• Steve H. Hanke
    05/04/2016 - 08:00
    Authored by Steve H. Hanke of The Johns Hopkins University. Follow him on Twitter @Steve_Hanke. A few weeks ago, the Monetary Authority of Singapore (MAS) sprang a surprise. It announced that a...

Retail Investors "Just Say No" To Bernanke's Artificial Wealth Effect

Tyler Durden's picture




 

And so the great standoff continues. On one hand, the Chairman will literally do anything and everything to get the retail investor to break their 4 year boycott of stocks, and come rushing back to the artificial and fabricated safety of an endlessly rising market: after all he has gone so far as to implicitly guarantee that there will never be a -1% day in the market ever again: all natural market forces will be crushed in the pursuit of the great asset bubble-based "wealth effect." On the other hand, the retail investor, older, wiser, and most importantly poorer, observing inexplicable and unpunished daily flash crashes across the numerous 'highly frequently traded' asset classes, still recovering from a market in which everyone told him to buy only to see a 50% loss in months, with ever less disposable income, is no longer interested in said "wealth effect" proposition, or any other proposition premised on the artificial manipulation of the political construct once upon a time known as the market, no matter how many personal guarantees of perpetual QEasing the Chairsatan will hand out. The culmination: the week ended September 12 domestic equity mutual funds saw the 8th consecutive outflow from stocks, amounting to $2.8 billion, and 32nd outflow of 37 weekly readings in 2012. The brings the total cumulative outflow year to date to $92 billion. The same period in 2011 had a total outflow of $79 billion, even though the market now is not only higher than it was in 2011, but the highest it has been since 2007.

Past two years:

And longer-term:

Of course, if the retail investor was still as dumb as everyone believes is the case (and still had money to invest in stocks), this cumulative outflow would be far smaller. It isn't, and that in itself is a testament that more than the absolute level of the S&P, the now virtually extinct investor class has always been far more interested in knowing how it got there. It appears that dollar dilution and outright manipulation just don't cut it when trying to inspire confidence in investing in stocks any longer. Or ever. Who would have thunk it...

Sadly what this means is that the lunatics in the Marriner Eccles building, who will not take no for an answer, will continue with their artificial inflation of equities, until such time as the retail herd comes storming back. Which it won't, and can't. And the charade will continue until it can no longer be perpetuated. At that point equities will finally tumble to fair values, and then, and only then, will the retail investor finally return to the stock market.

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Wed, 09/19/2012 - 21:40 | 2813580 vast-dom
vast-dom's picture

FUCK BONDS AND STOCKS

SHORT THE MOTHERFUCKER

Wed, 09/19/2012 - 22:03 | 2813645 Precious
Precious's picture

Bernanke seeks greater retail participation by making the markets wholly irrational.   That ought to work well.

Wed, 09/19/2012 - 22:22 | 2813689 hannah
hannah's picture

better off with a gransfors bruks axe....cant beat lodge cast iron.

Wed, 09/19/2012 - 22:32 | 2813700 hedgeless_horseman
hedgeless_horseman's picture

 

 

better off with a gransfors bruks axe

 

Another fine choice.  I like to buy locally made items when I can, and go with the best when I have no local option, like Zeiss. 

Wed, 09/19/2012 - 23:12 | 2813793 hannah
hannah's picture

cant beat zeiss glass...!

Thu, 09/20/2012 - 06:15 | 2814180 neidermeyer
neidermeyer's picture

Zeiss is great but severely overpriced (I have many cameras with Zeiss optics) .. Go with Vivitar "Series 1" for 99% of the performance at 1/3rd the price.

Thu, 09/20/2012 - 06:55 | 2814220 ClassicalLib17
ClassicalLib17's picture

I had a hand-me-down vivitar camera that took excellent quality pictures, back in the early 70's.  Then I decided that I would invest in a better(pricier) Olympus camera, and I have to say, the pictures didn't look as bright and color-rich as my vivitar would produce.  A good lesson learned.

Thu, 09/20/2012 - 06:03 | 2814174 smlbizman
smlbizman's picture

i would think it is more of the smart "movable" money that continues to leave....not the retail people who must keep their "trapped" money in the 401ks et.al. ....my friend can take his money out of his 401 as soon as he quits his job...

Thu, 09/20/2012 - 06:34 | 2814198 Bobbyrib
Bobbyrib's picture

You don't have to invest in the market in your 401K. My 401K for example has a cash equivalent with a 100% allocation (by me).

