Yawnnnnnnnn … I’m sorry, what did you say? The DIJA is down over 200. Investors are panicking about Europe. You woke me up for that? C’mon, don’t you know this is the new norm? Big gains, big losses is the way things are now …
Way back in my sailing and diving days, one of the great fears was getting caught in a strong current when diving for our daily ration of fish food. It happened to me once, and I must admit, I was really scared. It took all my strength to fight through that current, to break free from its powerful grip enough that I could get back to the boat. Personally, I don’t feel that sense of fear about Europe, but it is clear the market seems to feel it. One moment it is out and about looking for slow moving lobster on the sea floor, and the next it is fighting hard to keep from getting swept away in a strong current …
Rhetoric alone won’t be enough to appease investors’ nervousness, particularly given credit and secondary bond market prices are implying the near certainty of a Greek default that goes well beyond the scope of the private sector involvement plan already under way.
Apparently, the weekend of meetings between European financial bigwigs did little to assuage the fear this week, the same fear that seemingly dissipated last week. Didn’t the S&P 500 gain almost 5% last week? I guess it makes some sense to book profit after such a strong week, but the big-money investors must be binding themselves into chairs to keep from buying a market that is so cheap on a valuation basis.
Equity valuations may be cheap but stocks could cheapen further still given there is no sign of an end to the euro zone debt crisis and a Reuters global poll shows an increase in the perceived risk of recession in developed countries.
Yeh, in my eyes, the valuation looks very similar to the slow moving lobster we used to hunt, and it looks to me all investors are, as we were, very aware of the lurking current that could sweep you away …
Investors have pulled more money from U.S. equity funds since the end of April than in the five months after the collapse of Lehman Brothers Holdings Inc., adding to the $2.1 trillion rout in American stocks. About $75 billion was withdrawn from funds that focus on shares during the past four months. Outflows totaled $72.8 billion from October 2008 through February 2009, following Lehman’s bankruptcy, the data show.
Putting aside the $75 billion withdrawal from the retail fund investors, the more important issue is the $2.1 trillion sitting on the sideline. As any good bull will tell you, this is money just waiting to get back into the market. Keep in mind, the last time equity fund outflows exceeded $40 billion during a four-month period was in August 2010. Remember what happened last fall? Yeh, keep your eye on the sea floor, the strong current is way over there …
Trade in the day – Invest in your life …
