MUTUAL FUNDS ARE “ALL IN”
by ilene - September 13th, 2010 9:37 pm
MUTUAL FUNDS ARE “ALL IN”
Courtesy of The Pragmatic Capitalist
Eric King posted this interesting chart showing mutual
“The percentage of liquid assets (aka mutual cash levels) was 3.4% in July. This is the lowest percentage cash level ever and is near levels that accompanied the 2007 equity market peak.”
You’re likely familiar with the myth of cash on the sidelines, however, if mutual
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Digg16th Sequential Equity Fund Outflow Takes Total To Over $50 Billion YTD; Retail Boycott Of Stocks Continues
by ilene - August 26th, 2010 9:02 am
16th Sequential Equity Fund Outflow Takes Total To Over $50 Billion YTD; Retail Boycott Of Stocks Continues
Courtesy of Tyler Durden
The latest anticipated weekly outflow from equity mutual funds just hit a one month high of $2.7 billion, as reported by ICI, and with that, YTD redemptions by equity investors have hit over $50 billion. Domestic equity mutual funds have not seen a net positive retail inflow since April 28, yet despite this the market has been substantially rangebound and until last week. What is notable is that even during times of relative stock outperformance, courtesy of whoever it is that is left buying stocks, be it HFT algos, or Primary Dealers pumped with cheap Fed liquidity (and don’t forget today is another "free $2 billion courtesy of POMO" day), the investing public refuses to be drawn into owning stocks. CNBC has now failed to sucker its viewers into the stock ponzi for 16 weeks in a row and rising. The clear capital rotation winner- the bond bubble, but that is the topic for another week.
So Just What Happened On July 15?
by ilene - July 22nd, 2010 2:28 pm
So Just What Happened On July 15?
Courtesy of Tyler Durden
Now that the market is back to mirroring the melt up from last summer where bad news drove the market higher, and rare good news drove it to the moon, and every day’s closing price is more or less predetermined in the prior premarket session, is it ok if those handful of people who still give a ratus gluteus about market structure understand just what happened last Thursday, July 15 (incidentally the day Goldman announced its settlement, and just pre the infamous OpEx), when the ES-SPY relationship blew up, as the chart below shows. Where futures and SPY have traditionally correlated to 0.999*, on July 15 something snapped.
OK – we realize that with the Fed out of bullets, land mines, grenades and bazookas, and just a nuclear bomb or two left in the arsenal (not to mention countless lies), and the administration set to suffer a historic loss in November, it will be Bernanke and Obama’s only hope to ramp the market at least several hundred points over the next few months. That’s fine – nothing would surprise us anymore. After all, mutual funds have a few more billion in redemptions to face before they are all tapped out so the market must illogically surge. But little market abnormalities like the one above still entertain and amuse, and if maybe Liberty 33 could release a press release, blink in Morse Code, or send some other signal as to what happened, we can all go to bed knowing that the abnormal is now officially perfectly normal. And we simply ask, because there was a time, a whopping year or two ago, when such a sudden and violent shift in correlation would mean someone certainly blew up. Of course, with trading now being executed by a handful of counterparties, it would make an answer to such a question all the more interesting, if completely irrelevant in the grand scheme of all things Ponzi.
h/t Credit Trader
11th Sequential (& Massive) Equity Outflow Reignites Speculation Market Terminally Broken
by ilene - July 22nd, 2010 1:18 pm
11th Sequential (And Massive) Equity Outflow Reignites Speculation Market Terminally Broken
Courtesy of Tyler Durden at Zero Hedge
ICI reports that the week ended July 14 saw another massive outflow from domestic equity mutual funds of $3.2 billion, bringing the July total to $7.3 billion, and year-to-date equity outflows to a stunning $37.5 billion. Yet neither liquidations, nor redemptions, nor mutual fund capitulation, nor lack of liquidity, nor lack of human traders, nor rumors that it is all one big scam, can tame the market’s most recent bout of irrational exuberance: in a time when equity funds had to redeem over $7 billion in stocks, the stock market surged by 90 points!
