When Will Retail Start Buying Stocks?

Tyler Durden's picture




 

Via Peter Tchir of TF Market Advisors,

So when will retail investors start buying stocks?  One of the final legs propping up this rally is the belief that retail investors will finally pile into stocks.  There is hope that all this “money on the sidelines” will find its way into the stock market.  The S&P at 1,350 was supposed to do the trick.  Certainly 1,400 on the S&P was going to be enough to chase retail investors into stocks.  Basically the argument that retail will capitulate and finally invest in stocks is based on the assumption that higher prices increase demand – aka, a Giffen Good.

 

Is it realistic to assume that investors will decide to purchase more of something just because the price has gone up?  They did it in 2000 with internet stocks, that infatuation ended badly.  They did it with housing in the mid 2000’s, which ended even worse.  If anything, Americans have become more focused on buying things on sale and getting things at a bargain.  Why shouldn’t that apply to stocks as much as it applies to anything else?

 

We have hit multi year highs, yet most people seem to shrug it off.  If the retail investor was about to increase their allocation to stocks, do you not think there would be more hype in the media about how well stocks have done?  Expecting “the masses” to buy just because something is already up 20% seems a little silly, if not downright arrogant.  The retail investors are not stupid.  They can also see that the stock market has decoupled from the economy.  While professional investors can easily accept that, retail investors still have some level of conviction that the stock market should reflect economic activity and not just central bank printing and government spending.  Retail investors can see that the U.S.  debt has continued to grow and that in spite of lip service to deficit reduction, we are creating a bigger deficit.  They are nervous about what will happen when finally the spending gets pulled in.  They are also very nervous (as are many professional investors) that they will be the last purchase of stocks before the central banks stop pumping fresh money into the system in their never ending attempt to inflate asset prices.

 

If there is one sector where the upward price movement is sucking in more money it is amongst corporations themselves.  The number and size of buyback announcements seems to be increasing. That makes sense, since if any group has shown an ability to buy high and sell low, it is corporations themselves.  In 2007 and the first half of 2008, companies, including AIG, were buying back their own stock aggressively.  From the second half of 2008 and all of 2009, most companies couldn’t afford to buy back shares and many had to issue.  It is just wrong to expect individuals to be as frivolous with their money as corporations are.

 

I continue to believe that retail is reasonably allocated to equities, under the new allocation model.  The new allocation model takes into account debt before determining what is investible.  Then there is an actual allocation to ultra-safe “rainy day” money.  That “investible” money is then allocated at a much more realistic percentage to equities and fixed income and “other investments”.  A myriad of new investment vehicles have helped make it easier for investors to participate in the fixed income market and other asset classes, helping to ensure that the allocation to those remains higher than it was through the 90’s and the first part of this century.

 

I do not believe stocks are a Giffen good, at least when it comes to retail, so expecting “dumb” money to come in and take out the “smart” money may be just as paradoxical as a Giffen good.

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Tue, 04/03/2012 - 09:37 | 2312600 vmromk
vmromk's picture

As soon as the MOTHERFUCKER Bernanke gets the S&P to 1600.

That's when everyone will know it's safe and not a rigged market.

Tue, 04/03/2012 - 09:58 | 2312698 jus_lite_reading
jus_lite_reading's picture

Yesterday's headline platered all over Reuters and Yahoo was "2nd Quarter Starts Off With Rally" and of course the whole gist was "you better hurry up and BUY NOW before it goes higher..."

I remember the good old days when we sold stocks because they really had some value, not because some mad man with a printing press was forcing savers out of cash and into ponzi stocks... well, it's already game over and even they know it now!

3 years ago as the shit storm was approaching people started waking up to the fact that this will not end well... I declare that it will end in world war at the very least... thanks Ben!!

Tue, 04/03/2012 - 10:12 | 2312766 Pladizow
Pladizow's picture

Send 1000 bankers to ass pound prison, replace the whores known as congress and the senate, and elect Ron Paul.

Until then FUCK OFF!

Tue, 04/03/2012 - 12:59 | 2313473 optimator
optimator's picture

prisons are full, set up some sort of work camp for them.  For once in their lives let them physically produce something beneficial to society.  The exercxise and diet will make them healty.

Tue, 04/03/2012 - 10:33 | 2312834 BidnessMan
BidnessMan's picture

"Stocks have value" has always been part of the paper con game that has finally been exposed. What "value"? A minority shareholder is brushed off as an annoyance - sell your stock if you don't like it. The Gold crowd laments that gold shares are not going up. Well Duh - just more paper that can be created at will. The only value is hoping the greater fool will come along, AND promises will be kept. Ask MF Global customers how that worked out for them.

But it is easy - even the eTrade baby can click on a mouse. Real assets with real value take real effort. The day the con game ends and people stop taking paper and electronic bits for assets with real value is the day the world starts to return to sanity.

So please stop equating stocks to value. Just paper and promises .... And the number of chumps is dwindling.

Tue, 04/03/2012 - 10:43 | 2312882 mikla
mikla's picture

Agreed.

What the Central Planners misunderstand is that the "retail investor" has *already* capitulated.

Not only is he "gone", but he will never come back.  Ever.

They've lost this generation, and that's A Good Thing(TM), since the "stock-market" is merely a big bucket-of-fraudulent-speculation based on false accounting, false reporting, false earnings, and false future speculative projection.

Quite seriously:  Half of the S&P500 will "go-to-zero", because they are bankrupt, and there is no possible scenario of repairing their books.

The retail investors are the only ones with any sense, although I accept the assertion that in part, the retail investor is "not-buying" because the "cash-on-the-sidelines" does not exist (the retail investor is broke).

Tue, 04/03/2012 - 12:24 | 2313308 V in PA
V in PA's picture

TPTB don't care that they lost 'this' generation. They were successful at ripping off the baby-boomers, and that was the point all along. Tell them they can retire millionaires with a 401k, and just before they retire, wipe 'em out.

Tue, 04/03/2012 - 09:59 | 2312699 Short Memories
Short Memories's picture

LOL!

"Safe" does no apply to the retail investors. Herd mentality and seeing their fellow sheep get something for nothing that they don't and they'll be "All In" too. Regardless of the number attached to the S&P

Sadly, "This time is different" only in scale!

Ask an Albanian farmer why he sold his livelihood and bought into ponzis in the late 90's, he probably won't say "because I'm Albanian".

I'm pretty sure if this goes on much longer, that the retail investors will be sucked back in. It'd be nice if it all broke before then and the "mums and dads investors" were saying "glad I bought gold instead!!" <sigh>

Tue, 04/03/2012 - 10:13 | 2312771 jcaz
jcaz's picture

Yep-  SO tired of this myth....

Retail NEVER buys the bottom.

The other one I'm sick of is that "people will roll out of fixed income into stocks"

No they won't.  

Never have.  Never will.

If Timmy had ANY clue how retail market dynamics really worked,  he'd actually have some value to the world.

As it is, he can't even figure out his taxes, so there ya go......

Tue, 04/03/2012 - 10:49 | 2312922 Short Memories
Short Memories's picture

Agree and disagree,

"Timmy" has no clue about the market so he'll get burned again I agree. But Timmy can add value to the world without knowing about market dynamics!  The problem with Timmy is that he has enough knowledge to be dangerous and not enough to realise that he's out of his depth and the waters have dangerous algos ready to eat him.

I was once like Timmy, I got burned plenty and never knew why. Then I worked for the finance industry for a few years and now I own gold. Actually I add more value to the world now that I'm out of the finance industry than when my efforts were trying to make their systems more robust.

Why blame the sheep when it's the shepherds leading them astray

Tue, 04/03/2012 - 10:51 | 2312935 BidnessMan
BidnessMan's picture

Timmy's "oops" on his taxes provides an out for all. If the SecTreas can't figure out his taxes, who can? Well it worked for him anyway.

