Posted on 06/06/2010 8:42:37 AM PDT by blam
Investor Fund Flows Have Never Been This Bearish Since Lehman Collapsed
Vincent Fernando, CFA
Jun. 6, 2010, 8:45 AM
It's a bit of a surprise that stocks didn't fall further. The last four weeks were actually the worst 1-month outflows since Lehman collapsed in 2008, as shown below in red:
From a fund flow perspective, investors in mutual funds have now pulled money out of U.S. stocks during 2008, 2009, and now year-to-date in 2010. To us this should be read as a substantial contrarian indicator. The investor panic was enormous during the last four weeks, and on a multi-year view, investors have simply been pulling more and more money out of stocks:
ICI data is comprised of flow estimates 'derived from data collected covering more than 95 percent of industry assets and are adjusted to represent industry totals.'
[snip]
(Excerpt) Read more at businessinsider.com ...
Most mutual-fund investors buy high, and sell low.
This is OK with me, it creates opportunities.
Yeah, but even a blind pig finds an acorn once in a while, and we might really have a case of the rats fleeing the sinking ship before the captain knows it's going down.
People are piling into bonds at a very bad time..
I simply don't understand this. I can only assume people who are piling into bonds now don't have a clue about what they are doing. Interest rates are virtually at an all-time low in the U.S. right now, with both increased interest rates and big-time inflation guaranteed in 3 or so years, which means bond prices will plummet.
However, I suppose bonds might make some sense if your time frame for holding them is short term, like say 12 months, and you plan to bail at the first signs of an interest rate increase.
Agreed. However this idea that equities are attractive with Hussein and the national debt skyrocketing to $13 trillion is delusional.
It may be just about over thanks to idiots TV veiwers who are brainwashed morons. The 5 TV networks control 95% of the channels and they are ALL behind Obama including Fox/Saudia.
If equities pay dividends or the underlying companies have growth, they’re a better place to park your money than cash, CD’s or bonds.
That’s why the markets have been marching up (against all logic and reason about the looming debt) this past year. Nowhere else to deploy your capital except into companies.
That can change rather quickly when rates go up.
ping
Taxes are going to skyrocket on dividend income. interest rates are also going up.
We only have 2 mutual funds. They are the combo funds that are heavy in CDs, gold and short term treasury notes.
The article confuses the cause and effect - not surprisingly, a lot of money have fled the funds / MFs / ETFs when they got seriously hit by "flash crash" last May, and went from the "risk" of stock market volatility into the short term [temporary] relative "safety" of bubbles in Gold / GLD, Treasuries, and some into property / Real-Estate (Bloomberg: Wealthy Investors Betting on Property, Stocks, Barclays Says "Almost 90 percent of the surveyed investors in Singapore said the property market is likely to perform well in the next 12 months..., according to the survey")
ETFs Get an "F" for May 6 Liquidity - B, 2010 June 05, by Tom Sullivan
Part of the appeal of exchange-traded funds is that they can be bought or sold instantaneously during the trading day, unlike mutual funds, which can change hands only at day's end. But for 20 minutes starting at 2:40 p.m. eastern time on May 6, when the Dow Jones Industrial Average plunged nearly 1,000 points, some ETFs lost almost all their value and couldn't be traded at all. ETFs represented 70%, or 227, of the 326 securities for which trades were cancelled by the exchanges, owing to a price drop of 60% or more, according to a recent joint report issued by the SEC and the Commodity Futures Trading Commission. That was after many exchange-traded funds lost ground, along with stocks, earlier in the day because of the problems in Europe caused by Greece. ..... "ETFs are a wonderful vehicle," says Ken Leon, an analyst at Standard & Poor's Equity Research, citing their low cost, tax efficiency, diversification and daily reporting of holdings. "But it will take time to regain trust," ..... A similar flash crash occurred on May 28, 1962, when the market fell 5.5% in less than 20 minutes, and then partially recovered. "To this day, no one knows what precipitated that crash," says Ian Domowitz, a managing director at ITG. Back then, people were actually on the floor of the New York Stock Exchange. Most ETFs, in comparison, trade on the NYSE Arca, an electronic-trading platform. But Domowitz, who spoke in Washington last week at the SEC's panel on market structure, says that it wasn't an exchange that caused the latest crash. People, not markets, supply liquidity, he observes. "Investors who didn't panic would have seen value return in a half-hour." ..... ETFs stood for Extremely Troublesome Funds last month, after the flash crash in equities exposed their unexpected vulnerability to a steep drop in liquidity.
Selloff on Hungary default "fears" is just an excuse. It's entirely overblown, Hungary is not Greece and the new rightist government knows what they have to do. Their debt and deficits are very manageable, and they have said so immediately. They used the "Greece" comparison purely for domestic consumption, to help push through the needed spending cuts and other restructuring measures :
Is Hungary Playing Political Games on Debt? - CNBC / NYT, 2010 June 07, by Dan Bilefsky
Over the weekend, the Hungarian government took pains to assure shaken investors that it was nowhere near bankrupt and that it intended to meet the deficit target of 3.8 percent of G.D.P. Mr. Szijjarto also said Sunday that the introduction of a 16 percent flat tax on personal income was among the possibilities discussed at a three-day meeting on the country’s economy. ..... In Hungary — a small, open economy that traditionally depends on exports to drive growth — there is also a view that officials invoked the specter of a Greece-style financial meltdown to talk down the value of the forint and thus make Hungarian exporters more competitive in world markets. ..... The day before, Lajos Kosa, a vice president of Fidesz, the governing center-right party, and other officials warned that Hungary was in danger of suffering a Greek-style crisis, with budget deficits possibly reaching 7.5 percent of G.D.P. this year. (They were officially 4 percent of gross domestic product in 2009.) .....
The top performer was the SPDR Gold Shares ETF (ticker: GLD), which gained $4.2 billion in assets last month, bringing its total to $49.2 billion.
May's surprise, according to Nadig, was Pimco's Enhanced Short Maturity Strategy Fund (MINT), an actively managed money-market proxy that pulled in $596.4 million. That helped bring the firm's total ETF assets to $1.55 billion, a nearly 50% increase over April's total. Pimco, a fairly recent player in exchange-traded funds, became the 15th-biggest ETF firm, up from 19th in April. .....
ping to self
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