Thu, 09/20/2012 - 05:43 | 2814161 muppet_master
muppet_master's picture

i did SHORT last Fri

when spx @ 1475 and eur @ 1.315 i even called it THE TOP...NOT just A TOP.

http://www.zerohedge.com/news/marc-faber-fed-will-destroy-world?page=1

Wed, 09/19/2012 - 21:42 | 2813585 Seasmoke
Seasmoke's picture

Public employees are the only ones with disposable income and they do NOT like RISK

Wed, 09/19/2012 - 22:30 | 2813702 knukles
knukles's picture

In CA no need to take risk when the Defined Benefit Pension (exceedingly generous) Post Retirement Health Care Benefits (none better) which are for all intents and purposes no longer available in the private marketplace are funded out of the taxpayer's hides including the Abysmal Horseshit Money Management provided via Public Investment Arms of the Gubamint, want to hire cronies, kickbacks and the like, let alone the constant concerns of not properly calculating the full benefit obligation (ABO vs PBO) and Golly Gosh continual stories circulating about maybe not having marked all the crap to market properly.

No fucking reason to take risk, they've transferred it all to the private sector, the taxpayer which simply does not have the capacity to carry anymore public largesse....

Wed, 09/19/2012 - 23:27 | 2813817 oldman
oldman's picture

Knuckles,

Sorry, maybe you just made the wrong choice of how to put bread on the table.

I'm pleased that I never wanted security---especially when I lived those 37 years in sunny Southern Cal----but, shit, I ended up with a lot to fret over anyway. If i had taken a gov't job maybe I wouldn't still be making decisions about how to protect 'this and that'.

An oldman hardly knows what to do anymore     om

Thu, 09/20/2012 - 06:36 | 2814202 Bobbyrib
Bobbyrib's picture

That sounds a lot of like NJ to me. I think people are going to be very surprised if and when the market eventually collapses how bad state pensions will tank like in the last stock market collapse.

Thu, 09/20/2012 - 07:08 | 2814231 B2u
B2u's picture

Who is going to pay the Defined Benefit Pension when there is no more money?

Thu, 09/20/2012 - 11:01 | 2815002 Kayman
Kayman's picture

They will have to create a special "super tax" on Government Employees.  That ought to fix it.

Wed, 09/19/2012 - 22:46 | 2813730 otto skorzeny
otto skorzeny's picture

They sure do like their pools- I had a couple of different cops in my McMansion 'hood put in $50k+ worth of in ground pools this summer. Must be to unwind from the stress of writing tickets all day.

Wed, 09/19/2012 - 22:57 | 2813767 10mm
10mm's picture

Where would that be otto?

Wed, 09/19/2012 - 22:59 | 2813772 otto skorzeny
otto skorzeny's picture

the sleepy hamlet of shorewood IL

Wed, 09/19/2012 - 23:18 | 2813802 10mm
10mm's picture

24 sworn officers,population aprox 16k,salarys 51+ to 73K,must be some sleepy hamlet.$$$$$ thats alot of coin for a small population.

Thu, 09/20/2012 - 00:43 | 2813945 otto skorzeny
otto skorzeny's picture

I've got the tax bill to prove it-although i have shaved 40% off of that by showing recent comps to assessor-I tell idiot neighbors to do it but they're like "why even bother?"-says alot about US society

Thu, 09/20/2012 - 07:57 | 2814297 10mm
10mm's picture

The party will end for some of those employees,just a matter of time.That salary and population can not sustain each other.

Wed, 09/19/2012 - 21:42 | 2813586 Hedgetard55
Hedgetard55's picture

Bernanke trying to increase employment by buying MBS is like me trying to increase the number of red wines in my cellar by buying more Chardonnay and Sauvignon Blanc.

Wed, 09/19/2012 - 22:56 | 2813764 SafelyGraze
SafelyGraze's picture

as I explained to my grandkids when the satellite dish crapped out, we're just going to keep scrubbing the floors until that dagblame tv comes back on. 

me and granpa Nank. we think alike. 

Thu, 09/20/2012 - 00:27 | 2813925 Nobody For President
Nobody For President's picture

+1 for dagblame

Thu, 09/20/2012 - 03:45 | 2814095 dubbleoj
dubbleoj's picture

no no no, just add a little seasonal red dye.

sauv blanc==>cab sauv

havent you ever cooked (books) before?

Wed, 09/19/2012 - 21:43 | 2813588 Dr Benway
Dr Benway's picture

The retail investor has been fucked so thoroughly that even the most thunderous QEeef fails to amuse

Wed, 09/19/2012 - 21:43 | 2813589 Hedgetard55
Hedgetard55's picture

... or trying to fix a blown engine by adding more oil to it.

Wed, 09/19/2012 - 21:46 | 2813590 CClarity
CClarity's picture

More QE! More QE! oh Yippee! Oh Yippee!!!

