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Minyan Mailbag

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Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next discussion with that very intent.

Todd,

You know, the fact that the mutual equity fund inflows are missing in early Jan. may be a huge signal to the market's future. If you ask me, I think the intermediate-term has turned. Perfectly so, too. Bears weren't there and markets slipped enough without them that they may continually keep waiting for "the significant bounce" that never arrives. And now here's the kicker: they're STILL scared, generally speaking. It all looks just right for a spring '02 down move.

If the above assessment is indeed correct (and it might not be, of course), then there is an underlying fundamental explanation that can reasonably be assigned. The absence of equity inflows may bespeak a liquidity constrained household investor. If that's the case, then in the face of 3-4% GDP growth and stable employment growth, something doesn't compute. And that something is that the "official" GDP and employment growth figures have been overestimated.

We know that the adjusted, so called "real" GDP #'s are likely inflated by statisical machinations, primarily a falsely lower inflation rate. And since 80-odd % of employment growth has been from the birth/death calculations, the employment growth has been spuriously inflated because the birth/death calculations are based on the inflated GDP #'s.

In other words, there simply isn't the personal income to support a net inflow to equity funds, exclusive of the monetary/fiscal stimuli that has disappeared. Households are seemingly "finally" stretched by way of debt/mo. expenses to a point that excludes a net input on their part to fund the stock market.

Another possible explanation is that foreign sellers of U.S. equities are more than offsetting any positive domestic inflows. Just some thoughts.


Minyan WB

R.P.

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No positions in stocks mentioned.

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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