Seeking Alpha

Is the stock market dead? That's the question being put to a few thousand hedge fund pros at the...

Is the stock market dead? That's the question being put to a few thousand hedge fund pros at the Skybridge alternatives conference today. The ongoing lack of investor confidence and participation in the stock market has ominous implications, says Morgan Stanley Strategist David Darst. People have lost trust in not just the markets, but the entire societal structure. Sadly, Darst says, "They have a point ... You know this."
Comments (10)
  • dieuwer
    , contributor
    Comments (2341) | Send Message
     
    Reminds me of "The death of equities"

     

    http://seekingalpha.co...
    11 May 2012, 02:39 PM Reply Like
  • Wall Street Smart
    , contributor
    Comments (474) | Send Message
     
    I think lot of trading has moved to options. I know many people who now trade only options, including myself.
    11 May 2012, 02:42 PM Reply Like
  • D_Virginia
    , contributor
    Comments (2280) | Send Message
     
    Maybe, but the issue here isn't trading, it's INVESTING -- putting capital to good use, to create real value.

     

    From the article:
    "Money market mutual funds, where investors typically park their money in times of duress before deciding where to deploy, has shrunk from just short of $4 trillion during the worst days of the financial crisis all the way down to $2.57 trillion, according to the Investment Company Institute."

     

    Somehow I don't think all of that went to options. :)
    11 May 2012, 02:49 PM Reply Like
  • eabyrd
    , contributor
    Comments (311) | Send Message
     
    Probably not. But two possibilities...

     

    First, bonds, especially gov't bonds, have became very crowded. Seems like people lost trust in banks and (for some odd reason) put it in the government. Plus MMAs yields are terrible, although bonds aren't much better.

     

    Second, I'd be curious to know what impact ETFs have had. They've really taken off in the past few years. Look at BOND, PIMCO's newest ETF. It just launched and has already amassed a hefty amount of funds. Others that are based on investment-grade or junk bond indexes are the same. Junk bonds, as measured by HYG and JNK, are 7.2% and 7.3%, respectively. That's awful considering the risks.

     

    Not sure the impact of those two things, but it may be substantial.
    11 May 2012, 02:56 PM Reply Like
  • Topcat
    , contributor
    Comments (416) | Send Message
     
    Into the safety (but slowly eroded by inflation, which we all know in our daily lives is going up on most products we need to live) of bonds.
    11 May 2012, 03:49 PM Reply Like
  • DianeLee
    , contributor
    Comments (352) | Send Message
     
    Agree, Virginia. Traders seem to have forgotten the Market is about investing...and investors are not happy. The better question would be why aren't investors happy? and what would entice them back? Traders are resorting to "gimmicks" and the HFTs are gobbling actual investments as fast as they can. The rest is being parked in Treasuries, etc. just because they are less volatile.
    11 May 2012, 04:15 PM Reply Like
  • Hitesh Patel
    , contributor
    Comments (314) | Send Message
     
    Hence the Y/Y outflows of equity mutual funds and soon to be outflows out of Bond funds. Can you blame investors? I mean really, Billions being stolen by MF Global, Billions being squandered by leveraged bets by JPM which is probably only the tip of the iceberg
    11 May 2012, 02:49 PM Reply Like
  • berniespear
    , contributor
    Comments (233) | Send Message
     
    "They" made the stock market dead.

     

    Cheating, lying, scamming is scaring away everyone and it is all over "their" greed. Sucks.
    11 May 2012, 03:07 PM Reply Like
  • rambler1
    , contributor
    Comments (413) | Send Message
     
    I think it started with decimalization. As soon as it began I've never operated at better than 20% of what I used to make. The game is no good anymore to traders or investor types. Who wants to buy 1000 shares of IBM whether your a pro or John Q. Public when you have little hope of selling it whether a loss or a profit with the spread (profit margin). In addition try to buy 1000 shares these days you'll very often get down in 2 or 3 prints. Is that liquidity? No it's people not being able to gauge where a market should exist and being afraid to putting up size. It also made it easier for everyone to truly know what a book looked like. Now every level has 100 share representations, and dark pools exist somewhere in the ether. So who would be crazy enough to participate in something like that? In addition regulations including Reg FD have made it that news can generally only come out after the close or the in the morning. What difference does it make? I'd rather see things come out as they can be released. Is 7 a.m. or 4 p.m. any different to an investor who has a 9-5 job? Also, I'd rather have insider trading it would put a footprint on stock so we wouldn't have dramatic before/after hour moves that decimate everyone (i.e. FOSL) Also, without being able to call up a CFO or VP mid-quarter what good are 10-Q & 10-K's their ancient history. The whole environment is upside down. The best answer to the thought is why should uniformed investors trade if guys on the floor can't? It's taken years to play out but the damage is there. Sorry everyone for the rant this hit a nerve.
    11 May 2012, 05:20 PM Reply Like
  • davidbdc
    , contributor
    Comments (3150) | Send Message
     
    There is a lot more at play.

     

    First, some people have abandoned the market. They believed (wrongly) that if they invested over time things went up and when the crisis hit they were "shocked" at how much they lost. But these people weren't really investors - they were dreamers and niave folks.

     

    Second, Lots of people that were putting money in regularly no longer have jobs that produce enough income to allow them to do so (not to say anything about the out of work folks).

     

    Third, Lots of people are shedding debt before all else. Paying down mortgages, paying off car loans, credit cards, etc, etc. I view this as good - eventually they'll be back to investing but are using all current income to shed debt.

     

    Fourth, There are a larger percentage of people that believe the game is rigged.... and in some ways it is! Insider trading is rampant. IPO issuance/pricing is often just a giveaway to "preferred" clients.

     

    Fifth, Corporate boards and senior management is seen as simply using the system to financially benefit themselves at the expense of shareholders....... And they are correct about this!

     

    Sixth, There is much less trust in the "system". How many people are sitting in jail that helped to cause the crisis? Where is that AIG London guy that wrote trillions in insurance hedges against ZERO assets? Oh, he's in his 30 Million mansion.

     

    And the last one is the most concering. We've always had scum that tried to steal from people for their own benefit - up til now, those folks always ended up getting caught and paying a price for their behavior. Fuld, Mazillo, ???/ they paid by settling for living with 300 million instead of 500 million. Next time around I think you'll find some of these bums hanging in the town square or lying in a back alley - the citizens have had it. More and more people realize the triumvirate of the financial elite, bureaucrats, and politicians are systemically looting the country.

     

    Now why exactly would you want to invest into that environment???
    11 May 2012, 05:38 PM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Tools
Find the right ETFs for your portfolio:
Seeking Alpha's new ETF Hub
ETF Investment Guide:
Table of Contents | One Page Summary
Read about different ETF Asset Classes:
ETF Selector

Next headline on your portfolio:

|