Have you heard about the hot new "thang"? Yep… it's selling like bonkers among the newly cautious American investor.
They call it the "savings and/or checking account". Gonna go out and find me one – sounds enticing.
- Investors have been running from stocks and even bonds as fast as their feet can take them, putting their cash instead in accounts that earn practically nothing but provide shelter from turbulent times.
- Over the first 11 months of 2011, plain-vanilla savings and checking accounts attracted eight times the money as stock and bond mutual and exchange-traded funds, according to data from market research firm TrimTabs.
- The pace accelerated to nearly 13 times from September to November, the most recent month for which data is available.
- "The real money these days is going straight under the mattress," said TrimTabs CEO Charles Biderman. "The Fed is doing almost everything in its power to entice investors to speculate in overpriced asset markets. Yet investors — particularly on the retail side — are mostly refusing to take the bait."
Oh Charles, you do make my heart flutter when you talk in such terms about Helicopter Ben.
- Most recently, investors took $9.35 billion out of equity funds — including more than $7 billion of U.S.-based funds — for the week ended Jan. 4. Stock-based funds haven't had a winning month since April of 2011, and cash in mutual funds is just over $2.7 trillion, the highest level since June 22.
As I've written since 2008, from anecdotal experience, I believe those in the 50 and up set now for the most part simply want return of capital versus return on capital. They have lived thru 2 massive bear markets, and a real estate bust in between – one could point the finger at the Fed as the source for much of those imbalances.
As for their kids? Well many are just glad to have a job. Many of those that do work don't make much extra to actually invest… plus our last President has told us we should use that money for shopping … or the terrorists have won. But more seriously, when people of a certain age (such as mine) have lived through almost nothing but turmoil and pain in the market (going on 12 years)… and see how the market has treated their parents, they are apt to get mighty conservative.
- "Investors are very skittish. The last decade has really eroded American optimism," said David Kelly, chief market strategist at JPMorgan Funds.
A lot of this is parallel to experiences we saw in the Great Depression.
On a side note – the laws of supply and demand have somehow been refuted by "some power" – this market has had multiple huge rallies since early 2009, despite massive outflows of monies. I will have to figure out how that works as my Econ 101 book seems to argue differently.
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund's holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog