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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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