Click to enlarge:

Source: Bianco Research

Despite the recent Goldman Sachs decree that this is the best possible time to be buying equities (Calling All Muppets), the public is not participating.

There are lots of folks who are critiquing the Goldie call, but no one quite mocks the Über bullish gestalt quite like Zero Hedge:

“Goldman screams it is a generational buy, Larry Fink goes all in stocks, Notorious BIGGS is 90% long, anchors on comedy-financial fusion channels are channeling the producer in their earpiece and screaming at the teleprompter to “sell bonds and buy stocks”, even as stocks are at their highest in nearly 5 years and… what happens? In the latest week, ICI just reported that domestic equity retail funds just saw another $2.9 billion outflow, the 4th consecutive in a row, and the 23 of out 27 outflows during the entire parabolic blow off top phase the market has undergone since October, and instead put another $9 billion in fixed income funds “soaring” yields be damned.

What does this mean? Probably that the stock ramp is about to get uber-parabolic for the simple reason that this is the only thing left in the status quo’s arsenal – to keep doing the same old same old, hoping for a different outcome, because this time it’s different. Only this time the dumb money either doesn’t have the cash to burn, or just doesn’t want to participate in a rigged, corrupt, centrally-planned market. Whatever the case, the Primary Dealers and the Fed will just have to keep hoping more central banks pull a Bank of Israel and sell the hot grenade axes to them, since Joe Sixpack is done being the “dumb money.”

-“Dumb Money” Refuses To Be The Dumb Money For Yet Another Week

Josh blames ETFs for killing the mutual fund — that might be a factor as well . . .

Category: Investing, Psychology

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.

34 Responses to “The Public Is Still Not Buying Equity Mutual Funds”

  1. VennData says:

    ZH, with a Romney-esque touch for the common mind claims, “Joe Sixpack is done being the “dumb money.”

    Well, we’ll see, won’t we.

    My bet is that Joe’s still dumb (and loading up on bonds)

  2. theexpertisin says:

    Fool me once, shame on you.
    Fool me twice, shame on me.

    Can’t blame the retail investor for evidently heeding this old chestnut advice.

  3. albnyc says:

    Stupid citizenry. Must be put buying guns and butter.

  4. albnyc says:


  5. [...] Americans are not exactly pouring money into equity mutual funds.  (Big Picture) [...]

  6. obsvr-1 says:

    @VennData My bet is that Joe’s still dumb (and loading up on bonds)

    Joes’s loading up on beer, and with the price inflation has nothing left to invest …

  7. jaymaster says:

    ETF’s have certainly done it for me. Since I figured them out a couple years ago, I moved everything I had in MF’s into ETF’s. The only place I’m still buying MF’s is in my 401k, where I don’t have a choice.

  8. AHodge says:

    its understandable to not play in the casino
    far far from investment
    the markets are now
    as long as they dont get stupid and play after a year or two of higher
    many will….

  9. [...] Barry posted charts from Bianco Research showing the Net New Cash Flows into a variety of Equity Mutual Funds: Domestic, World, Hybrid and the combination of all of them.  Individual Investors still aren’t buying. (Check out the data at The Big Picture) [...]

  10. ashpelham2 says:

    I see a lot of bond buying going on, and I’m a proponent of it. But be warned, one of the last investments for perceived “safety” is getting too much money and getting too heavy. We are bound to have an interest rate shock at some point, just decimating all of these boomers who have moved to fixed.

    Meanwhile, equities, the very evil that burnt us last time, just keep gliding up, up, up. Retail investors just never will understand that all investments have a timetable on them. Nothing is just buy and hold.

  11. “…Josh blames ETFs for killing the mutual fund…”

    no doubt, ‘something’ should.

    as We know, most (the vast majority of) MutFunds should, not only, be ‘Hung in Effigy’, but, also be ‘Taken out Back and ____’. (be well worth the U$D 0.75 expenditure..might be the ‘Best Investment’ J&J 4-Pack ever make..)

  12. mad97123 says:

    You have to like Goldie’s Muppet logic – bond yields are so low that bond are a bad investment, but stock yields are a fraction higher (read bad investment), so make that bad investment instead. The minute the Muppets act on that advice, bond yields will move up, and stock yields will move down due to higher stock prices relative to dividends. Then the reverse is true and bonds look good relative stocks in the blink of an eye.

    If Japan or the 1930s are any indication, there is little risk of a V shaped reversal in bond yields any time soon.

  13. Francisco Bandres de Abarca says:

    What percentage of retail financial advisers invest their clients in front-loaded mutual funds for the commission these days? How many retail investors would tolerate such a recommendation?

