This is one reason why we continue to believe that after a bit of a correction stocks can move higher as investor liquidity is still not tapped out yet.

Translation:
——————-
“People buy stocks because they still have money, in our opinion. Based on a sentiment index assembled by an investor’s trade group , we think there is still cash available. Thus, the stock market will rise because there is still money on the table. Economic explanations aren’t relevant. Just available cash since, we believe, people live to buy stocks. Stocks will rise, based on the Lemming Effect. No math is involved and is completely ignored.”

(WTF … AAII?? Where do they hold club meetings? Is this like the steel workers union or teamsters union, except it’s for for stock investors?)

It wastes your time, and annoys the pig . . .

Term it out a bit. 3yr swap was 3.5% in Sep 08… by Sep 09 it rolled to a 2yr swap at 1.9%. Total return was approx 3.5% carry, +3.2% roll = 6.7% (from 3yr swap risk!).

Since Aug 29, 2008 PIMCO total return bond fund earned 17.5% or 12.2% annualized. S&P500 lost 11.5%.

yeah- I know what you mean- that .25% interest adds up- lol

Second, starting from 90/10 is silly. Classic institutional framework is 60% equitys / 40% bonds. Bogel wrote a great editorial piece at the end of 2008 saying, since he follows the old adage “invest your age in bonds” he was either slightly positive or only down 1-2-3% in 2008.

Third, savings continues to accrue… both through interest accrual and earnings/savings. Remember only 5-10% of people lost their jobs. The other 95% of people are still working and probably spending much less! I think Fidelity said total 401k balance holdings hit new peaks in Sept 2009. So basically this means even though S&P stocks were down about 20%… between fixed income perf, interest, dividends and savings additions… balances were back to highs in about 1-yr.

you have $1,000,000 in stock and $100,000 in cash. Stock market crashes 99%. You now have $10,000 invested in the stock market and a 10 to 1 ratio- cash to stock-

so on the face of it- it appears plenty of liquidity to buy stock-

but from a psychological point of view- how quickly will that money be reinvested in equities- considering a 99% loss of $990,000?

The small investor was, as always, the last to re-enter the quity markets at the top of a rally. The next easy way for Wall Street to make money is on the downside.

Anybody have any more information about the HUGE bet on the VIX by GS just before the “Correction” started?