Disappearing act
Investors withdrew a staggering $33.12 billion from domestic stock market mutual funds in the first seven months of this year, according to the Investment Company Institute, the mutual fund industry trade group. Now many are choosing investments they deem safer, like bonds.
The story goes on to say that many times people remove money and then start to re-invest when the economy starts to turn around. They say this has only happened one time before...
“At this stage in the economic cycle, $10 to $20 billion would normally be flowing into domestic equity funds” rather than the billions that are flowing out, said Brian K. Reid, chief economist of the investment institute. He added, “This is very unusual.”
It may take many years before it is clear whether this becomes a long-term shift in psychology. After technology and dot-com shares crashed in the early 2000s, for example, investors were quick to re-enter the stock market. Yet bigger economic calamities like the Great Depression affected people’s attitudes toward money for decades.
Some of this can be attributed to the bad economy and people hitting their 401k's to make up for lost income. Personally, I think that the stock market is nothing but a giant trading card scheme. Replace the word stocks with comic books, or sports cards, or Beanie Babies, and you have about the same thing. Back when Companies paid dividends (some still do) stocks were a good investment, now, you might as well be trading and call it your Fantasy money football team.
posted by davis14633 at 07:57
1 Comments:
I have concluded in my mind that stocks have become much more of a way for the fortune 100 or 500 C-suite people to fund their huge compensation packages rather than efficient capital funding mechanisms. This is generally an ivy league group of Martha's Vineyards vacationing elites that bring little more value to these big companies than someone making $150k could, but they steal shareholder value while living grand lives and supporting their neighbors, the politicians, who do likewise for them. Consider the BP idiot and his perspective on the "little people", and his arrogant and inept ability to even remotely market an effective damage control spin on the oil spill. With all the resources he had to get experts to help him spin it, and he was still to arrogant and stupid to do the job effectively. While our corrupt government can screw bondholders, as they did to GM or Chrysler's or both, generally bonds place more limits on the thieves, and I will move my money there when bond rates come back to reasonable representations of long-term risk. Our government is currently keeping the rates artificially too low through poor or corrupt monetary policy.
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