As the S&P 500 levitates ever higher on the back of what even JPM and Citigroup now both admit is nothing but a global central-bank reflated bubble which, hardly a spoiler alert here, will burst sooner or later leaving those who are holding the bag with unprecedented losses, one thing is clear: the retail investor is not coming back. Whether it is a complete lack of trust in a market that has been revealed to be more rigged than any casino, or because every risk asset is artificially propped up by a few Princeton economists, or simply because the "retail" investor does not have the disposable income to come back, is irrelevant: retail is done.
There is, however, a problem.
As the exuberant talking-heads proclaim, day after day, that "this is the moment of clarity for retail to come storming back off the sidelines", the question arises who exactly would retail be buying from?
The answer: the same institutions whose proximity to the Fed has allowed them to lever up at near zero cost of debt rates, and who have bid up risk to unprecedented levels, pushing the S&P over 2000 in recent weeks. Of course, those are all paper gains, as institutions know all too well. Which is why the time to monetize paper profits is now, and why with every day that retail refuses to come back and buy what institutions are increasingly desperate to sell, is one day more in which the day of "paper profits into very real losses" reckoning approaches.
This epic divergence between institutions and retail is shown in the JPM chart below.
Needless to say, it won't take much is for the rickety game theory equilibrium in which not one institution has dared to sell, over fears what would happen if every other institutions rushes in, finally breaks.
It is also why every media outlet, newspaper, ant TV channel has a simple message for you, dear retail investor: please come back already, and buy, buy, buy... what every bank, prop desk, hedge fund, mutual fund, pension fund, and central bank, is so desperate to sell.