Just like last week, despite huge order blocks of selling pressure, the fact that volume is so light and liquidity so tight, the market succeeds in ramping ever higher, now that the few remaining carbon-based market participants have reverse engineered the key algo "predictive" frontrunning mechanisms, and manage to fool them that there is bid side interest, into which all domestic equity mutual funds manage to sell en masse. Soon enough there will be little left to sell, which will, paradoxically cause a much overdue market crash. (It is a bizarro market for a reason). And even as equity mutual funds are running on fumes (explains Bill Miller’s call of desperation yesterday), all the money in the world continues to rush into credit funds: the past week saw inflows into every single bond category, with a total of $5.8 billion going into all taxable bond funds. We are gratified that behind the fake equity facade of "alliswellishness", everyone is pulling their money out of stocks with an increased sense of urgency. Retail has had it with this pathetic shitshow of a market: the computer can front run each other for all anyone cares. We are fairly confident that the Obama administration will not have a soft spot in its heart to bail out the quant community… unless, of course, Rahm Emanuel discovers some way to unionize algorithms and give them voting rights.
Quad Witching Expiration and a Pullback from the Long Term Trend
by ilene - March 19th, 2010 12:02 pm
Quad Witching Expiration and a Pullback from the Long Term Trend
Courtesy of JESSE’S CAFÉ AMÉRICAIN
The front month on the SP futures has now switched from March to June as a part of the Quad Witching Expiration. (Technically it switched last week, but for charting purposes I made the switch last night.) The June Futures have essentially the same formations as did March, it’s just that the earlier months have few trades to mark them.
This is the first serious test for US equities since mid-February, as it has been on a spectacular rally streak, no doubt fueled by excess liquidity applied to a selling exhaustion in the funds. Curiously not among corporate insiders who were selling at a rate of 57 to 1 in this latest rally, no doubt for diversification purposes.
The extent of this correction will be determined on the amount of actual selling that starts to occur. For now what we are seeing is more of a trading correction in response to an outsized rise in price, or as the Street likes to say, the market was getting ahead of itself.
Key levels to watch are 1135 and 1120. If we break those I would look for a consolidation around the 1080-1100 level.
Mutual Fund Cash Depletion Highest Since 1991
by ilene - March 9th, 2010 4:54 pm
Mutual Fund Cash Depletion Highest Since 1991
Courtesy of Mish
In what can best be described as a contrarian indicator with an uncertain timing trigger, Mutual Fund Cash Depletion Highest Since 1991.
Equity mutual funds are burning through cash at the fastest rate in 18 years, leaving them with the smallest reserves since 2007 in a sign that gains for the Standard & Poor’s 500 Index may slow.
Cash dropped to 3.6 percent of assets from 5.7 percent in January 2009, leaving managers with $172 billion in the quickest decrease since 1991, Investment Company Institute data show. The last time stock managers held such a small proportion was September 2007, a month before the S&P 500 began a 57 percent drop, according to data compiled by Bloomberg.
Stocks will rally this year as the prospect of higher interest rates lures cash from fixed-income securities to equity accounts, says Mark Bronzo at Security Global Investors. Data from ICI, the Washington-based lobbying group for professional money managers, show investors have pumped $369 billion into bond funds since March 2009 versus $23.4 billion for equities.
“There’s so much money in the fixed-income market and there’s so much money in money-market instruments paying almost nothing,” said Bronzo, whose firm oversees $21 billion, in an interview from Irvington, New York. “If that money shifts to stock funds, it’s going to be very bullish.”
Equities may be boosted by investors deploying some of the $3.17 trillion held in money-market funds tracked by ICI. While $754.3 billion has moved from the accounts in 14 months for the fastest decline on record, Bronzo says more cash will be withdrawn as investors gain confidence in the economy.
It gets tiring pointing this out, but the only time money can move into the equity market is at IPO time or other offerings. Otherwise it is impossible for sideline cash to move into equities. For every buyer there is a seller. At the end of any normal equity transaction, there is as much cash on the sidelines as before.
So many misunderstand the simple mathematical function of buying and selling, that I feel obliged to make corrections.
