Tuesday, March 8, 2011

Small, Retail Investors (aka 'Dumb Money') Are Back in the Stock Market (Top Must Be Really Near..)

From AP (3/8/2011):

CHICAGO (AP) -- As a historic bull market reaches its second birthday, everyday investors are piling back into stocks, finally ready for more risk and hoping the rally has further to go.

The Standard & Poor's 500 index has almost doubled since March 9, 2009, when it hit a 12-year low after the financial crisis. And the Dow Jones industrials are back above 12,000, about 2,000 points shy of their all-time high.

Little-guy investors appear to be on board. Since the beginning of the year, investors have put $24.2 billion into U.S. stock mutual funds, according to the Investment Company Institute. They withdrew $96.7 billion in 2010.

"It didn't feel right to be back in until now," says Richard Dukas, who heads a public relations firm in New York City. "I still don't want to put all my money in the market, but I believe we've come through the worst of it."

QE2 is a roaring success.

The article cites "improved economy" and "job security" as reasons for retails coming back in, but the real reason is also given later. It's Ben Bernank, basically; they are pushed to take the risk to get a decent return on their money:

One reason to set aside their reservations: They can't find a better place to stash their money. The bull market in bonds has ended, money-market accounts are returning 1 percent or less, and the average two-year CD earns no more than 1.5 percent.

As a result, many investors returning to the market are tiptoeing back in. They're buying what Trennert calls "stocks that look like bonds" -- dividend-paying blue chips that they hope will hedge their risk by guaranteeing at least a dividend payout.

'Dumb money' has been entering the stock market since Ben Bernank started QELite, and then QE2. As one of the purposes professed by Bernank is the rising stock market that instill CONfidence in the general populace, he is succeeding. Perception is everything. Reality? What reality?


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