CautiousInvestor

Everyone Fleeing Into Stocks and Bonds Not a Good Sign - IRA

Individual investors, as measured by the flow of funds into mutual funds, are ignoring the siren song of MSM, brokers and government apparatchiks and avoiding equities. They are, though, piling into Treasuries

"Equity funds had estimated outflows of $4.16 billion for the week, compared to estimated outflows of $7 million in the previous week. Domestic equity funds had estimated outflows of $3.15 billion, while estimated outflows to foreign equity funds were $1.01 billion.

Hybrid funds, which can invest in stocks and fixed income securities, had estimated inflows of $548 million for the week, compared to estimated inflows of $489 million in the previous week.

Bond funds had estimated inflows of $12.06 billion, compared to estimated inflows of $9.84 billion during the previous week. Taxable bond funds saw estimated inflows of $9.67 billion, while municipal bond funds had estimated inflows of $2.39 billion."

Amplifying what Whalen is fearing, the Fed themselves have have considerable concerns about the collapse of CRE: "In a just-revealed presentation to banking regulators last month, the Fed lamented that U.S. banks "are slow" to book losses on commercial real-estate loans being battered by slumping property values and rental payments (see below for more on commercial rentals). "Banks will be slow to recognize the severity of the loss - just as they were in residential," the Fed warned, suggesting banking regulators are girding for a rerun of the home-lending breakdown. NY Fed chief Bill Dudley echoed similar concerns in a speech this week, saying, "More pain likely lies ahead for this sector and for those banks with heavy commercial real estate exposures."

The Economy Is Bottoming

And while there are some encouraging signs in existing home sales, consumer spending and orders for durables, I'm still not ready to declare these as green shoots of a recovery.

The fundamental problem of troubled assets is still very much front and center; the various PPIP plans have not begun. Employment losses continue to mount and this recession has now cost us over 5 million jobs.

Manufacturing remains in shambles and the "adverse feedback loop" between the financial economy and the real economy is still wreaking havoc owing to falling home prices. World trade has fallen off a cliff and the global economy will contract.

I will readily cede that rates of deterioration have stabilized.