A striking graph from a New York Times piece pointing out the massive outflows of money from US equity funds:
Contrararians 'R' Not Us
The whole article is worth a read if you want to know why equities are so cheap and bonds are so expensive, but here’s a taster:
To be sure, a lot of money is still flowing into the stock market from small investors, pension funds and other big institutional investors. But ordinary investors are reallocating their 401(k) retirement plans, according to Hewitt Associates, a consulting firm that tracks pension plans.
Until two years ago, 70 percent of the money in 401(k) accounts it tracks was invested in stock funds; that proportion fell to 49 percent by the start of 2009 as people rebalanced their portfolios toward bond investments following the financial crisis in the fall of 2008. It is now back at 57 percent, but almost all of that can be attributed to the rising price of stocks in recent years. People are still staying with bonds.
Needless to say, my money is on equities for the long term.
(Source: New York Times)
{ 2 comments… read them below or add one }
What are you pretending not to know sir? This economic ‘recovery’ is a four cylinder engine (inventories, consumer spending, jobs, earnings) that is only firing on two cylinders (inventories & earnings) at best and one cylinder (inventories) if you take into consideration the quality of earnings given liquidity injections to major bank coffers.
To quell your bullishness I ask you to refer to near perfect correlation between the ISM index correlated against the S&P 500 index (Since the ‘recovery’ of course). The inventory rebuild in done my friend, and so goes the S&P and those wonderful earnings that has needlessly pushed up asset prices for the past 15 months. Enjoy your longs, while the enlightened buckle down the hatches and prepare for the storm.
Or maybe not:
http://stocktickle.com/2010/09/01/ism-index-in-the-us-surprises-the-bears/
Thanks anyway for stopping by Joel, good luck with those shorts. Hope you don’t end up eating them.
p.s. I don’t pretend to be a guru, but I do try to stick to what’s actually happening, not what I’d like to imagine is happening. That’s the big flaw in many bear arguments in my view (not talking about yourself, not familiar with your writing).