I am Quoted in Some Local SoCal Newspapers

This article on coping with the current market appeared in the Pasadena Star-News and the San Gabriel Valley News. Not exactly earthshaking advice in the quotes, but I thought I would post the link anyway.

The Fund Outflows Keep Coming

The mutual fund outflows for the first 2 weeks of October exceeded those of the entire month of September. And the money came out of stock AND bond funds indicating utter panic as the money basically is moving into cash equivalents, one step away from going under the mattress. My gut feeling at this point is that a significant market recovery around dow 10,000, s+P 500 around 1000)and/or a testing of the lows (around 8,000 on the dow,s+p500 around 850) will spark more outflows, flushing out most of the remaining "weak hands".

At that point there would be what is probably close to record amounts of cash on the sidelines, which when put back into the market by market chasing individual investors would lead to a significant market rally.

But please take this, like any other short term market forecast, with a massive amount of skepticism.

Actually This is A Good Sign

As the research of economists of the behavioral finance school have shown, individual investors are consistently very poor at timing the markets. Hence recent data on the behavior of mutual fund investors gives a glimmer of optimim amidst the barrage of bad news. And should certainly give hesitancy to anyone looking to liquidate their mutual fund portfolio.


Equity mutual fund outflows for the month of september were a bit under $50 billion compared to outflows of $75 billion in outflows for the first eight months of 2008, Outflows from international funds accounted for 58% of all stock fund outflows last week and 92% of all stock fund outflows last week.

This data on individual investors has proven over time to be a fairly reliable contrary indicator. Individual investors historically sell at the bottom and buy at the top.


BOSTON -- TrimTabs Investment Research on Tuesday reported that for the month of September through last Friday, stock mutual funds have seen outflows of $41 billion, while $22 billion have been redeemed from bond funds. The data don't include Monday's market sell-off. TrimTabs said the September fund flows through Sept. 26 compare with outflows from equity funds of $75 billion and inflows of $95 billion into bond funds for the eight months of 2008 through August 31. "Money is leaving the stock market and money market funds for the equivalent of the mattress, seeking safety in Treasurys and accounts in strong banks," said TrimTabs CEO Charles Biderman. "Individuals are scared and have no confidence in our system and whether our leaders know what they are doing. There is a huge amount of sideline cash that wants to return to the stock market. What's necessary for that to happen is a return of confidence in the system."

http://www.marketwatch.com/news/story/fund-investors-flee-during-september/story.aspx?guid={8679A4BF-31C3-4536-BFD6-696748550A58}&dist=hpmp

Stock Mutual Funds Saw $7.16 Billion Outflow Thursday-Wed - TrimTabs


NEW YORK -(Dow Jones)- Stock mutual funds saw an outflow of $7.16 billion during the week ended Wednesday, compared with an outflow of $6.33 billion during the previous week, according to TrimTabs Investment Research estimates.
For the week ended Wednesday, domestic funds saw an outflow of $3.29 billion, compared with an outflow of $492 million during the previous week. International stock funds saw an outflow of $3.87 billion, compared with an outflow of $5.84 billion during the previous week.
Separately, bond funds posted outflows of $8.14 billion, compared with outflows of $5.95 billion during the previous week. Hybrid funds, which mix stocks and bonds, posted outflows of $3.82 billion, compared with outflows of $ 2.26 billion during the previous week.