Doug Henwood wrote:
> John Mage wrote:
>
> >http://www.nytimes.com/2001/04/08/business/08LEDE.html
> >
> >in the middle of the piece ["The Rainy Day Is Here. Now What Do We Do?"
> >By Danny Hakim] there's this:
> >
> >....When the bears roar, investor sentiment suffers. Stock funds
> >experienced net withdrawals of $3.1 billion in February, according to
> >the Investment Company Institute, the fund industry's principal trade
> >group. That made February the first month of net withdrawals from stock
> >funds since August 1998, when investors were frightened by the
> >near-collapse of Long-Term Capital Management, a multibillion-dollar
> >hedge fund. Stock funds suffered another $9.7 billion of net withdrawals
> >in March, according to a projection from AMG Data Services....
> >
> >hadn't seen this before (proves nothing, i'm not following this stuff
> >that closely) & at least the trend seems significant to me, but i've
> >lost track of whether numbers like this are submicroscopic. doug?
>
> Between 1996 and 2000, U.S. households put about $1 trillion into
> mutual funds, according to the Fed's flow of funds data. So it'd take
> about 8 years at March's rate to reverse that. It's not impossible
> that a long bear market could do that. Over the last 5 years, HH
> purchases of mutual funds equaled about 3.5% of after-tax income,
> over 10 times the levels of the 1950s and 1960s. In the 1970s, HHs
> sold mutual funds on balance (-0.1% of after-tax income in the 1970s).
>
> An odd thing in the FoF stats is that HHs have been relentless
> sellers of directly owned stocks since 1959 - every year except 1975
> and 1976 (the years after the worst bear market since the 1930s). The
> selling stepped up over the late 1990s - $1.8 trillion of it from
> 1996 to 2000 - just as mutual fund purchases rose. Rich people are
> more likely to own shares directly, and less rich people are more
> likely to own mutual funds. Maybe the selling from the 1960s through
> the mid-90s is just a data quirk (the household number is a residual:
> everything that can't be attributed to institutions, like mutual
> funds and banks, is attributed to households, but no direct household
> numbers exist). Or maybe rich people have been professionalizing
> their money instead of managing it themselves. But the acceleration
> in their selling, just as mutual fund buying was picking up looks
> like what Wall Street technical analysts call distribution, when
> smart money sells to dumb. If this is a bear market, and bear markets
> are time when money returns to its rightful owners ("like the
> Rockefellers," as small traders say), then maybe the rightful owners
> can buy cheaply in a few years, just like 1975 and 1976.
>
> Doug
--
Michael Perelman Economics Department California State University Chico, CA 95929
Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu