Skip to comments.Market Meltdown Warning: Institutional Investors Are Offloading Stocks to Retail Buyers
Posted on 01/19/2012 10:27:35 AM PST by JohnKinAK
As the Dow Jones appoaches 13,000 and continues to break through multi-year highs, reports over the last several months suggest that the smart money, including major trading houses and hedge funds, is heading for the exits. The latest report comes to us from none other than government bailout darling Goldman Sachs:
Earlier today we got our first clue that the smart money has stopped distribution and is now offloading to retail after we saw the first equity fund inflow, however tiny, in months, and only the second one out of 37 outflows since April, as reported by ICI. The second and far more important one comes from todays Goldman sales roundup, which confirmed that following todays latest borderline ridiculous meltup, retail investors looking for the sucker at the poker table, wouldnt be able to find one. Heres why. Quote Goldman: As has been the recent trend, our cash flow remains better to sell, both from long-only and hedge funds. And there you have it: smart money (well, relatively so) has recently been using every melt up chance it gets to dump the bags with the E*Trade baby. Third and final proof: ETF flow however skewed toward better buying. At this point retail investors may want to ask themselves: what do they know that the others, who are actively selling to them, dont.
Source: Zero Hedge
In late November 2011, it was reported that a silent run on the banks in Europe had already begun:
As is generally the case in the financial community, the big investors which include large sovereign wealth funds and behemoth financial institutions, are one upping the public by getting out while the gettin is good. While mainstream media makes it seem like we are moving in a positive direction with respect to Europe, one thing should be clear: its a sham. This the same thing we were being told two years ago, a year ago, a month ago, a week ago. Nothing could be further from the truth.
Business Inside reports that a run on Europe has begun, and large institutional players are liquidating their exposure to European bonds and other assets:
Until recently, the concern about Europe has been mostly theoreticala potential train-wreck that would occur if/when the worlds lenders decided that the continents problems extended beyond the basket case known as Greece and cut lending to Europes core.
Well, that concern is no longer theoretical.
The worlds lenders are increasingly deciding that its better to be safe than sorry, and theyre pulling their money out of Europe.
Source: The Daily Sheeple
The big money players and investment firms know whats happening in Europe, as well as the United States.
In just the last couple of days it has been reported that Greek officials arrived in the US to discuss default fears as they approach a March 2012 deadline to make good on bond payment commitments made during their last bailout cycle. For bondholders and lenders who bought into the recovery falsehood and invested money into Greece when they were first threatened with a sovereign debt default a couple of years ago, the possibility of a 50% (or more) haircut on their investments is quickly becoming reality. This has spooked investors all over the world. They know billions of dollars are about to vanish. On top of that, we have the debt of Italy, Spain and Portugal to contend with a situation that is significantly worse than that of Greece alone.
What were seeing from across the Atlantic ocean is that we have massive amounts of outflows, as no one is willing to risk their money in European Union related debt (except the Federal Reserve, of course). Like we saw in the midst of the meltdown in 2008, the outflows are headed straight over to the United States into what many consider to be the last bastion of investment safety good ol U.S. Treasury bonds. This will have a direct impact on the US dollar, which according to The Daily Crux, may be set to explode to the upside in the very near future. Additionally, stock exchanges are showing technical signals which tend to appear right before market breakdowns.
On top of that, we are hearing that earnings reports for US companies will be lower than expected, with negative news reportedly outweighing positive news by a ratio of 3.5 to 1. This will put added pressure on stocks.
All of these signs suggest that, not only are investors pulling out of European bonds, but also global equities. The report from Goldman Sachs above may be confirmation of this developing capital flow trend.
Confidence in the stability of credit and equities markets around the world may very well be evaporating.
Or if you believe all of this you can sell the stock in your 401K and go into cash.
That’s if you believe it, of course. There is risk either way just as there always is when making investment decisions.
We could have a melt up before the meltdown.
I’ve been sitting on some BAC waiting for a chance to cut my losses. But, now I’m wondering, what’s driving that stinkin’ stock up?
Bubbles expand before they pop.
Go into cash, and watch your mattress depreciate day by day, but know you will be better off than those caught by a bank holiday.
It’s a legitimate worry. Governments are afraid of their citizens, and that makes citizens fear their governments. The world is a tinderbox built on fiat money.
A VERY legitimate concern. It could easily work like this:
The One-Hour Meltdown By Robert Wayne Atkins, P.E.
You do realize the SHTFPlan has been preaching doom and gloom for years now.
Everybody’s got an A**hole and everyone’s got an opinion. That’s why it makes sense to diversify.
Not surprised at all. In fact, the point of my post was just that: I see lots of predictions of doom posted here, and it kind of amuses me because if one really believes this, then they can profit from such a situation by making the right moves.
“...it is now practically impossible for them to pay their way out with causing a major financial meltdown and meanwhile every day they are piling on more debt?”
Yep - keep it going until the ruling class is sure ALL the (soon to be) serfs’ money will be transferred to them when the collapse occurs.
Sold what I had just before the end of the year...taking the loss on my 2011 return.
I think the solution being tried (by the Powers-That-Be) is to have their Central Banks create $$ out of thin air, then turn around and buy sovereign bonds at artificially low interest rates. That’s been going on since at least 2009 to keep the bond vigilantees at bay. So far, its “working” in the sense that the Economy hasn’t melted down; but neither has it recovered.
The center-of-gravity of the strategy is to keep interest rates suppressed to almost zero. If Sovereign interest rates rise, then the Welfare State quickly becomes unaffordable and all Hell breaks loose. You see this happening in Greece and the smaller European countries. These are countries that have no Central Bank and are no one’s reserve currency, so they will suffer because they are “expendable” compared to the US and Japan.
Its not free, however. Keeping interest rates near zero is a HUGE STEALTH TAX on savers. Make no mistake, they are the ones paying the price for everyone else’s mistakes.
So what is the ‘rosy’ solution that brings an outcome that makes everyone money and evades Doom?
When you diversify, your admitting you have no idea what is going on or can't make up your mind what you think the fed is going to do next.
or can’t make up your mind what you think the fed is going to do next.
I have no idea what is going on now. When QE2 started I figured stocks would go back down when it ended. I am guessing something similar is going on now with operation twist and ECB hocus pocus.