    I would presume that most fee-based financial advisers are migrating to ETFs, or recommend from their own screens (less likely), unless an actively managed mutual fund clearly outperforms for a certain asset class, and will likely continue to do so.

  14. gloeschi says:

    Remember when the Muppetry issued an S&P 500 target of 1,150 for the first half of 2012?

  15. mad97123 says:

    Here is an article on the other main rationale we hear day in and day out for why this is a generational opportunity to buy – all the money on the sidelines…

  16. Moopheus says:

    Maybe people are finally getting the clue that Wall Street is designed to move money in one direction–out of your pocket and into theirs. Maybe not, but who knows. Back in the day when mobsters ran the casinos, they at least gave you free drinks and a decent floor show while they were picking your pocket. Now we have Jim Cramer.

  17. mad97123 says:

    gloeschi, remember this May 2011 call?

    Goldman Sachs Lowers Year-End 2011 S&P 500 Forecast to 1,450

    We’re almost there now. Only problem with this call back in May was we saw 1075 first. In the end this just allows the cheerleaders to use impressive percentages about how far we’ve come off the lows, as if recovering from a crash is strength and a good reason to buy now much higher.

  18. glengarry says:

    I agree with most of what’s being written, but the hard question is “what is Joe supposed to do now”? A friend, smart and well-educated, but unsophisticated in investing and too busy to learn, told me that her FA recommended that she buy some front-end loaded mutual funds. Of course, I told her why not and warned her off bond funds. But when she asked me what she should do, what do I tell her? I’m not taking on that responsibility. She’s thinking Vanguard index funds.

  19. Rube says:

    mad97123,.. I’m with you. The idea that bond yields are about to explode is likely wrong. They may be turning and they may not. The spike in the ten year may just be noise.

    Yields may even go nominally negative. They have already changed the selling prices to allow for this.

    That would sure drive the bond vigilantes crazy.

    Not to mention blowing the bond bubble even bigger.

    There’s still this notion that the bond market is “always” right.

    It’s true, until it’s not.

  20. Just have an exit plan before ever entering.

  21. Rube says:



    ” Of course, I told her why not and warned her off bond funds. But when she asked me what she should do, what do I tell her? I’m not taking on that responsibility. She’s thinking Vanguard index funds.”

    I’ve learned the hard way not to give any specific advice. That never goes well. Just try telling someone that due to a stock split they are ahead when they are convinced they have lost money,..

    Here’s what you can say. Everything is rigged, Wall Street is in business to fleece you and they are really good at it. Nevertheless,.. the tax code favors capital gains,… so if you “can” make them it’s easier and less taxed than working.

  22. crunched says:

    Gee, I wonder why not. Buying at the top of a three year cyclical bull within a secular bear market sounds like a great idea.

    At least all the overlords of the trade-bots that pushed up to these nose-bleed levels are getting rich.

  23. crunched says:

    By the way, anyone holding recently bought Calls would be wise to sell. This market will go nowhere to down between now and Monday.

  24. dead hobo says:

    BR chided:

    Despite the recent Goldman Sachs decree that this is the best possible time to be buying equities (Calling All Muppets), the public is not participating.

    I like mutual funds if they are actively managed and have a good history. It must also have a short minimum holding period. I don’t like ETFs because they are fixed in selection. I still like to buy and hold for a while. Trading individual stocks is for idealists and those who BELIEVE, or simply hope. Or quick traders.

    I fail to understand the implication and tone of this piece. I don’t see the urgency. If the public MUST BUY NOW or the whole idea is a fail, then that looks a little like missing the point of investing, or advising all who are out of the market to stay out for their own good, or sanctifying the need for a good fee driven asset manager.

    I see world markets at or near a bottom in the aggregate. If commodity speculation gets fixed and replaced by a true reflection of supply and demand, then GS’s prediction is on point. Short of another liquidity crisis from the EU or the like, the long term trend is up, just not all at once.

    The public will get around to investing again when it looks less crooked at the margins. Since it is reasonably crooked, at least with respect to commodities and the corrupt regulators who oversee this trade, the uptrend will be slow for a long while.

  25. glengarry,

    w/ ‘your Friend’, that is..”…unsophisticated in investing and too busy to learn…”

    tell her to WTFU, and “Remember the Fundamentals.”

    think..”What else do ‘We’ do, before ‘understanding’ “How to do it?””

    LSS: tell her..”Don’t.”

