14th Consecutive Week Of Stock Outflows: Retail Refuses To Go Back Into Stocks No Matter What Market Does
So much for engineered stock market "rallies" and global "bailouts" - per the latest ICI update, we can now confirm that no matter how or what the market does, retail investors have firmly decided that the ridiculous market volatility is simply too much for most, and have withdrawn another $3.7 billion from domestic equity funds, and have now taken out money for 14 straight weeks ($44 billion) since the US debt downgrade (but, but, the S&P barely lower), or 31 weeks ($130 billion) if one ignores the statistically irrelevant blip of a $715mm inflow on August 17. Perhaps instead of trying to fabricate a makeshift price for the SPX which nobody believes any more, the Fed should focus on moderating the insane volatility which is the primary reason preventing any normal investors from putting cash into stocks. And yes, $6.2 billion went into bonds, despite the record low yields. Said otherwise, retail investors have withdrawn $214 billion from domestic equity mutual funds since the beginning of 2010. Put a fork in stocks: America's infatuation with the stock market is officially over.
If anyone is still confused by what has transpired today, here is Peter Schiff explaining in simple words, why what happened "may be one of the most important economic events of the year" and what to do next: "Today’s unprecedented announcement by the world’s most powerful central banks was a loud and clear bell ringing to buy precious metals. The move, disguised as an attempt to help the fragile state of the global economy, is in reality a move to prop up failing banks in Europe and the US. By reducing interest rates paid for dollar swaps, central bankers are in effect increasing the quantity of global dollars in circulation. The result? The dollar will weaken, inflation will rise, and gold will soar. Gold was up more than $30 today, and the dollar got crushed. I urge you to take 7 minutes to watch the video I recorded exclusively for my subscribers a few hours ago. It explains, in plain language, what happened today – and what is the likely outcome for your portfolio. This may be one of the most important economic events of the year." And pardon Schiff's self-promotional piece at the end, but the truth is that he is essentially correct about what the actions means from a big picture perspective. Furthermore, as Goldman made all too clear, this is merely the beginning as more and more inflationary actions have to be undertaken by central banks to save banks from being crushed by untenable debt loads. Whether they succeed in overturning the deflationary tsunami is unknown. What is certain is that they will bring fiat currencies to the verge of viability (and beyond) in trying.
The bottom-calling will continue of course but for the fifth month in a row, September's Case-Shiller home price index fell year-over-year as the Non-seasonally adjusted price index fell for the first time month-over-month since February. The overall index dropped 3.9% YoY, compared to expectations of a 3.1% drop. The more narrowly focused 20 City Index also missed expectations, falling 3.59% (relative to expectations of -3.00%) and saw its biggest drop in six months as it drops back to 2003 levels.. The index value is back below 142, its lowest in 3 months, as prices muddle along the bottom here with the mix most likely holding us from a more vertical drop. We assume the second derivative crowd will note the -3.9% drop is slower than the -5.79% drop of Q2, but October and November have been tumultuous months and we suspect the acceleration top the downside will revert - especially given recent rises in delinquencies to record highs.
