Is "Dumb Money" Coming Back to the US Stock Market?

Is this a sign that the top is indeed in?

Zero Hedge reports that after 33 consecutive weeks of outflows, the money is flowing back to the US equity funds:

The inflection point has arrived. After pulling money for 33 consecutive weeks, and withdrawing over $98 billion in capital from domestic equity mutual funds, in the week ended December 21, the Fed has finally succeeded in getting the rotation out of bonds and into stocks as per ICI. After a total of $4.4 billion was redeemed from bond funds in the same week, mostly from municipals but also $837 million from taxable bonds (still a major decline from the almost $9 billion in bond outflows the prior week), domestic equity funds saw a token inflow of $335 million, compared to last week's $2.4 billion outflow. Just enough to halt the seemingly endless outflow. Still, since the bulk of the move seems predicated upon a move out of muni bonds, with $9.5 billion in outflows in December alone, should the muni crisis accelerate, and validate the investor concern, stocks as an asset class will certainly be impaired once the muni insolvency thesis start being played out... unless of course it is met with further action from Ben Bernanke in the form of QE3, as most Zero Hedge readers believe will inevitably happen. At that point, and as always when the Fed intervenes, all bets are off, suffice to say that gold will be well over $2,000 by then.

Go Ben! Before Congress takes away your power to print money so that Timmy can print on demand... (If you're interested, take a look at the bill (HR 6550) proposed by Dennis Kucinich, who seemingly has become a mouthpiece for the "Greenbackers" like Ellen Brown.)

At this point, I don't care how much Ben's gonna print, or Timmy's gonna print. Bring it on, so the whole system can crash and we get to start fresh.

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17th Consecutive Week of Outlow from Domestic Equity Funds

reports Zero Hedge:

Can You Hear Me Now? 17th Weekly Fund Outflow As Equity Fund Redemptions Accelerate (Tyler Durden, 9/2/2010 Zero Hedge)

"This is just getting silly: perhaps the next update on ICI mutual fund flows should occur if there is an inflow for once...ever again. In the meantime, ICI reports we have just recorded the 17th consecutive weekly outflow from domestic equity mutual funds, and what's worse for mutual funds' depleted liquidity ratios, it is now accelerating, hitting a total of $4.3 billion, a more than 50% increase from last week's $2.7 billion. YTD outflows have now hit $54 billion, as ever more capital is going into far safer fixed income instruments.

"...As for this being a contrarian signal, hopefully all those who see this as a buying opportunity can also find a way to make the now retiring baby boomers about 10 years younger and force them away from fixed income capital reallocation. Oh, and fix the broken market and restore investor confidence that the casino is only modestly rigged." [Go to the link above for the entire article.]

Here's the chart they have at Zero Hedge, plotting the fund flow against SPY performance. The significant outflow started right after the flash crash of May 6, when more retail investors saw the market for what it had become - a casino; my imagery of the day continues to be a black elevator shaft with no bottom to be seen.


But now that the retail investors are crowding into the bond funds, maybe the time is approaching when the big boys pull the rug and tank the bond market. Who knows...

BTW, speaking of a casino, Las Vegas Sands (LVS) shares are trading near 52-week high; it is at $30.07 right now. Not bad for a stock that went $1.38 on March 9, 2009. Things cannot be that bad, can they?

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