feel good about their fellow Ph.D.s running things.  Obviously they are smart enough to centrally plan everything themselves, so if they can just get the right people doing the right regulatory tweaks, nothing will go wrong.
  • Ph.D.s probably benefit from the system, so why spoil a good thing with cognitive dissonance?
  • Ph.D.s don't have painful daily reminders that smart people are always looking to use the system to dick them around.
  • They didn't get initiated into the Illuminati when they got their degree.  They never get direct conspiratorial commands.  Therefore, the whole thing must be mere paranoia.
  • They had more years of subtle collectivist indoctination.
  • "Us" vs. "Them" thinking gives a knee-jerk response of supporting the system.

Except for TV zombies and dole monkeys, "stupid" people are easier to wake up than smart people.  Your best targets are tradesmen and people who live close to the land.  Try paying them in silver.  Sometimes it only takes 10 minutes to mint a new silver bug.  The conversion revolves around three simple words:  It's all bullshit.  Too bad most of these people are just scraping by.

Tue, 09/11/2012 - 10:08 | 2781515 blunderdog
blunderdog's picture

A major *function* of the educational process is to weed out people who won't submit to authority and refuse to accept "knowledge" presented to them based solely on bureaucratic rank.

This means that in order to reach the higher levels of the education game, a person HAS TO be a bit of a sucker.  Or he has to be able to behave AS IF he is a sucker.

There are exceptions, but it's a general truism.  The hard-sciences folks are a bit less susceptible because real study of the subjects requires a bit more intellectual independence.

Tue, 09/11/2012 - 16:59 | 2783095 New World Chaos
New World Chaos's picture

The kool-aid weedout is ridiculous, especially in the humanities, but the Ph.D.s I was thinking of while writing are physicists.  Supposed paragons of the unchained mind.  They do have much more respect for objective reality than humanities Ph.D.s but many of this particular crew still had a weed-out filter:  Security clearance.  Even those outside the filter didn't fare much better.  Two think 9/11 was a false flag but Obama and the Fed are great.  One doesn't believe anything he hasn't heard from the mainstream media.  One thinks there are no financial conspiracies, just "emergent phenomena".

P.S. Climategate.

Mon, 09/10/2012 - 19:15 | 2780179 not fat not stupid
not fat not stupid's picture

This guy's distain for the sheep (as he sees it), is obvious.

Mon, 09/10/2012 - 19:28 | 2780211 geoffb
geoffb's picture

"Yea, the stock market's a tough racket, I used to sell stocks." Blake from Glen Gary, Glen Ross.

What a fucking baby. Of course your customers are stupid. I sure as hell hope to god you didn't get paid to write this article.  "Coffee is for closers."


Mon, 09/10/2012 - 19:30 | 2780213 AynRandFan
AynRandFan's picture

Of all the possible reasons for low participation among retail investors, lack of education has to be the most remote.  Has the average financial education level changed between 2007 and now?  No.

Dumb article.

Mon, 09/10/2012 - 19:34 | 2780225 TLoane
TLoane's picture

Blaming low market volume on retail investor's ignorance is incorrect.  The fact is that we (retails investors) NO LONGER TRUSTR stock market professionals.

Mon, 09/10/2012 - 20:53 | 2780411 Umh
Umh's picture

I never did trust them. Do you trust the dealer when you're buying a car?

Mon, 09/10/2012 - 19:41 | 2780245 Son of Loki
Son of Loki's picture

Capital gains tax revenue is going to plunge = much more printing to compensate

Mon, 09/10/2012 - 20:02 | 2780296 dolph9
dolph9's picture

Of course we can only speak anectdotally, and try to sort out the endless information that we get these days.

I personally am not involved because twice in my lifetime I have witnessed huge crashes, because I know the system is rigged, because I know that the only people generally who make money off of it are brokers, because I am better informed on precious metals, because I understand how precarious the global situation is.

So if you want me to call me "stupid" because of that, so be it.

But there's another point:  I just don't care anymore.  I don't give a shit.  

And THAT they can't stand.  They can't stand that you might have better things to do.  They want, they need you to be watching the Dow Jones and Nasdaq 24/7.  And if you say "thanks, but no thanks" that pisses them off because it proves that you can't be corrupted, that you don't buy the propaganda.

Mon, 09/10/2012 - 20:11 | 2780317 AurorusBorealus
AurorusBorealus's picture

See, if 10 guys sit down to gamble at cards and each guy has $1000 in his pocket, if the house takes a rake and the dealer gets tipped, and if no one leaves the game, eventually 1 guy will have about $3000 and the house and the dealer will have the other $7000.  Then you won't have a game any more.  Right now, the house and the dealer have all the money... that is why the game is ending.

