Record cash outflows from mutual funds in 2011 but stocks close higher suggesting that stocks are now firmly in strong hands
For weeks I have been saying that there has been a massive transfer of stock ownership from many individual owners (weak hands) into the hands of a relative few (strong hands). Believe it or not, more funds have left equity mutual funds in the last 12 months than in all the years since 1990 put together (I say since 1990 because that is when Bloomberg began keeping ICI mutual fund flow records).
The graph below should have been presented in a histogram format but Bloomberg didn't have that option for this price series.
ICI Yearly Net Mutual Fund Net Cash Flows of "Growth" oriented Mutual Funds
It is interesting to note that the S&P 500 and the Dow both closed positive last year and the year before in light of record mutual fund outflows. Given that there has not been this amount of fear and uncertainty in the market in living memory, this amount of net outflow from mutual funds (moms and pops dumping on mass), I think the big miracle (9th wonder of the world perhaps) has been the fact that equity markets have risen in each of the last two years, especially last year!
Again - how much more uncertainty/fear is it going to take to push the major market indices lower because the fear/uncertainty over the last two years has clearly not been enough! I would say that investors are now "maxed out" on uncertainty/fear. This only leaves room for them to become less uncertain and more confident.
I'll leave you with John B Templeton's famous quote: "bull markets are born in pessimism, grow in skepticism, mature in optimism and die in euphoria".