Mom and Pop Flee the Stock Market

Investors (mom and pop) have withdrawn a huge amount from the stock market in the week ending 8/26/2015 (Tuesday). ETF’s accounted for the lions share of outflows with over $15 billion leaving the markets, with mutual funds accounting for another $2.6 billion in outflows. There is no reason this should come as a surprise to anyone–we have seen this time and time again when markets start moving in nonsensical ways–and it will be years before many of these folks come back.

Today we had the same silliness as we have had for days as high frequency traders and other thieves and crooks ran the averages up and down—and up again.  None of this makes sense at all.  GDP was revised upward which should have shoved bond yields higher as the FED continues to load their gun for a rate hike–but it didn’t–bonds rose a bit instead.  Oil skyrocketed, which again should have moved interest rates higher–but it didn’t.  The fact of the matter is that traders (and/or their computers) are pushing not only stock prices around, but today the game playing extended into the interest rate complex and commodity markets

If it keeps up there will be a financial accident-just wait and see.

Today we gained back a reasonable share of earlier losses and all portfolios ticked up around 1/2 to 1%–this would be a nice, meaningful gain if we thought that markets were stable, but the fact is it could all evaporate in an instant.  We believe that the games of the past few days will likely be around for another week or 2 as it has probably been a highly profitable adventure for the players.

Today we had the most explosive gain in the MLP sector that we have seen in over a year.  The massive jump in crude sparked quite the rally–unfortunately a move in crude prices from $39 to $42/barrel is almost meanlingless in terms of saving any of the marginal MLP’s.  There are few fundamental reasons for oil prices to continue to move higher so we would expect them to move back down and take the MLP’s with it.

Again we wait and watch and see what kind of silliness Friday brings.