Tuesday, August 4, 2009

Americans Say "No Thanks" To Stocks

Good Afternoon Folks

I am a little early today because I am busy this evening. Stocks are pretty flat as I type. It appears the new battleground for the bulls and bears will be S&P 1000.

As you all know, I have been very a huge skeptic of this artificial "bailout" rally over the last few months. Several weeks ago I made the comment that the TARP money was nothing but a $700 billion buy order on the S&P. This article I came across this morning in The USA Today has only heightened my suspicions:

"The stock market may be roaring, but mutual fund investors are snoring. The Dow Jones industrial average has soared 9.9% since June 30, and gains like that usually attract big inflows to stock funds. Not this time. In fact, fund investors are far more interested in bonds than stocks.

Investors bought a net $2.3 billion of stock funds the week ended July 22, according to the Investment Company Institute, the funds' trade group. Net purchases for July 1 through July 22, the latest figures available: $4.1 billion. But investors remain far more interested in bonds, which have fared far better than stocks the past decade. Total purchases for bond funds from July 1 through July 22: $28.8 billion.

TrimTabs.com, which tracks fund flows, estimates that another $5.2 billion has flowed into stock funds the past five days — more than in the previous four weeks combined.

But even that figure is dwarfed by TrimTabs.com's estimate of $12.3 billion that sloshed into bond funds the past five days.

At Vanguard, the pattern was the same in July: $3.9 billion to stock funds, $7.6 billion to bonds. "It was the strongest month of the year for bond funds," says Vanguard spokesman John Woerth.

Flows to stock funds remain well below their 10-year average of $7.8 billion a month."

My Take:

Alrighty folks, someone tell me how the market has rallied 50% from the lows without J6P contributing money into mutual funds in his 401k? This is one of the largest sources of money for the stock market.

The numbers in the article above are staggering. In the first three weeks of July, investors threw $4.1 billion into mutual funds versus investing a whopping $28.8 billion into bond funds.

This is pretty shocking considering the market has been soaring the last few weeks. Usually inflows into mutual funds soar when the market is flying. Why isn't it happening this go around? Perhaps investors have lost all trust in the stock market?

Do you think maybe everyone feels like they have been gamed as this casino rises and falls over 50% in less than a year? Volatility like this is not healthy and only makes investors shy away from the market because they don't understand what in the hell is going on.

The Bottom Line:

When I see data like this it only strengthens my belief that America has had it with stocks. Their portfolio's have been destroyed twice by our bubble blowing stock market.

This also reinforces my belief that this rally has been articially created using our taxpayer bailout money that was donated to them by the Fed. The banks then turned around and used it to buy every stock under the sun.

This is not sustainable IMO, and disaster #3 for the average investor is right around the corner when the trading desks at the banks run out of funds trying to rally the market without the help of the retail investor.

Let's not forget that Wall St has already infuriated the investors that got out at S&P 666 out of fear that they may lose everything. You think they might be a little frustrated and confused right now after losing 50% of their money only to see the market get manipulated back up?

Nooo, I am sure they don't feel like they have been gamed(scarcasm off).

Congratulations Wall St! Your have now officially scared almost everyone out of the market. Good luck trying to keep this rally going now that the average investor has picked up their toys and decided they no longer want to play in your sandbox anymore!

Let me use a baseball analogy: When this last rally fails it will be three catastrophic strikes in 10 years for the average investor's portfolio. We all know what that means: YOU'RE OUT!

10 comments:

CT-Hilltopper said...

Hi Jeff:

I'm going to be on and off too.

Today is my birthday and I'm going out later.

I think a lot of people have rethough the supposed "safety" of the stock market. I also think thats why CNBS has tanked so badly in the ratings. They pump the stocks so much, and a LOT of people now know that the markets are being manipulated.

I keep thinking back to our discussions on china yesterday, and I'm thinking of something that we didn't really discuss. The Chinese have been selling off a lot of our Treasuries to buy fixed asset stuff ( gold, steel, soybeans, etc...). If they buy an of our treasuries at all, they have been buying short term treasuries, not thirty year type stuff.

I believe they are just basically setting themselves up to tell us to go scratch at some point. And that point will be sooner than anyone would like to think.

That's just my feeling.

I'm still sticking to my original feeling about this whole thing. Everything will work until it doesn't. Something from out of the blue will rock everyone back on their heels. and nothing will ever be the same. Something people wouldn't normally expect that don't follow Denninger...etc...

