Why Are Investors Fleeing Equities? Hint
By tovarichpeter Follow Tue, 7 Aug 2012, 10:04am 925 views 10 comments
In South San Francisco CA 94080
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Baltimore, MD
Perhaps they would have made money if they had invested in dividend paying stocks instead.
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I heard the P/E ratios of the highest dividend paying stocks is sky high.
Looks like everybody jumped on that bandwagon.
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"Boomers can’t take risk. Gen X and Y believe in Facebook but not its stock. Gen Z has no money."
Goldman Sach's of the WS cannot exist or be nearly as large as they are if there is no risk to bet on or against. And with risk aversion that is so common today, they are dead in the water. They brought it onto themselves, all those abuses of the markets over years... they had it coming.
US can't continue unless we let the markets write off all the bad debt that is choking this nation. They should have let banks and institutions, as well as the housing market, fail. Recovery would be fast. Instead we have nothing but prolonged pain.
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San Leandro, CA
FortWayne says
"KICKIN THE CAN" is their romantic term.
Would you agree that Small investors KNOW that the gubmint is propping up the markets ?
Subliminally, those same small investors KNOW the market would fail as soon as gubmint quits. And they certainly don't trust gubmint.
As long as you have jumper cables you do not need a new battery to get the motor running, When the alternator fails, you are walkin !
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Madison, WI
They are moving over to indexed funds instead, the ETF's are all the rage because you get a basketful and I guess they are easy to jump in and out of. These might be one reason for so much activity at open/close since managed funds pull you in or out at end or beginning of the day. No expert, just what I've seen how mine were handled.
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47 male
Lafayette, CA
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This is a very odd thread. The stock market is the most democratic institution on the planet. When people flee equities, the price goes down. When people flock to equities, the price goes up.
The Dow is still above 13k so nobody is fleeing anything.
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There are a few reasons why the Dow is above 13k, like there is not much to flee to, certainly not with these interest rates, so big money has to put their money to work somewhere. However the Dow can stay high without the participation of individual investors. A lot of people have their money parked in funds/401Ks and the rest is done by the algos on low volume which can keep the market afloat without real demand. I would assume that there is no big flight from securities, but neither there is demand, there is disinterest and certainly distrust, so I think overall the small investor has been avoiding the market since the crash - "fleeing" is a bit hyperbole.
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For christ sakes. The stock market is something like 15 trillion dollars. Losing 200 billion in mutual funds. which are only 20% of the market, isn't exactly large scale fleeing. Why don't they look at individual stock holdings which is 40% of the market. That would give a lot better look at who is fleeing. Piss poor story.
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iwog says
In theory, yes, but not always in practice. In equities and housing, rising prices are seen as "good," and falling prices are seen as "bad," and politicians like to be seen on camera promoting the "good" and fighting the bad. So, just as the federal government props up housing prices (e.g. "helping homeowners" including "Operation Twist"), so too it props up equities (see Reagan's Executive Order 12631, commonly called the plunge protection team). The major investment banks have reorganized as bank holding companies, so they can borrow from the Fed at 0%. They buy equities, but it's a pre-emptive bailout: heads-they-win-tails-you-lose. You can flee equities into what, cash paying 0.5% APY thanks to Uncle Ben? Even if you do, the bankers can buy your shares with $ they borrowed from your government. If the shares go down, the banks default on the loan or get another bailout, while the bankers collect their bonuses either way. If inflation erodes your savings but raises the value of everything else, including shares, you lose they win. It isn't "democratic" with a small d, though it is perhaps new Democratic with a capital D, and Republican with a capital R, depending on which party offers the most bailout $ with the lowest tax rate.
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TMAC54 says
I think, and I may be wrong, that small investors don't really understand all the intricacies of the markets. I'm pretty sure large institutions are aware of it, after all they are the once benefiting the most.
So it's hard to tell where it will all go. But asset inflation cannot be sustained, many markets already priced buyers out which means those markets are going for a fall.