NY Times: In Striking Shift, Small Investors Flee Stock Market

[marmar]

In Striking Shift, Small Investors Flee Stock Market

By GRAHAM BOWLEY
Published: August 21, 2010


Renewed economic uncertainty is testing Americans’ generation-long love affair with the stock market.

Investors withdrew a staggering $33.12 billion from domestic stock market mutual funds in the first seven months of this year, according to the Investment Company Institute, the mutual fund industry trade group. Now many are choosing investments they deem safer, like bonds.

If that pace continues, more money will be pulled out of these mutual funds in 2010 than in any year since the 1980s, with the exception of 2008, when the global financial crisis peaked.

Small investors are “losing their appetite for risk,” a Credit Suisse analyst, Doug Cliggott, said in a report to investors on Friday.

One of the phenomena of the last several decades has been the rise of the individual investor. As Americans have become more responsible for their own retirement, they have poured money into stocks with such faith that half of the country’s households now own shares directly or through mutual funds, which are by far the most popular way Americans invest in stocks. So the turnabout is striking.

So is the timing. After past recessions, ordinary investors have typically regained their enthusiasm for stocks, hoping to profit as the economy recovered. This time, even as corporate earnings have improved, Americans have become more guarded with their investments. ..........(more)

The complete piece is at: http://www.nytimes.com/2010/08/22/business/22invest.html?_r=1&hp

[FreakinDJ]

1. The Demographic of the Baby Boomers

At 50 - 70 years old its time to move to CDs

[Earth Bound Misfit]

2. Small investors are the the only ones at risk

in the Too Big to Fail--Can't Lose Casino

[hobbit709]

3. That's it.

The big boys set the game up to fleece the little guys and the little guys that are left are catching on that the game was rigged.

[Hannah Bell]

4. "more guarded with their investments" = losing their jobs, drawing down their savings.

[TomClash]

6. Spot on nt

[Warpy]

5. Wow, talk about missing the point!

Most of that $33.12 billion wasn't converted into bonds, it was converted into food and mortgage payments by people who were thrown out of their jobs long before retirement and who had no alternative but to burn through everything they'd saved and invested to survive. Some of the rest was converted to safer forms of liquidity, like FDIC insured CDs because people knew their jobs were shaky, at best, and that the days of paper profits in the market were over and they'd better keep enough of their nest egg intact to be able to survive for as long as possible when the axe finally fell on them.

The small investor is not going to get out of income earning equities unless there is a damned good reason and he's not going to go into bonds that can default. He's fleeing to safety, either the temporary safety of running through his retirement to keep his roof and food on the table or the longer term safety of insured savings.

These idiots need to get out into the real world a little more often and find out what's actually happening. I can guarandamntee it's not a rush into the bond market, not at the bottom.

[TomClash]

7. Spot on Again nt

[trumad]

12. Bingo

[ThomWV]

19. Exactly

Add to that the brainwashing that people are getting that tells them that "Wall Street" is he great evil.

[ixion]

8. This small investor pulled out in 2007, when Bear Stearns went down

and has never looked back with regret.

[Earth Bound Misfit]

18. Bear collapsed in March '08, not 2007.

http://en.wikipedia.org/wiki/Bear_Stearns#Fed_bailout_and_sale_to_JPMorgan_Chase

This sale price represented a staggering loss as its stock had traded at $172 a share as late as January 2007, and $93 a share as late as February 2008.

[ixion]

25. Nope. It started in the Summer of 2007. I remember it very well.

http://news.google.com/archivesearch?pz=1&cf=all&ned=us&hl=en&q=bear+stearns+collapse&cf=all&scoring=n&sugg=d&sa=N&lnav=d2&as_ldate=2007&as_hdate=2007&hdrange=2008,2010

[safeinOhio]

9. I've been taking mine out of

stock market mutual funds for a couple of years. I've notice that the amount I put in mutual funds has stayed the same or gone down over the years, while the individual stocks I own have increased. Those fees get you over time.

[JHB]

10. If an invisible hand strikes Wall Street in the face, is there anyone who hears it?

What a surprise! Gut regulation, let insiders and swindlers run loose and people who aren't in those groups start seeing that it doesn't work in their favor, and go elsewhere.

Plus long-term joblessness causing those investments to be cashed out to keep head above water todat...

Striking? Only if you find it striking that deer move away from wolves.

[ThomWV]

11. Is this from the same New York Times that gave us Judith Miller and the War against Iraq?

Is there some good reason I should pay a bit of attention to anything they put in print?

[conspirator]

13. Well, if you have to gamble in a casino, you are better off gambling in Vegas

those casinos are regulated.

[CanonRay]

14. We finally figured out it's a craps game with rigged dice

and nobody gets to win but Goldman Sachs.

[ThomWV]

17. What did you figure out? Looks more to me like you listened to idiots.

Investing is not a crap shoot, its the only way we go forward.

[CanonRay]

20. Goldman and others are using programmed trading

to interject trades to raise or lower the price, whichever will make them money, before "real" trades go through. Come on dude, open your eyes, the game is rigged, and we ain't in on it.

PS I used to invest in stock. I truly believed the SEC kept the game fair. At one time they did. I think they don't do shit now.

[girl gone mad]

24. In my view..

the exchanges made a huge mistake when they chose to reverse certain "flash crash" trades back in May.

If small investors had any doubt about rigged markets before, those doubts were vanquished as the same algorithms that helped the banks come out ahead every single trading day in the first quarter were suddenly declared errant when they generated big losses for the banks.

[xchrom]

15. Recommend

[dixiegrrrrl]

16. "after past recessions"

Maybe THAT is the clue the Times is missing.
both the "after" and the "recession" parts.

[Divernan]

21. I took enough Capitol Loss last year to cancel out my federal taxes

Don't forget about Capitol Losses!

My banker/daughter pointed out to me about a decade ago (before programmed trading wiped out the small investors) that I was better off owning stock directly than paying fees to mutual funds. Researching on the web, I found and invested in conservative stocks which paid VERY good dividends (10% on average), while growing at a modest rate. Their prices were driven significantly up and down by speculating day traders, but the dividends were not affected by that speculation. Then came the Bushian financial debacle and the stocks stopped paying dividends. The prices kept spiking up and down, but always lower. About the middle of last year, when it became clear from further research on analysis of these companies that the dividends would not be resumed in the foreseeable future, I put in sell orders at what I calculated would be the top of those price fluctuations. By November of last year, I had sold all of my stock at close to their peak prices for the year, and generated a Capital Loss large enough to cancel out my federal tax obligations for the year. I'm retired, and on a very tight budget. We're not talking a very large amount here, but it was enough to make a significant difference to me.

I cannot see myself ever investing in the stock market again - particularly with the high speed electronic trading going on, an individual investor like me is just a source of profit for professionals.

I worked part-time this year, and can "shelter" $5,000 from federal taxes by putting those funds into a traditional IRA with my credit union. I like the fact that all my credit union IRA Certificates and/or IRA Shares are federally insured up to $250,000 by the National Credit Union Administration (NCUA). From what I could tell looking at IRA offerings from other sources, their IRAs were not insured.

[Tierra_y_Libertad]

22. I bailed in 2008 when my house doubled in value in one year.

Even a non-economist like me could see the handwriting on the wall was flashing neon and saying "this isn't going to end well".

[w4rma]

23. Good! Get your money away from the sharks! The stock market is tilted against the small investor. nt