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 " [2]wealth effect [2]." 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 [3], 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:
[4]
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.