Tue, 04/03/2012 - 10:23 | 2312816 DeadFred
DeadFred's picture

Retail is not being invited to this ramp fest because they are not wanted. There really haven't been many propaganda pieces aimed at retail investors (correct me if I'm wrong). The occasional pieces I've seen have mostly looked like real reporting, there is still some of it around. Some reporter noticing retail hasn't returned and doing a minor report that doesn't get much follow up is different than the multichannel sales jobs we see when TPTB want something to happen. Retail would just provide friction for the HFTs and their officially sponsored run-up. I doubt they will ever be invited back in because the aim is to drive volume down ever lower. When you calculate the amont of money inflow required to move an index higher the limit approaches zero as market participation approaches zero. Outsiders are no longer welcome in this captured market.

Tue, 04/03/2012 - 10:25 | 2312827 SheepDog-One
SheepDog-One's picture

I just saw in the New York Times front page article begging retail to come buy stocks!

Tue, 04/03/2012 - 09:37 | 2312606 fuu
fuu's picture

Tomorrow.

Tue, 04/03/2012 - 09:39 | 2312616 Sandmann
Sandmann's picture

Do you have the faxline for TARP funds ? I thought about applying for a $100 million line to bail out the New Penn Square Bank and invest the proceeds in Stocks though I might do a few gas leases. Is there any chance the Feds will let me have a chance at syndicating these drilling loans to New Continental Illinois ?

Tue, 04/03/2012 - 10:32 | 2312840 fuu
fuu's picture

Discount Window

Discount Officer

Tel: (866) 226-5619
Tel: (212) 720-5394
Fax: (212) 720-5686

Start there I guess.

Tue, 04/03/2012 - 09:44 | 2312610 SheepDog-One
SheepDog-One's picture

Yea 'retail' wouldnt buy at DOW 10,000 or 11,000 or 12 or 13,000, but the bankrupt and unemployed will surely buy bubble equities hand over fist at 14,000 I'm sure.

Face it Bernank, you 1-sided pumped in free money expecting you'd be able to sell it later because people are so stupid and gulliable....but reality is people are broke, unemployed, bankrupt, and suffering under your non existant inflation.

AND, they dont trust the markets anymore because of all your clownish in your face pumping, they know its all fake. Ya fucked up, man.

Tue, 04/03/2012 - 09:53 | 2312669 Cdad
Cdad's picture

The criminal syndicate known as Wall Street simply rufuses to accept the truth here...that they have destroyed market credibility, and therefore the market.  Psychopaths are not good at accepting responsibility...and so Average Joe is forcing the issue...by vacating the nonmarket.  

We'll know it is a market again when this fact is finally  "priced in."  My guess is we start that process at about 1275 S&P, and from there subtract the cost of America's impending bankruptcy.  

Tue, 04/03/2012 - 09:56 | 2312684 oogs66
oogs66's picture

it is underperforming hedge funds trying to justify 2 and 20 who have been the buyers chasing it up...let them fail miserably

Tue, 04/03/2012 - 10:46 | 2312714 jus_lite_reading
jus_lite_reading's picture

And where does the private Federal Reserve fit in? Just look at who OWNS the FRB-

1) The Rothschild Family - London 2) The Rothschild Family - Berlin 3) The Lazard Brothers - Paris 4) Israel Seiff - Italy 5) Kuhn-Loeb Company - Germany 6) The Warburgs - Amsterdam 7) The Warburgs - Hamburg 8) Lehman Brothers - New York 9) Goldman & Sachs - New York 10) The Rockefeller Family - New York

As you can see, one big happy "family!" SHALOM AND HAPPY PASSOVER PONZI!!!!

Tue, 04/03/2012 - 10:24 | 2312818 SheepDog-One
SheepDog-One's picture

Exactly Cdad, Wall St is in 'denial' phase. They had a print and pump party while saying 'Hey dont worry, we'll be able to dump it to gulliable retail later, theyre so stupid! For now, its party time fellas!'

They created a fake recovery, while in reality everyone is hurting....Bernanke can say theres no inflation ALL HE WANTS, but reality is food and gas is way more expensive and everyones broke. 

