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The Real Money Goes under the Mattress

Checking and Savings Accounts Get More Than Eight Times More Money Than Stock and Bond Mutual Funds and Exchange-Traded Funds in First Eleven Months of 2011.


The Federal Reserve is doing almost everything in its power to entice investors to speculate in overpriced asset markets.  Yet investors are generally refusing to embrace speculation.  The real money these days is going under the mattress.


In the first 11 months of 2011, investors poured a stunning $889 billion into checking and savings accounts.  This inflow is more than eight times higher than the $109 billion that flowed into stock and bond mutual funds and exchange-traded funds.


Inflows into checking and savings accounts peaked at $208 billion in July 2011 and $207 billion in August 2011 as the Standard & Poor’s downgrade of the U.S. credit rating and the Eurozone debt crisis rattled markets.  Yet inflows into checking and savings accounts outstripped inflows into stock and bond mutual funds and ETFs in every single month of 2011, including in tax season.


Most portfolio managers desperately want to believe that the economy will improve this year so they can pocket bigger bonus checks for 2012 than they will for 2011.  But our real-time indicators suggest the economy is still sluggish.  Wages and salaries, which we track each day in real time, are falling slightly sequentially, mostly because Wall Street players are getting smaller bonuses.  Meanwhile, postings on online job boards are rising only slightly sequentially.


Given the economy’s weakness and the constant interventions in markets by central bankers and politicians, it’s no wonder investors are hunkering down in bank accounts.  As long as most investors keep stuffing most of their money under the mattress, the economy is unlikely to get off to the races anytime soon.


David Santschi
Executive Vice President
TrimTabs Investment Research

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.