New soap opera "As the Fed Fumbles"

Wed, 09/19/2012 - 21:43 | 2813592 I_Am_
I_Am_'s picture

I have given up. I have tried to stomp back but kept hitting a wall and now too tired to even limp..... Buy and hold.. what shit...

Wed, 09/19/2012 - 21:43 | 2813593 slaughterer
slaughterer's picture

Retail investors want a 50% off sale, not this continual levitation.

Wed, 09/19/2012 - 22:04 | 2813651 Precious
Precious's picture

As every grasshopper knows, only stupid ants store food for the winter.

Wed, 09/19/2012 - 23:31 | 2813829 you enjoy myself
you enjoy myself's picture

which is why i'm still genuinely shocked Ben unleashed QEi when we're over 1400 and there's been maybe 10 down days all year.  what, do you think retail going to jump in at 1500, while its obvious to anyone with money to invest that the freaking world is about to blow up?   its not just 2008 that investors are remembering, but 2001 too - the steady rise after 2002 was at least based on a roaring economy (though of course debt fueled). 

if Ben hadn't gone full retard, and allowed for even a slight correction, he might have gotten retail dipping back in.  but everyone can now recognize the house of cards for what it is, precisely because he went too far.  even Madoff knew to keep returns at 10% or so - you show 30% every year no matter what and even idiots can sniff it out.

Wed, 09/19/2012 - 21:44 | 2813594 fonzannoon
fonzannoon's picture

the retail guy's 401k is very much still in the market. if the market fell to it's reality based levels it's game over for the stock market

Wed, 09/19/2012 - 22:49 | 2813741 ltsgt1
ltsgt1's picture

I moved my 401k to cash in March.

Wed, 09/19/2012 - 23:02 | 2813777 toady
toady's picture

Everyone has, that's the point of the story.

If you still haven't you better get started on it yesterday!

Wed, 09/19/2012 - 23:29 | 2813820 yatikto
yatikto's picture

actually its not that easy.

you have to lose your job or have a significant hardship.

Wed, 09/19/2012 - 23:54 | 2813849 toady
toady's picture

I know more than a few that are in trouble for taking 'loans' against their 401k and never paying it back. My wifes company was bought and all the employees were made contractors. That's how we cashed out.

Wed, 09/19/2012 - 21:45 | 2813598 saycheeeese
saycheeeese's picture

Retail investors are also voters and show that trust and faith in the gvt and its institutions have been lost but who cares.... The HFT algos have taken their place in the rush for endless wealth.

Wed, 09/19/2012 - 21:46 | 2813599 CClarity
CClarity's picture

oops

Wed, 09/19/2012 - 21:46 | 2813603 jim249
jim249's picture

Oh so right! I have been waiting for 3 years for a correction like that was seen during the Great Depression. Bernank is a real dumb ass!

Thu, 09/20/2012 - 07:22 | 2814243 WhiteHose
WhiteHose's picture

patience jim! its comming. it not nice to fool mother market! fuck the bernank!

Wed, 09/19/2012 - 21:48 | 2813609 Mae Kadoodie
Mae Kadoodie's picture

QEeen.  We Will, We Will Rock You!

 

Wed, 09/19/2012 - 21:52 | 2813617 new game
new game's picture

fuck stocks

fuck the stock market

fuck the participants

fuck the millionaire shareholder

fuck the regulators

fuck the financial advisors

fuck the market makers/brokers

and most of all, fuck you if you are stupid eneough to buy and sell stocks!!!!

Wed, 09/19/2012 - 21:55 | 2813625 new game
new game's picture

everybody i know has moved on and WILL NEVER BE BACK  to this insider rigged looser ripoff scam!

Wed, 09/19/2012 - 22:10 | 2813664 chump666
chump666's picture

Forget the markets, buy some gold, have fun and think of business ideas.

I guarantee that this market will collapse spectacularly, with or without the idiots at the Fed. 

Wed, 09/19/2012 - 22:44 | 2813728 ltsgt1
ltsgt1's picture

I have 50% in rental properties, 30% in PMs, 5% stocks and 15% cash. I was waiting for S&P to return to 9000 but I don't think I will be bother with the equity market any more. I don't want to add any more PMs so I'm looking to spend half of the remaining cash on a farm with acreages.

I still cannot believe it is going to happen but I think we have reached or already passed the point of no return.

Wed, 09/19/2012 - 22:49 | 2813739 otto skorzeny
otto skorzeny's picture

ammo will some day be worth its weight in gold. a stockpile of refined gas never hurts.

Wed, 09/19/2012 - 23:03 | 2813779 chump666
chump666's picture

+1 brother.

By land, farm land, grow stuff, sell stuff.

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