This is 'rock, meet hard place' time.

Tue, 04/03/2012 - 10:34 | 2312852 SillySalesmanQu...
SillySalesmanQuestion's picture

Will someome please Tweet "Margin Calls".

Tue, 04/03/2012 - 10:49 | 2312917 jus_lite_reading
jus_lite_reading's picture

SD-1 The US of A is rotting from the inside out... 

Tue, 04/03/2012 - 10:15 | 2312779 spanish inquisition
spanish inquisition's picture

The people are figuring out it's nothing more than a 3 card monte game (= bubble economics). "Look you are winning" and "it's different this time" are not cutting it anymore. Ben is now saying he is going to help the little people win, "see a corner of the card is slightly frayed, you are practically guaranteed to win". Wall Street has a freshly marked deck, but the street is empty. Time to give money to corrupt politicians and force the masses to the table.

Tue, 04/03/2012 - 10:16 | 2312784 Schmuck Raker
Schmuck Raker's picture

"they dont trust the markets anymore because of all your clownish in your face pumping, they know its all fake.

Ya fucked up, man."

 

Perhaps Ween said it best:

You fucked up
You bitch
You really fucked up
You fucked up
you fuckin' nazi whore
You dicked me over
But now you'll pay
You fucked up
Aaaahhh

ween- You fucked Up - YouTube/2min

*Not suitable for children over the age of 55*

Tue, 04/03/2012 - 10:32 | 2312846 fuu
fuu's picture

+1

Tue, 04/03/2012 - 15:00 | 2314077 rayduh4life
rayduh4life's picture

You can shear a sheep and keep getting wool, skin 'em and you're done.

No return to reality until some of the azzhats get the perp walk.  (Do any of you expect they would do "hard" time?)  not likely.

 

Tue, 04/03/2012 - 09:39 | 2312614 McUSA
McUSA's picture

Seems like for the last six years, Wall Street has baited the average retail investor into the market only to swiftly sell the market off, leaving the retail investor rightly skeptical and unwilling to give away their money again and again!!

 

Tue, 04/03/2012 - 09:40 | 2312621 MFL8240
MFL8240's picture

When Will Retail Start Buying Stocks?

 

When the price of these companies reflect reality rather than the bullshit propoganda values they now have!

Tue, 04/03/2012 - 09:43 | 2312629 SheepDog-One
SheepDog-One's picture

Also, Wall St may be fooling TV news anchors into euphoria, but Main St no longer trusts the stock markets. They went too far in their vapor ramps to save their precious little equities and now anyone can see its a rigged game.

Tue, 04/03/2012 - 12:56 | 2313456 disabledvet
disabledvet's picture

I agree that bailing out Wall Street with free money while sticking ma and pa kettle with a "happy 20% debt rate, no job, a worthless house and higher prices" is a problem. The retail investor is the the last thing you want in equities however.

Tue, 04/03/2012 - 10:05 | 2312724 jus_lite_reading
jus_lite_reading's picture

I would like to point out that insiders are selling like mad.

Please see TOLL BROS as an example. They sell more stock than the company "earns" for its shareholders! NOW THAT IS A PONZI!!

BTW- the CEO is celebrating his Passover Ponzi this weekend with an extra $30 MILLION in cash!! WOOHOO!!

Tue, 04/03/2012 - 12:19 | 2313292 oogs66
oogs66's picture

Insiders selling like mad while they start buy back programs at the company level - talk about theft

Tue, 04/03/2012 - 10:09 | 2312750 LawsofPhysics
LawsofPhysics's picture

True price discovery (an important function of a healthy market) has not been allowed for 30+ years and continues to get worse as banks continue remove any remaining regulations and/or barriers to "mark to fantasy" accounting.

 

Let me say that again, what we have now is unregulated "mark to fantasy" accounting for the "right" people and all government entities.  Everyone else, eat your peas and pay your taxes.

 

 

Tue, 04/03/2012 - 09:41 | 2312624 CryingBear
CryingBear's picture

AAPL

Tue, 04/03/2012 - 09:53 | 2312628 DormRoom
DormRoom's picture

the APPL effect will ruin retailers once that trade turns. iBurn.

45M Americans on foodstamps. US Real Disposable Income Per Capita hasn't gone up in 30 month.  Retail cannot afford to be burned by the markets. again.

Tue, 04/03/2012 - 10:10 | 2312753 LawsofPhysics
LawsofPhysics's picture

+1 for the "iburn" comment.

Tue, 04/03/2012 - 12:50 | 2313422 resurger
resurger's picture

yup! iBurn is going to be the shiiiiiiiiiiiiiiiiiiiiiiit

+1

Tue, 04/03/2012 - 09:42 | 2312627 toady
toady's picture

I believe the general public is finally caught on....

They ran up the stock market and stole all my grandma's money in 87, They ran up the market and stole all my mother's money in 08, I'll be damned if they're gonna run up the market and steal all my money.

I think more than a few people have learned this lesson like I have!

Tue, 04/03/2012 - 09:46 | 2312639 dash8flyer
dash8flyer's picture

Hate to admit it but the CNBC and media propaganda is so good that when we surpass the 2007 highs, John Q will reenter the market just in time to see the hammer fall on him!

 

Tue, 04/03/2012 - 09:47 | 2312642 BrokeDayTrader
BrokeDayTrader's picture

WTF???

AAPL the greatest cult stock I've ever seen, $585 billion mkt cap is totally absurd

Hurry up and crash that pig!

Tue, 04/03/2012 - 09:50 | 2312656 Jim in MN
Jim in MN's picture

China will take them when the time is right.  Stockholders are just chasing pennies in front of a big red steamroller.  Otherwise known as fools.

 

Now would be an excellent time to sell.  Never would be an excellent time to buy.

Tue, 04/03/2012 - 10:02 | 2312720 DIEKeynesianEco...
DIEKeynesianEconomics's picture

$587 billion now. The crash is coming alright. Just think of how much people actually NEED apple products. Some business people may need Ipads but a laptop works just as well. As a matter of fact, trading software doesn't work on macs. POS macs

Tue, 04/03/2012 - 10:11 | 2312761 LawsofPhysics
LawsofPhysics's picture

for those of us holding since 1989, the correct term is "cash that pig in."  Done and done.

Tue, 04/03/2012 - 09:47 | 2312643 kralizec
kralizec's picture

No unicorn farts in my portfolio, thank you very much.

Tue, 04/03/2012 - 09:48 | 2312646 SheepDog-One
SheepDog-One's picture

Case in point this mornings open, futures down but ramped into the open to comfortably green as usual. People arent this stupid, they know its fake and in no mood to gamble on rigged stocks. Theyve got inflated food and gas to worry about paying for.

Tue, 04/03/2012 - 09:54 | 2312673 scatterbrains
scatterbrains's picture

Speaking of gas, UGA is one pretty little break out chart.. reminds me of AAPL.

GO BEN GO!!

Tue, 04/03/2012 - 09:49 | 2312648 Jim in MN
Jim in MN's picture

 

 

Anyone looking to buy and hold needs to understand that China will be OUT of the US company hosting business soon.

www.nytimes.com/2012/04/03/world/asia/chinese-insider-offers-rare-glimps...

Also, US corruption is what is destroying the stock market as well as our cherished values and way of life.

Psychopathocracy.  Forget paper assets while the Xanax-fueled nutjobs are in charge.  This is a human crisis, not a financial crisis.

Tue, 04/03/2012 - 09:52 | 2312663 SheepDog-One
SheepDog-One's picture

Its lunatics running the asylum! These clowns actually believed they could pull the rug out of markets in 08, crash everyone out and create a panic and then run stocks back up and pass off the pump, AGAIN? They staged a market bubble and no one showed up and no ones going to show up either! I just wonder how long till reality sets in. I believe its soon, because returns are diminishing very rapidly now.

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