  26. Concerned Neighbour says:

    Beyond the fact that central banks have destroyed price discovery, bank financial statements are largely made up, the average person is still struggling to get by during this “recovery” and has no money to “invest” in Bernanke’s rocket ship to the moon, and the market is now trading within spitting distance of all time bubble highs despite high underlying risks (even according to the central banks), I can’t fathom why the retail investor is shying away from equities.

    I also can’t stand the logic that if one crappy investment is marginally better than another crappy investment, then the latter crappy investment is in fact a good investment. They’re both still crappy in my books. Bernanke and co. have created a situation where you either contribute in the great bubble blowing effort, or earn negative real interest rates.

  27. mad97123 says:

    Jeremy Grantham, John Hussman, Robert Shiller, and many other good, reasonable, data driven forecasters see no real stock gains for the next 7-10 years.

    Who am I going to listen, to these reasonable guys, or the Muppeteers?

    Robert Shiller Sees S&P 500 At 1,430 In Year 2020!

  28. cognos says:


    I think they said we were all BANKRUPT 3 years ago… “toxic assets”, “muni defaults”, “SPX going to 500″.


    Mad97123 – Those guys (Hussman, Grantham, etc.) have pretty lousy performance. Why would you listen to them?

    Its funny… bc you guys think “sheep” or “muppets” get dragged into equity markets now. I think – hunting the bubble (big move up, early) – is the key to good investing. And you all will join 5 years from now, when prices are 2-3x.

    Cashflow looks excellent. World econ growth is under appreciated. Multiples are fairly low… and we’re just starting to add jobs in the US. = ?

    Buy, buy, buy.

  29. mad97123 says:


    I follow them because they have been proven very accurate on a long-term basis. We’re talking about a “generational buy” call from Goldie, not where the market will be next week.

    Hussman has missed the post-crash rally, but even given that, his performance is almost double the S&P since his funds inception in 2000. I guess 2x buy and hold is not good in your book.

    Shiller’s CAPE model’s has a 95% statistical confidence level for predictive value, not good enough for you?

    GMO manages $100 billion in assets because the have poor performance?

  30. ComradeAnon says:

    Maybe a few people have finally learned that a bird in the hand is worth two in the bush.

  31. neddyj says:

    i’m currently a stock bear, and have been for too long – but i think turning bullish now would be foolish. i think the weak stomached investors got out of the market a while ago (08 and 09), and the buyers have pushed prices up simply as a function of fewer sellers. this is why volume has been anemic this whole run, and why this is a cyclical and not a secular bull market. i’m not an idiot – of course i wish i had been in for the last 2000 points, but if i had been – i’d hope that i’d have the sense to get out now. strong headwinds are coming to our markets, the current selloff in many commodities as well as weakness in the currencies of resource rich countries (australia, canada) is a bad omen for stocks. china’s market has been sick for a while now and has somehow stayed under the radar because of all of the focus on europe. the slowdown numbers in china look real, and while our markets can try to thumb their nose at weak european numbers – a slowdown in china will be a splash of cold water on this equity rally.

    i’m somewhat of a bond bear too. i don’t think rates will zoom higher, but they’ll probably creep higher over time.

    by the way, has anyone noticed how much higher yields are now than when the fed began ‘operation twist’ bond purchases in september? i think they lost the stronghold they had on the bond market. in fact, while i applaud bernanke’s creativity to save the financial system from disaster in 2008 – i think that since then this has all been a science experiment. bernanke is a bright kid, but even he doesn’t know what some of the side effects will be of the various fed policies.

    finally, i must say that my contrarian play right now is cash. i know we have some inflation right now, but we’ve also had some flashes of deflation – and it’s not too late for things to go down that nasty road. i understand that my purchasing power may be at risk – but i’d rather not tie my money up in a long term bond, and definitely not in a stock market that is high on drugs.

    i hope i’m wrong about the dismal landscape i see for the primary two investment asset classes – and i definitely hope this recovery is for real. but as they say, hope is not an investment strategy.

  32. gman says:

    Not only are equity mutual funds suffering outflow, on many recent time frames so are the big equity etfs! SPY and EFA are NOT the recipient of that money. The big inflow are into bonds, gold and VOLATILITY ETFS!

    That tells me this rally has MUCH longer to run. The dummies and the “smart” people both hate this market. Who is left to be the panic induced seller?

  33. MarcG says:

    Wow! This is the first time I ever see ZH calling a market top. Time to sell everything.

  34. [...] of time thinking about what could go wrong. Yesterday, we  discussed how mom and pop are still not buying equity mutual funds. The day before, we trotted out SocGen’s chart showing markets are not cheap, by way of [...]