Bloomberg Writes: Stock Funds Lure Most Cash in 13 Years as Market Rallies
Investors are pouring more money into stock mutual funds in the U.S. than they have in 13 years, attracted by a market near record highs and stung by bond losses that would deepen if interest rates keep rising.
“The timing of retail investors tends to be terrible,” said Jonathan Pond, an independent financial adviser in Newton, Massachusetts, who oversees $200 million. The deposits may be a contrarian indicator of a market near a top, he said.
Jeremy Grantham, chief investment strategist at Boston-based money manager Grantham Mayo Van Otterloo & Co., told clients in a letter this week, “We will have the third in the series of serious market busts since 1999.” BlackRock Inc. Chief Executive Officer Laurence D. Fink said this month that stocks may decline as much as 15 percent because of political risks in China, Japan, France and the U.S.
As the melt up in the stock market continues, retail investors are the last ones to join the party. As always. As the article indicates, last time we had similar inflows was at the end of 1999 and early 2000 or right before the tech collapse and the subsequent recession.
I would go even further and suggest that today’s investor psychological backdrop is identical to that of 2000 top. For example, even though multiple high performing investors did spot the technology bubble and have tried to warn the others, for the most part they were completely ignored until it was too late. It was the “NEW” economy the old guard did not understand. Today’s environment is identical, except one fact. Instead of it being the NEW economy, today most markets participants believe that the FED can control the economy and its interest rates. That is of course a mirage that they will pay for dearly. Overall, the bullish sentiment is off the charts. As always, retail investors will lose the most as soon as the bear market kicks in.
As I have stated so many times before, the bear market will start in March of 2014 and will take 3 years to complete. While it will not be a violent move to the downside, it will shave off about 30-50% from today’s market prices over the next few years. You have been warned.
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