Thursday, September 09, 2010

65 Billion Outflow From Long Term Equity Funds

And it simply just got uglier!

  • Equity funds had estimated outflows of $9.54 billion for the week, compared to estimated outflows of $4.60 billion in the previous week. Domestic equity funds had estimated outflows of $7.60 billion, while estimated outflows from foreign equity funds were $1.94 billion.

That's EIGHTEENconsecutive weeks of outflows from equity funds!

And the total outflows?

Just some 65.296 Billion!!

Here's my S&P chart. The arrow indicates the current period (26 Aug to 1 Sep) where the Americans deemed it was fit to withdraw another 7.6 Billion out from their long term equity funds. ( On 26 Aug, SP closed at 1,047.22 and on 1st Sep, SP closed at 1,080.29)

So from 28th April 2010 to 1 Sep 2010, it doesn't matter if the equity market is up or down, Americans just want out from the long equity funds.

It's 65 Billion taken out from long term equity funds!

Remember long term equity funds needs funds. Without funds... what then?

Well, here's an interesting article. Hedge Funds Burned By July Outflows

  • Hedge funds continued to hemorrhage assets despite strong performance in July, according to a new report.

    Investors yanked $2.9 billion from hedge funds in July, TrimTabs Investment Research and BarclayHedge said. The outflow—the industry’s second-straight monthly setback—of 0.2% of total hedge fund assets left industry assets at their lowest level since November at $1.53 trillion.

    “Hedge funds posted a positive return in July, but they did not regain the ground they lost in May and June,” BarclayHedge’s Sol Waksman said.

    Things look even grimmer for funds of hedge funds, despite a proportionally smaller outflow, according to TrimTabs’ Vincent Deluard.

    “Funds of funds are in a bad way,” he said. “They posted only five inflows in the past 25 months.” One of those months was not July, when investors pulled $670 million from funds of funds, or 0.1% of total assets.

    Things were not bad across the board, however. Commodity trading advisors alone took in $3.9 billion in July, the strategy’s fifth-straight inflow.

On ZH: Retail Capitulation: Stock Outflows Surge By Over $7.5 Billion In 18th Consecutive Week Of Record Stock Market Boycott

  • This is getting really ridiculous. In the week ended September 1, domestic equity mutual funds saw a near record $9.5 billion in outflows: the biggest one week outflow in 2010 since the $13.4 billion redeemed in the Flash Crash week. The trend developing is simple: retail investors withdraw increasingly greater numbers in weeks in which the market is down even a little, and withdraw just a little in weeks in which the low-volume melt up presents them with an opportunity to get out at a better price level. Of course, the common thread is that as we have said for 18 consecutive weeks, retail just wants out. And now that, courtesy of Mary Schapiro, retail has finally put two and two together, and knows that even the regulators are concerned about redemptions, which are perceived by the SEC as being a function of distrust in market structure, we now fully expect more and more redemptions. Year to Date the total pulled out is a whopping $64 billion, incidentally with both inflows and the market having peaked at the same time in April. On thr other hand, if the market were tracking mutual fund redemptions (whose net liquidity is now down to just 3.5% of assets and getting worse by the day), the S&P would be in the 900 range. Once the destructive impact of the Fed's daily meddling in the stock market is eliminated, it will get there. The longer stocks are artificially held up at current artificial levels, the greater the crash when reality and anti-gravity finally meet.

Yes, even the ETFs are not spared!

  • Total ETF assets declined by about $20 billion during the month, and outflows totaled nearly $2 billion. Perhaps reflecting overall market sentiment, investors ran to the exits of domestic equity funds during August, as outflows from this asset class topped $12 billion last month. ( source: here )

It be wise not to ass-u-me. This posting merely highlights the very fact that Americans are withdrawing their money from their long term equity funds. And they have been doing it in regardless of whether the stock market is going up or down.

And naturally it would be damn silly to suggest that this posting is suggesting anything!

LOL! Sorry but I need to put this disclaimer in. The local markets is hot and people have nothing better to send in senseless comments saying I am suggesting this and that.

ps: So why do you think the Americans are withdrawing money out continously from their long term equity funds? Let me list out some possible flawed answers. Let me know what you think could be the reason....

  1. They hate the stock markets.
  2. They no longer have faith and they no longer trust the stock markets, more so with the recent FLASH crash. Yes, HFT should be outlawed!
  3. They think the stock markets is going to crash because they can see it in their daily lives that their economy is sooooooooooo bad.
  4. They found a better option to invest their money.
  5. They need the money!


Would you have a better reasoning?


swifz said...

For every seller, there is a buyer. Money only flows into the stock market during an IPO. Money only flows out of the stock market when a stock de-list.

If someone is pulling out his money from the stock, someone else is putting in the money. The article only highlighted one-side of the coin.

The question is: Who is buying?

My speculation:
1. Foreigners
2. Banks!

Remember, Bernanke printed a lot of money, if banks are not lending, why not just speculate the stock market to make some profit to cover the big losses?

The money is now showing up in commodities, that is why agriculture products are moving up.

The next question: Should you hitch a ride up? The answer is entirely up to you.

Moolah said...

The statement from Mary Schapiro:

SEC probing flood of orders in markets

May 6 ‘flash crash’ has sparked some new rules

NEW YORK: US regulators are looking for possible fraud related to the large numbers of rapid-fire stock orders that are placed and cancelled almost immediately, a common practice in today’s markets, according to Securities and Exchange Commission (SEC) chairman Mary Schapiro.

Schapiro, addressing the Economic Club of New York, broadened the already wide array of issues the SEC is looking at in the wake of the flash crash, including the fact that some firms regularly send more than 90 buy or sell orders for every trade they ultimately make.

“People don’t realise the velocity of trading and the volume of trading at the multiple venues that exist,” Schapiro told reporters on the sidelines of the luncheon.

“I thought it would be helpful to give people a sense of what the numbers tell us.”

Regulators are looking at what has recently come to be called “quote stuffing” the flooding of markets with bogus orders in connection with the mysterious May 6 “flash crash,” when the Dow Jones industrial average dropped dramatically before quickly recovering.

“The SEC and other regulators are looking carefully at certain practices in this area to assess whether they violate existing rules against fraudulent or other improper behavior,” Schapiro said in her address.

“Quote stuffing” was not seen as the cause of the dramatic market drop, sources have said. A report that might explain the flash crash was expected toward the end of the month, Schapiro told Reuters before delivering the speech.


Moolah said...

:: Today is just a dismal showing so far, and unless some bomb hits the news this afternoon this could well be the worst day on record. The attached chart is quite telling, and keep in mind that other than the short covering last week the past few weeks have already set record lows in volume for the year, so the comparison is quite telling! I understand it's a Jewish holiday but we are running at 1/3 of the volume of what would be already a very slow day!

...... The real reason why volume is so poor is that the market is fixed, I just don't know anyone who is a clever investor out there who thinks the market is fairly valued here and most buyers I talk to are motivated by the thought that the Fed will keep printing and debase the currency enough to make asset prices go up... talk about an optimist point of view: the only buyers are cynical! ........

Laurence Kotlikoff has been talked about quite a bit after a couple op-eds in which he basically highlighted the fiscal gap and the absurdity of our current pension system. Volumes in stocks will not and should not pick up until we deal with it, it's time to wake smell the coffee and address a problem that everybody recognizes. People don't invest because they know the system is broken and they want nothing to do with it in its current state, as made obvious by the outflow out of equity funds....