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 . . .

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Source:
The Apathy Trade
MICHAEL SANTOLI
Barron’s September 4, 2010
http://online.barrons.com/article/SB50001424052970203681904575461680823992128.html

Category: Psychology, Trading

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

7 Responses to “The Apathy Trade”

  1. investorinpa says:

    On the flip side, Don Luskin (aka the contrary indicator) says that the economy is ready to pop, double dip recession risk is over, and good times are a-flowin… http://www.smartmoney.com/investing/stocks/the-stock-market-slide-is-over/

  2. Richard R says:

    “Apathy” is a misnomer, “aversion” better describes people’s attitude toward the financial markets. People who have worked hard to gather a little money would be investors if that were still possible. The industry promotes trading over investing in so many ways, people instinctively know that they are the sucker at the poker table.

  3. Tarkus says:

    Richard R is correct. The general populace has seen that the financial malfeasance of TBTF banks and Wall St is rewarded by regulators and the Justice Dept, not punished. Observing a huge 3-card Monte game on the sidewalk is no different – want to put your money there?

    It is blatant hypocrisy when they claim the banking system is built on “trust” (to prevent runs-on-banks) and yet they are perfectly willing to abandon the foundations that would build trust when it requires cleaning-up the system.

    People see it. They know it at least on a visceral level and that is enough. And they know who perpetrated the corporate raid on their pension and retirement funds.

  4. baychev says:

    “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”

    a bizarre statement: if people are indeed worried about public finances, why would they rush into public debt?
    maybe it simply exemplifies the stupidity of the crowd and the after effects of CB lending programs that only served to prop up asset prices to better position liquidation levels.

  5. VennData says:

    The obtuse-seemingly demand for ’09 bonuses is all you need to know about “the banking industry.” You asked “How could they?” Duh… they’re in it for the money, they don’t care “how it looks.”

    That they have been able to make themselves look like victims and make the Democrats look like the problem speaks worlds to the financial industry’s ability to trick and befuddle the populace.

    …It was Barney Frank! We couldn’t help ourselves, he made our foreign competitors do it in their countries too!

    …Obama’s the reason none of the investments we sold you panned out! How did we know the S&P would be up 75% under him!?

    That the gov’t had to put in place a “pay Czar” tells you everything you need to know about the artificial walls to rational, long-term, asset allocation (think Jack Bogle) that the mutual fund, hedge fund, and Wall Street tricksters and their Tea Partier financiers use… ask the Tea Partiers what’s wrong with asking the SEC to make brokers have a fiduciary obligation to their clients, as the new financial reform bill hopes to get the SEC to do.

    Speaking of Dodd-Frank (which you’ve been told to hate) …Now, these brilliant CEO’s tell us they can’t divide! …they don’t know their payroll doesn’t seem to bother anyone… imagine these over zealous regulators asking them to do long division! It’s impossible… “…with all the employees we have!” “…I don’t know what we pay guys in India, we don’t keep track of that!” “… How am I supposed to know what our payroll is?! I’m only the CEO!”

    “…new pay disclosure rules under the Dodd-Frank financial reform to publish the ratio of their pay to their average worker’s pay.”

    http://video.ft.com/v/599535237001/CEO-pay-exposure

    Hysterical. And this asshat from U. of Delaware, Charles Elson, and his “this is a political exposure.” What a tool, a stooge for the board-stuffing CEOs. I’d love watch his student ask him in class to explain the statistical basis for his “feelings” on the subject…

    http://www.ft.com/cms/s/0/93ff41de-b457-11df-8208-00144feabdc0.html

    …Students, rake this sucker over the coals.

  6. JustinTheSkeptic says:

    No one except Wall Street has the ability to pull a new product out of their ass at will to save their livelyhoods. Other workers work and hand their money over to you and you say bend over! Oh yea, I know that you guys are way out on the end of the bell curve – the bell curve of greed!