I'm not that surprised at your data from today. I think a lot of people are terrified at the thought of putting their money in the market, if , indeed, they have money to put into the stock market.

I'm not all that convinced that there's all that much cash on the sidelines. People can't use their homes as an ATM anymore. They are TERRIFIED that they are going to lose their jobs. Many of them are working less hours, bringing home less money per week in a check. So when Larry Kudlow or someone on CNBC talks about all the cash on the sidelines, I just keep thinking about the 11 trillion dollars of personal wealth that has been destroyed during this depression, shake my head, and think, "Is THAT the cash on the sidelines to which you keep referring? I don't think it's coming back any time soon."

We have been lied to so much, and by so many people, its staggering. It's hard to keep up with. And it's a damn thing. One day, I will have to answer to my children for all of this.

I can't imagine what in the world I will ever have to say in response.

CT-Hilltopper said...

I wish to hell we had an "edit" button for the comments section. LOL

Where to start.

Immediately after:...(gold, steel, soybeans, etc...). If they buy any of our treasuries...

The next mistake is just after:


We've been lied to so much, and by so many people, it's staggering. it's hard to keep up with. And it's a damn SHAME.

That should fix all my mistakes.

Jeez. LOL

Jeff said...

CT

Happy Birthday!!!

I hope you ordered those Chippendale's and that bottle of champagne that I suggested a few days ago:)

Seriously, have fun!

Regarding China and the market I totally agree.

Today is interesting because GOLD is up on a day where the dollar is up and treasuries have sold off.

Could a new flight to safety bedeveloping in gold as the world loses confidence in the US dollar?

Thats what I am starting to think about. I will be looking to see if this develops into a trend.

Gold and silver have soared the last few days. Congrats to any of the metal heads/goldbugs out there!

Toney Brooks said...

You know, the stock market is pumped up by high speed computers to convince the American public that things are returning to normal. Fundamentals are out the window. The perception of normality is the government's number one goal.

Washington likely has the support of the 19 other G-20 nations. All realize America is the economic engine that pulls the train and the American consumer powers roughly three-quarters of it.

Of course bonds are the place to be!

Anonymous said...

I have to admit I scratch my head more and more when I see the market keep on rising- I know, I know the market is a forward looking beast but everything I keep seeing is pointing the other way. Yes, the detoriation has slowed and in some cases has temporarily reversed but I just don't know how far out the market is looking. In my neighborhood I am seeing more and more vacant strip centers, new strip centers with no occupants and struggling small businesses about to go under. That's just my small suburb of 1 major metropolitan area. My investment portfolio is enjoying the ride back up to where it was before all this mess but I am still accumulating cash as I am waiting for the fundamentals to return. Maybe that is what mustard seed Kudlow is referring to. CT enjoy your Birthday!

getyourselfconnected said...

Jeff,
Great take.

There are many calling this a "suckers rally" and that a retest of the lows will occur again, maybe in the enxt year. I have always felt that one more 30-40% downdraft and many regular investors (401k', small brokerage) will just take their remaining cash and stay away, maybe forever. You summed that sentiment up exactly!

CT,
Happy Birthday! Have a drink on us.

Minton Mckarkquey said...

CT, You share your birthday with Obama! Holy hell! :-) Have a great one, and an extra martini on me.

Peter said...

I don't think it is just the public not in the market. Everyone not in bed with the government (while I guess the banks and government as well) know that there is no data that supports this rally on a macro level. The only possible support for this market is massive inflation in the very near future, and that is highly unlikely.

What about all the hedge funds that should be shorting this market here? Where are they?

I think everyone has now realized that this market is completely run by the banksters with government help, and trying to fight that is impossible. It appears that the only people in the market now are the banks trading amongst themselves.

Do you think they have a Sunday night call to determine where the market will end each day of the following week?

I think it is highly unlikely we see any meaningful decline until after health care. This government wants to pass health care and there is no way that it passes with the market down. Man, I don't even trust the bond auctions. When they go well I just assume that the FED is buying them up through a front man. This entire market is rigged for political reasons.

Minton Mckarkquey said...

Jeff - no need to continue the blog since Obama has declared that the stimulus is working (http://www.latimes.com/business/la-na-obama-indiana6-2009aug06,0,1077386.story). Everything's fine now so don't worry. :-)

Jeff said...

Minton

Thanks. Now I can finally rest:)

Peter

There is a lot of crazy stuff going on. I will be the first to admit that I don't have a grasp on all of it.

I am back home finally.

PPost up later. maybe 7