This morning, I want to direct your attention to a Bloomberg News article titled “Individuals Pile Into Stocks as Pros Say Bull Is Spent..” It is a worthwhile read, but a bit of context is required.

The article notes that Main Street and Wall Street are allocating money in diametrically opposed ways:

“Individual investors are plowing money back into the U.S. stock market just as professional strategists say gains for this year are over. About $100 billion has been added to equity mutual funds and exchange-traded funds in the past year, 10 times more than the previous 12 months, according to data compiled by Bloomberg and the Investment Company Institute.”

At the same time, various big-name forecasters are predicting the “stock market will be stagnant.” They further observe “valuations are at four-year highs.”

Individuals pile into equities while the pros pull out? The knee-jerk response is to run for the hills, or Treasuries, or whatever your favored disaster trade might be.

Unfortunately, it is never quite that simple. A little bit of context explains why neither of these indicators is of much significance.

Continues here



Category: Investing, UnGuru

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.

2 Responses to “Context Required: Mom & Pop vs Professional Investors”

  1. orsogrigio says:

    Interesting (as usual) article. But, every time I read such articles, I always miss one thing: WHAT is a share ? are people buying/selling little brightly colored shells (or tulip bulbs) ? Lets make the ‘Martian experiment’ now [the Martian experiment is a nice trick I have been thought many, many years ago by my Professor at University: let's imagine a Martian, an extraterrestrial individual, reads the article. This Martian knows perfectly our language, has logic and scientific knowledge, but, of course, is not deep in out fashions and pre-digested 'ideas', or common sense] He can read the whole article (or ANY article about this subject), and not have ANY idea of why the ‘stocks’ have a price going frantically up and down, so he HAS to come to the conclusion that those stocks are useless things like colorful little shells, used as tokens in a large, obscure, game. This will put in his mind stock exchanges together with bingo, lottery, card games and Monopoly, and why not, places called casinos. There is no logical difference one can find out, and so if there is no difference between two things, our Martian comes to the conclusion that are the same thing. Now, it is likely that Mom & Pop, at least some times, reason like our extraterrestrial guest, but, going at Wal Mart know that Coke is not a colorful tiny shell, is a PRODUCT, and thus the KO token has some VALUE … and try to buy values … and thus do better than many (or, imho, most) pros, who are still playing with tiny, colorful shells. Funny, isn’t it?

  2. HydMan says:

    Barry, can you clarify something for me? I have seen several articles comparing institutional investors and private investors (i.e. mom and pop). How can you distinguish between the two? I have an IRA with Fidelity and a 401K with Vanguard. I direct my money thru these institutions into various funds that they provide. When I move my money from an equity fund to a bond fund, does this count as an institutional move or a private investor?