Tue, 09/11/2012 - 04:00 | 2780931 StychoKiller
StychoKiller's picture

On the front it says:  "I have a drug problem"
On the back it says: "Billy and dick have a quarter bag of weed.. There's about 48 hits in the bag, and it takes dick two hits to get the munchies, and it takes billy 4 hits to get the munchies. If they eat 15 pretzles each every time they get the munchies, how many pretzles will each one eat?"


Some surveys are totally useless.

Mon, 09/10/2012 - 20:11 | 2780312 hannah
hannah's picture

"Time, and continued strong performance from U.S. stocks."....strong performance..? if i rob a bank, can i describe my checking account balance as strong performance. the us stock market doesnt have strong performance. a rigged system cant have 'performance' of any kind because it is contrived.


this whole article points out actually how smart the retail investor has become. they are no longer the lemming that buys at tops and then the market roles over. i would say that the average trader finally figured the game out.


this author is a piece of shit....

Mon, 09/10/2012 - 20:32 | 2780366 Fred Hayek
Fred Hayek's picture

I would say that another factor is that the game is so rigged that the media capsule explanations for each day's trading make absolutely zero sense. How many times in the past couple years has there been devastatingly bad economic news that some the finance drones on CNBC spun as somehow positive through economic Newspeak.

Terrible manufacturing report? Stocks up!
Terrible unemployment report? Stocks roar!
Europe falling apart.. Stocks skyrocket!

Why is anyone who sees these events, and the plainly nonsensical explanations for them that we're fed, wrong for not wanting to play in that game? Is it so terrible to stock pumpers that truth has value?

Mon, 09/10/2012 - 20:34 | 2780374 GernB
GernB's picture

Now I'm dying to grab my spreadsheet for calculating correlation factors and plug in the average rate of return for savings accounts or mortgage interest rates and see how correlated it is to the value of a 10 year treasury note.

I wonder if interest rates really are correlated to bond prices or if that's just " conventional wisdom" that breaks down in rigged markets

Mon, 09/10/2012 - 20:45 | 2780393 Downtoolong
Downtoolong's picture

retail investors do not generally have the knowledge necessary to make sense of modern capital markets

Come in to my markets said the spider to the fly. What more is there to know.

Mon, 09/10/2012 - 21:01 | 2780423 BetTheHouse
BetTheHouse's picture

Stupid article. How smart do you have to be to know when you are getting fucked over? Even a dog knows the difference between accidentally getting tripped over and getting kicked. Reatil is out because they got fiucked by smart guys like this Wall Street professional too many times. And they are not coming back. How's that for dumb?

Mon, 09/10/2012 - 21:07 | 2780432 blindman
blindman's picture

the exchange stabilization fund and mechanism
is entirely opaque as is the associated hft
dominance and control. why would anyone invest
with bernie madoff after he had been arrested
and confessed? plus people don't invest anymore,
they gamble. investing implies growth and development
in something sustainable and with a bright future.
a collective pragmatic and somewhat predictable....
future. it requires some vision, ideals and standards..
oh yea...and some money or income

Mon, 09/10/2012 - 21:11 | 2780440 Tombstone
Tombstone's picture

Since we are now in direct competition for a centrally planned economy with Communist China, I expect that all prospective sanity has been banned from the market for the next decade.  It has to be, in any environment, that Pareto's Law is in full force: The vast majority (80%) must lose to the remaining 20% so that the game may be extended into infinity.  You could never have markets where the majority could be winners.  Therefore, your goal in any market is to become a member of the 20%, and for most that is next to impossible because the vast majority of participants cannot execute their trades without emotion.

Sun, 09/16/2012 - 00:08 | 2799901 MeelionDollerBogus
MeelionDollerBogus's picture

Holy shit. I think that's about the most accurate & brief actual description of the actual economy ever - other than "it's fraud, bitchez".

Mon, 09/10/2012 - 21:12 | 2780445 orangegeek
orangegeek's picture

A "bigger picture" SP500 weekly chart show wave 2 ending - it took about 3.5 years to complete - and at the end of wave 2, volumes are anemic.


The market is running out of legs.  They can only push a rope for so long.

Mon, 09/10/2012 - 21:56 | 2780535 q99x2
q99x2's picture

The many many miniscule pin pricks of HFT can push a bubble only so far and the retail investor knows not to be there when it bursts.

Mon, 09/10/2012 - 21:56 | 2780536 Dr.Engineer
Dr.Engineer's picture

The writers are retards.  People know when they have gotten screwed twice that they are going to get it a third time.  Espeically when the criminals are still at the till and haven't been shipped off to jail.

This is the credibility trap.

The arrogance is astounding.  Oh.  Hold on.  We're talking about Wall Street -- squids, muppest, and vampires.

