I'm sure you have heard about the net outflows from mom and pop investor in 2009 and how this is supposed to be a bad thing because it shows a lack of confidence by investors...I've argued the opposite...that this behavior by mom and pop investor is actually bullish. History shows when they fade the market like this it sends a strong contrarian signal re-enforcing the trend in place. Why? Because they are the dumb money. They often make decisions using rear view mirror statistics and emotions.
Check out this expert from an article I read
There was no gain at all, absolutely zilch, from net new sales. And this was during a year when all the North American stock markets posted gains in excess of 20%. If no one is buying your product under those conditions, you've got trouble.
The bear market caused a lot of people to rethink their entire investment approach and mutual funds suffered as a result. When interest rates start to move back up, which they will eventually, we could see a lot of money flowing from mutual funds into GICs unless the industry begins to seriously address its problems.
This article was written about 6 days ago...did I say days? Sorry...I meant years! But if I did say 6 days ago it would have been true as well wouldn't it?
And guess what? Eventually the retail investor DID return and as usuall, did so only after it was painfully obvious the economy had truly turned around and the bear market of 2000-2002 was really over....just in time for the next bear market! Poor suckers.
Given that they've been burned big time twice now in such a short period of time, it's probably going to take even longer for moms and pops to feel confident again about stocks especially when the economy is still not creating jobs yet. Don't buy into the "retiring baby boomers don't want stocks anymore" argument as an explanation as to why they've been shying away. When you retire you still have another 20+ years of living to do which gives you the time frame you need to have equities as part of your portfolio especially when the alternative GICs and bonds offer terrible competition. No...the main reason people have been selling into the rally is fear and disgust....but eventually greed will get them...it always has. It could take 1,2,3 or more years but it WILL happen mark my words.
As far as the market goes....I gotta tell you, it's amazing how the higher it goes the angrier and bolder the losers and bag holders get. You would figure that after taking such a beating the losers would show some humility...but no...it's just the opposite! Just look at the Yahoo boards....what a joke!
I noticed Alcoa reported and is down after hours. All this is likely to do is keep the hopes of these jokers alive and the prevent the TRUE bear capitulation that I believe the market needs before any correction of significance can occur but one by one they are giving up. Check out this post I just read
Yes I've lost money shorting this market
but I swear I will never touch this market again.
I don't beleive this is a free market.
I don't beleive the numbers the telling us.
I don't beleive any of the volume telling us there is real buying but this thing still going up every day.
I am done with this game forever.
The hell with the money I lost. It hurt me to know I am right but still be wrong.
GL to all of you.
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