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August 22, 2010 – Comments (15)

From the NYTimes - here are the domestic flows of cash into and out of equities and bonds over the last twenty-five years for small investors.  In 2008 was the peak of money flows out of equities, and in 2009 was the peak year for money flowing into bonds.  When you look at the current year of 2010, we small investors are still net pulling money out of equities.  And our bond purchasing is still really darn high (about half of 2009).  

What does this mean?  It means among small investors, the attitude is predominantly still quite bearish.  It makes sense to me - the media is highly bearish and has been skeptical about the rally since march 2009.  The poor employment picture has made plenty of bad news for small investors.

On the large scale though - what we've been seeing is continued growth in China, a resurgence of the manufacturing and exports industry over the last year, a stabilized banking system - with quite large profits from the low interest rates, low inflation, and a buildup of corporate cash (now leading to mergers and aquisitions).  We've got an IPO of GM coming up, and probably many more.

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The crowd is still scared - therefore I think equities are still running at sale prices right now.

What is fair price?  I think it happens for many stocks above S&P 1200 levels.  

-Rof

15 Comments – Post Your Own

#1) On August 22, 2010 at 2:29 PM, rd80 (98.07) wrote:

I would challenge the NYT caption of  "the relative safety of bonds."

'tis my humble opinion that high quality dividend growth stocks are a safer investment than long bonds at current prices.

 

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#2) On August 22, 2010 at 2:56 PM, dragonLZ (99.43) wrote:

I think it has begun in March of 2009 (but a lot of people don't know it yet).

A couple, three years from now (when it becomes obvious that double dip ain't gonna happen), 99% of retail investors will once again be wondering how did they miss it.

Remeber, we had a chance of buying F at $1, LVS at $2, BAC at $3, GE at $6, HOG at $8,... (these are not some small stocks you had to be an expert to know and find)...

It's the same every single time.

When the fear strikes, it's so esy to not see the obvious. When the fear is gone, we kick ourselves for not being able to see it (and promise ourselves, once again, "next time we'll be smarter than that")...  

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#3) On August 22, 2010 at 3:01 PM, portefeuille (99.65) wrote:

#2 exactly.

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#4) On August 22, 2010 at 3:04 PM, portefeuille (99.65) wrote:

exactly

well said.

 

I hate "exactly".

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#5) On August 22, 2010 at 3:07 PM, MegaEurope (21.81) wrote:

I think there may be a long term trend for small investors away from mutual funds towards individual stocks and ETFs.  That would have the effect of exaggerating the importance of domestic equity fund outflows.

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#6) On August 22, 2010 at 3:07 PM, portefeuille (99.65) wrote:

#2 One thing people will hate themselves for is not owning EMC shares or call options on the day someone will buy EMC or VMware oe both or on the day EMC says it will distribute the VMW shares it owns to the EMC shareholders. I am pretty sure that one of those things will happen in the next few weeks. Just a feeling of course ...

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#7) On August 22, 2010 at 3:09 PM, portefeuille (99.65) wrote:

oe

or

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#8) On August 22, 2010 at 3:12 PM, dragonLZ (99.43) wrote:

Since March of 2009,

F is up 500%

 

LVS is up 1400% (No, that's not a typo)

 

BAC is up almost 300%, HOG 200%.

IMO, people waiting to buy these stocks at their March 2009 prices might have to wait for a while... 

 

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#9) On August 22, 2010 at 3:23 PM, dragonLZ (99.43) wrote:

#6 I don't follow EMC and/or VMW so I have no choice but to believe you. 

p.s.

I'm glad we share the same opinion about this market.

p.s.2

I hate that Wolfsburg lost to Bayern...

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#10) On August 22, 2010 at 3:25 PM, portefeuille (99.65) wrote:

IMO, people waiting to buy these stocks at their March 2009 prices might have to wait for a while...

people can be extremly "stubborn" ...

http://caps.fool.com/Ticker/LVS/Scorecard.aspx?pagenum=1&filter=1&pageSize=99&sortcol=32&sortdir=0

http://caps.fool.com/Ticker/F/Scorecard.aspx?pagenum=1&filter=1&pageSize=99&sortcol=32&sortdir=0

http://caps.fool.com/Ticker/BAC/Scorecard.aspx?pagenum=1&filter=1&pageSize=99&sortcol=32&sortdir=0

http://caps.fool.com/Ticker/VMW/Scorecard.aspx?pagenum=1&filter=1&pageSize=99&sortcol=32&sortdir=0

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#11) On August 22, 2010 at 3:47 PM, dragonLZ (99.43) wrote:

people can be extremly "stubborn" ...

I'm not gonna comment on that...(as I'm sure I'll be on the "stubborn list" at some point too)...

However, for right now, I'm glad this was my pitch for my LVS call. It goes with what I said in #2... :)

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#12) On August 22, 2010 at 5:39 PM, whereaminow (26.32) wrote:

people can be extremly "stubborn" ...

Kind of like the people that keep referring to gold as a silly yellow metal.

Equity rallies created by credit expansion can be quite volatile.  Google: "The best performing stock market in the world in 2007"

Normally I don't pay much attention to what's printed on the regime's typewriter, but in this case, I will speculate:

A stock market dip is staggering.  The banks/Fed know this and want use that opportunity to purchase some cheap assets.  Then another round of liquidity is shoved down our throats, pushing equities way up.  As the suckers move in when the market pushes higher, the banks unload, and we do the dance again.

As Jim Rogers says, the Dow can go to 1,000,000 if you print enough super tokens (frn's)

David in Qatar

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#13) On August 22, 2010 at 5:55 PM, portefeuille (99.65) wrote:

silly yellow metal

or stupid shiny metal ...

(I even own 1oz, still stupid ...)

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#14) On August 22, 2010 at 5:57 PM, portefeuille (99.65) wrote:

Why can't all the goldbugs be like camistocks. Somehow you are always left with the annoying ones ...

(just joking)

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#15) On August 22, 2010 at 6:31 PM, whereaminow (26.32) wrote:

to be offended by you would be a low point in anyone's self esteem.

(just kidding)

David in Qatar

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