I want to be there when you explain yourself to God and he asks you which god you served?

Rot in Hell.

Mon, 09/10/2012 - 22:04 | 2780550 Elmer Fudd
Elmer Fudd's picture

Good one, calling them stupid and then concluding that only "Time, and continued strong performance from U.S. stocks" will bring investors back.  Ignore the low volume and just watch them all time highs in AAPL.  Please come back to grab this here bag I am stuck holding!



Mon, 09/10/2012 - 22:07 | 2780557 Pandorable
Pandorable's picture

No one can understand what is hidden or disguised.  This market is full of dark pool fake-outs, algo traps, and big money waves that that can blindside the most savvy investor.

And the best part is that - even if they can be found and identified - the transactions are too numerous and next to impossible to track, much less regulate.

Time to duck while sitting on your helmet.  A smart soldier takes a detour around the war zone.

When the casino is rigged - people stop coming.

Mon, 09/10/2012 - 23:05 | 2780666 GoodMorningMr.V...
GoodMorningMr.VanRumpoy...'s picture

The Retail investor doesn't worship Mammon the way Wall Street and their ilk do. The ordinary person is no longer so blinded by greed to the point where they would bet the farm in a rigged casino game in pursuit of false hopes and dreams that are based on illusionary promises.

They hate this. They have an unnatural lust of money and expect everyone else to accommodate it. It's a lust so strong they would rip off charities, elderly, disabled, their parents, their wife, their children, whomever, to satisfy their urges.

You can insult the retail investor; call them stupid. But they will no longer indulge your perverse impulses with you. You are now truly alone in your unnatural love of money and you will sink by yourself. Goodbye.

Mon, 09/10/2012 - 23:48 | 2780746 Let The Wurlitz...
Let The Wurlitzer Play's picture

Viva Joe Sixpack


Tue, 09/11/2012 - 00:13 | 2780782 lakecity55
lakecity55's picture

Once you lost the bundle in 2008, why get burned again?

Go PMs.

Tue, 09/11/2012 - 01:47 | 2780872 Poor Grogman
Poor Grogman's picture

The only choice the PTB have to get the sheep back into the market is to guarantee a reasonable ROR in writing, or force them to contribute some of their hard earned cash via way of coercive legislation.

In Australia businesses are forced to pay superannuation contributions for employees, these contributions then fund the lifestyles of the finance industry managers thus causing the worst funds to often post negative returns.

The sheeple complain about the lousy balance shown on their annual retirement statement so the government increases the minimum contribution and claims to be helping the workers save for their retirements!

Central planning 101
"when something is not working, just do more of it"

The stupidity is unbelievable....

Tue, 09/11/2012 - 02:46 | 2780893 Zero Govt
Zero Govt's picture

"Investors, Nostalgic For Logical Markets, Boycott New Centrally-Planned Normal"

Couldn't agree more

if any market has been improved or invigorated by Govt intervention in 2,500 years i've yet to find it

"The only prescription to allay their concerns is, I think, time.  Time, and continued strong performance from U.S. stocks."

that'll be the time left for the US Govt and IRS to extend its tyrnaical powers at dis-baring Americans (not the elite) looking outward at global opportunities

Americans, try opening a bank account in Europe or Asia... good luck with that!

when an Empire dies looking outward is always first to go. Looking inward at your navel (or the even more insular, sticking your head up your arse) is all that's left 

Welcome to the Death Phase (see Rome, Venice, Ming China, Argentina, Communist Russia and China etc) perfected by Govt of cutting off your nose to spite your face

Tue, 09/11/2012 - 06:19 | 2780997 GFORCE
GFORCE's picture

Retail investors aren't taking part because they're broke. No more home equity riches. Those who did play the markets also got burned so badly in 07+ that they may skip a generation of stocks. They'll all buy back in soon as the market hits new juiced highs. Then they'll get burned again. Deserve to lose their cash in the Wall St casino.

Tue, 09/11/2012 - 08:24 | 2781165 MeelionDollerBogus
MeelionDollerBogus's picture

"Look further back, and this pattern hold true for the entire rally from the lows in March 2009.  American investors aren’t chasing performance; in fact, they are running from it"

- hardly - some sheeple are figuring out they will be sheared when their asses are exposed, others have not grown back their winter coat from the LAST time they were sheared.

The sole purpose for the retail investor in a collusion-driven mafia-market of MFGlobal, PFGBest and Goldman Sachs is to be the victim of robbery. No victim, no crime - those who can choose will buy food, land, trucks and silver or gold. Those who don't know any better largely were robbed already and are just too broke to be robbed again.

Sun, 09/16/2012 - 00:15 | 2799909 MeelionDollerBogus
MeelionDollerBogus's picture



Do NOT follow this link or you will be banned from the site!