Sentiment, Not Sideline Cash, Is The Driving Force
Share prices do not move up because sideline cash comes in (as noted above it cannot happen in the first place). Share prices rise or fall…
THE MUTUAL FUND INDUSTRY – INVESTORS DESERVE BETTER
by ilene - October 12th, 2009 11:27 am
Interesting look under the hood of Mutual Funds, by The Pragmatic Capitalist - Ilene
MUST READ: THE MUTUAL FUND INDUSTRY – INVESTORS DESERVE BETTER
I was shocked to see the front page of Barron’s with the image of investing legend Bill Miller titled “He’s Back! - It’s Miller Time”. The article says Miller is back at the top of his game after a disastrous 2 year run. A closer look at Miller’s fund and the mutual fund industry actually shows a pervasive and destructive problem on Wall Street -a total and complete lack of risk management.
The Barrons interview claims that Miller’s fund is worth taking a look at again. Miller himself even says that his patient investors have been rewarded:
“The shareholders who stuck with us believed in our process and have seen us underperform; it has happened before,” Miller told Barron’s in a recent interview. At least “we built up large tax-loss carry forwards, which will mean no capital-gains taxes, which may go up.”
In 2007 Miller lost 6.7% and then lost an astounding 55% in 2008. His fund is up over 36% this year. $100,000 invested with Miller over the last two years would leave you with roughly $60,000 today. Glad you stuck with Miller? Miller goes on to claim that his performance this year is due to superb risk management:
But this time was different. “This turned out to be a collateral-driven crisis caused by underperforming debt,” also known as toxic assets, Miller says. “We’ve analyzed that mistake and tried to make adjustments to risk management and the portfolio-construction process.”
Risk management? Hardly. Read on….Bill Miller is infamous for supposedly outperforming the S&P 500 for 15 straight years. He has made hundreds of millions of dollars due to this performance and essentially built the Legg Mason brand by himself. But a look under the hood shows a massive Wall Street problem. See, Miller is a part of an industry that has been proven to underperform a standard index fund (more than a handful of studies show that over 80% of all mutual funds underperform a comparable apples to apples index).
What mutual funds like Miller’s do is this: they come up with fancy sounding names that give investors the impression they are investing in one thing when in fact they are investing in an index fund clone –…
About That Hedge Fund Renaissance You Were Told Of Yesterday
by ilene - September 10th, 2009 5:08 pm
About That Hedge Fund Renaissance You Were Told Of Yesterday
Courtesy of Joshua M Brown, The Reformed Broker
For some reason, yesterday I heard the soundbite that “Hedge funds are back! On pace to have their best month/quarter/year since blah blah blah” repeated at least a dozen times.
Absurd. I can think of several high net worth people I’ve spoken with in just the last few weeks that would give up a firstborn child to get away from a gated fund or two.
The hedge fund industry claims many of the most talented managers on earth…but it also features some of the most insipid me-too acts since the tragic Boy Band Craze of the late 90’s launched a thousand cheesy singing groups from Orlando, Florida. OK, that was a ludicrous analogy, but still…
Many of the late-comers and also-ran funds have already been been drummed out of hedgieland and most funds are but a shadow of their former selves asset-wise.
That said, the real story you didn’t hear yesterday is that money is still fleeing the industry at an astounding rate…
According to The Hennessee Group:
Investors have continued to pull money out of the hedge funds after having removed a record $152 billion in the last quarter of 2008.
In July, the most recent month for which data is available, clients redeemed $20 billion from hedge funds, significantly more than the $6.9 billion they pulled out in June.
Yes, that’s correct, triple the amount of money was pulled from hedge funds in July than in the prior month.
Too be fair, some of that is related to redemption requests that could not be honored during the heart of the liquidity crisis and some is probably from the worsening conditions in employment and real estate, which forces investors to move money even from performing assets.
But the breathless reporting of the Return of the Hedge Fund we heard yesterday for the most part neglected the fact that the predilection of the wealthy for more plain vanilla investment management has still not changed. Investors are clearly taking more risks than they were willing to last winter, but they want transparency, control and liquidity – three things that the hedge fund industry cannot offer them, for the most part.
This goes for individual investors, endowment investors, pension investors, sovereign wealth investors, corporate investors,…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
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