Mike Santoli in this mornings Barron’s:
Flows into and out of funds, and new investment-product launches, tell a story compatible with the apathy trade notion. A net $42 billion has flowed out of U.S. stock mutual funds since April 2009, while a net $450 billion found its way into bond funds.
And the most avidly promoted new exchange-traded-fund products have centered on ways to promote volatility itself as an asset class, or to showcase income sectors such as master limited partnerships–both examples of the financial-services industry serving up what would have been exceedingly profitable if offered a few years ago.
This same apathy trade means that the supply/demand balance for stocks could remain unfavorable, or get worse, naturally. Fright, risk-aversion and global-growth doubts could easily cost the market 10% in a hurry. And there’s no denying the long-term headwinds of excessive government debt and hamstrung fiscal policy.
But with the major indexes at levels first reached 12 years ago, with stocks having underperformed bonds for every period captured by most active investors’ memory and with most investors worrying far more about the path of public policy than the market itself typically does, it seems that public psychology has effectively pulled forward the long-lived concerns to the present. (emphasis added)
Interesting stuff . . .
The Apathy Trade
Barron’s September 4, 2010
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