On Friday, January 13, a report was released by “TrimTabs” in California (they track investment funds flows, in order to find trends and patterns regarding sentiment) which reveals that investors moved an incredible $889 billion into their bank accounts during the first 11 months of 2011 – while a comparatively paltry $109 billion was moved into mutual funds and ETFs invested in equities and fixed income securities. In an interview with an online financial publication, TrimTabs Executive Vice President David Santschi reported that this huge flow of funds into bank savings and checking accounts is more than double the 12-month average of funds flow since 2000. Almost as startling (and telling) is that this huge money migration away from “risk” nearly matches the magnitude of funds flow into banks during the period of December 2008 (just after the start of the mortgage and bank “meltdown) to November of 2009.
TrimTabs’ data also reveals that flows into banks were greater than into stocks/bonds during every single month of 2011 – not surprisingly peaking in July and August, right in the midst of the daily news about gridlock in Washington, DC, followed by the S&P downgrade of U.S. Treasury Debt. Although many different interpretations can be offered to account for this dramatic shift of funds, Mr. Santschi offers these three: 1) demographic factors (the advent of what will be a continuing exodus of “Baby Boomers” from the workplace); 2) an anemic, jobs-challenged economy; and 3) fear of government manipulation.
Elaborating on these points, Santschi says: “First of all, older baby boomers need to shift into assets that are less risky. Secondly, the economy for the typical family in Peoria isn’t that good; a lot of people are drawing down their retirement funds to pay bills. A third reason is because of all the market manipulation by the central banks and politicians. A lot of the reason the economy is doing better than it would be doing otherwise is because of all the monetary intervention during the past three to four years. They keep getting bigger and bigger and more frequent. What’s the financial backstop after the central banks? People aren’t going to come down from Mars to lend us money.”
One final fund flows trend is worth noting: of all the funds that moved into securities (instead of banks) during the final three months of the report, a disproportionate share mobved into corporate bonds. More specifically, 16.3% of assets which moved into securities were invested in corporate bond ETFs! Mr. Santschi added his unique take on the data in the TrimTabs report, saying: “The Fed is doing almost everything it can to get people to speculate, but retail investors aren’t taking the bait. If you want to know where the real money is going, it’s all going into savings vehicles. We have not seen this point made anywhere by anyone.” http://www.advisorone.com/2012/01/13/investors-flee-stocks-and-bonds-stuff-cash-in-matt