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."
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!