Tuesday, September 7, 2021

The Retail Tail: Bull Or Bear?

 Axiom: individual “retail” investors pile heavily into stocks at the tail end of a bull market, signaling it’s time to sell and go fishing.

Here are two charts from the Financial Times showing retail investors buying heavily this summer.  Monthly retail inflows averaged around $5 billion until March 2021, but have since ballooned  to $10-15 billion per month. Annual inflows to August 2021 have already reached all time record levels, even though we still have another 4 months to go until the year is over.



You may expect that accelerating inflows would result in accelerating prices, but they haven’t . The S&P 500 index soared 190% from March 2020 to April 2021, but only 6% since then. Looking at it in monthly terms, that’s an average of only 1.2% per month now, versus 15% per month before - even though retail inflows have expanded greatly. See chart below.


It is obvious that heavy retail demand is being met with significant supply from elsewhere, very likely “smart” institutional money that are reducing positions, “dumping” them onto Johnny-come-lately retail speculators. The pace of IPOs has also accelerated, supplying the market with fresh “merchandise”, often of dubious quality.

So, beware the tail you end up holding because it may very well be the bear’s.


Beware The Retail Tail



26 comments:

  1. the real joke will happen if the stock market crashes and the Fed prints even more... =)

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    1. If it does so, my expectation is that it will be pushing on a string. This is not so much a credit craze bubble like in 2007-10 but a crazy valuation bubble. It has much more in common with Tulipmania and the dotcom bubble than anything else.

      …. and P.S. the Fed’s own reverse repo is already bursting at the seams at $1.074 trillion. If a crash happens I’m betting it will soar even higher as investors search desperately for any safe have.

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    2. They may end up buying the stocks themselves.... sounds mad... but Japan has been doing it for some time.

      I think the root question lies in answering why the Fed so enthusiastic about avoiding any correction? And the answer cannot be the Fed chair is an idiot. =)

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    3. The Federales 😜 are 100% political appointees, thus politicians themselves who don’t want to be blamed for a crash.

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    4. but the Fed chair was always a political appointee... remember that irrational exuberance thing? they weren't always this way.

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  2. Fed officials were always political, of course. Every government is dependent on monetary control.

    But the US has never been as politically split as today’s Trump Babies Era…

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    1. Ah... I see... the argument is that today's politicians are worse than before... feels about right... I thought bush was bad... then it was trump.... and then it was biden...

      Statistically, it is unlikely that one generation of politicians is much different from another... fundamentally, the argument goes back to the electorate... and from my previous post, it may fundamentally stem from a failure of the welfare state.

      It is not really what the republicans say, that welfare robs the poor of motivation..... rather, it does something more terrible, it takes the meaning out of their lives... striving to live is a meaning in and of itself... If I dun misremember, there is a statistic which shows that the number of suicides in the gulag is very low... lower than outside the gulag...

      how you feel about this line of reasoning?

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    2. Cradle to grave welfare is dehumanizing, for sure.

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    3. Which welfare state? The US is a full blown plutocracy. If it actually had a welfare safety net, Trump wouldn't have been elected to begin with.

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  3. Here's the total absence of the welfare state in full display https://youtu.be/HRqQ6-ANjL4

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  4. For people without access to decent healthcare and education, welfare is a must. In order to arrive at true free market capitalism based on merit, you have to first level the playing field. Then a meritocracy is ok. Only until the playing field is level. You need some socialism first in order to arrive at capitalism. Without welfare, you're just protecting those at the top, hence a plutocracy.

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    1. I would say welfare should be about equal access to justice, schooling and healthcare... it should never involve giving money to people.

      Unfortunately, the former is difficult but the latter is easy (and appears cheaper)... but in the long run, the latter is more expensive for both the giver and the taker.

      From the blacks point of view, they should learn to win from a disadvantage and take pride in it... why beg the white man for equality... we are better and will demonstrate it. =)

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  5. Unfortunately, the system is designed to make it very difficult for "the blacks" to "pull themselves up their bootstraps". You only get anecdotal examples of success with how the current system is designed. The majority will never make it as is.

    And yes, giving people money has worked in other countries where it's been tried... A universal basic income is favored by many serious people.

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  6. *"pull themselves up by their bootstraps"

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  7. Hmmm.... I have yet to see a case where giving people money has worked.... The whole of Western Europe and the US seem to have failed (even the corrupt, laid back Asian countries are catching up)... and there is a sort of aimless listlessness to them...

    The one that I know a bit more about is Malaysia and that is an utter disaster... what economic success stories are there in which there is serious welfare? ie the person is given enough money such that he can not work yet not starve to death...

    maybe it is not so much about economy... its more about the zest of life... a person can be poor but not feel poor... giving things to people make them feel poor. And the truth is that any man that can feed himself and his family, is not poor... should never be considered poor... is in no need of help and would scorn to ask for any...

    Think of the Joad family in Grapes of Wrath..... they were poor... and yet they never felt poor... I am not sure if I am coming across...

    I think that many people in America can make an ok living just from their work... we should not be saying these guys need help..... we should be celebrating their work; there goes a person of respect and dignity...

    to speak of the blacks... sure the system is rigged against them... it always will be... but even if the system is tilted in their favor, the wealth and status is given... and that which is given can be taken away.... no.. no.... our goal is not to win your favor... our goal is to be in a position where you have to win ours....... sure, it is difficult... it is the difficulty that gives the task its meaning...

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    1. Here are a few examples of how giving money to people works...

      https://www.nytimes.com/2004/01/03/world/to-help-poor-be-pupils-not-wage-earners-brazil-pays-parents.html

      https://apolitical.co/solution-articles/en/brazil-lifts-millions-poverty-direct-cash-transfer-scheme

      https://www.bbc.com/news/world-europe-57198737.amp

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    2. Western Europe and the US haven't failed due to giving people money... much less the US which is a plutocracy, not a welfare state. Europe might have more to do with societal issues such as an aging population. But c'mon, no one's really getting free money en masse.

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    3. ...unless you're talking about rich bankers ;)

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    4. I like the Brazil example... The idea is there..... if we could tie it more to the students grades, such that the cash is earned, rather than given, it would be even better.. =)

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    5. I worked in UK for a time... (working 18 hours a day and earning half what their security guard made)..... =)

      The lady I was staying with was receiving more than my pay in welfare subsidies for her children... I understand, she could not make it if she did not get that money... but if they did not give out the money that way, prices would come down and she could make it from her own work..... harsh and terrible yes... I am aware of the horrors of Victorian society.... but maybe ours is terrible in a different way...

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    6. Here's more free money flowing in the wrong direction...

      https://www.cbsnews.com/amp/news/tax-avoidance-richest-americans-163-billion/

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    7. To answer your question.... if we fix the core of society first, it will begin to heal and naturally start demanding an account from the rich.... the problem is not the rich... it is ourselves....

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    8. But "ourselves" are mostly a reflection of the narrative being constantly pushed by the rich through the media... The problem is corruption. This corruption is what has allowed the rich to become way richer than they otherwise would've become, by buying politicians. Hence, corruption.

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    9. the problem is us, for allowing corruption.... the people are ultimately responsible for their government..... and yes, I understand that means all Chinese are ultimately responsible for the actions of the CCP.

      It has been great talking to you..... I have to sign out now, I have a long day ahead... do say what you think.... I will reply later =)

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    10. Well yes, ultimately we're all responsible when our elected officials don't do their job. I guess they exploit human nature to the fullest... And constantly brainwashing them with the "you can be rich too" mantra in order to weaken and divide their resolve doesn't help either.

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