We are unsure what is more notable in this week's most recent fund flow
update: that in the week ended May 2, investors pulled out another whopping $6.6
billion out of domestic equity mutual funds, the 11th consecutive, and a
total of $42 billion in 2012 (compared to $10 billion over the same period in
2011), or that as the chart below shows, the two identical S&P overlay
arrows (identical in their length and angle) demonstrate just how comparable the
effect of QE2 and Operation Twist, or QE3, have been. the two arrows also
demonstrate without a doubt, that, as Goldman admitted
last month, the "flow" effect at the long-end of the curve (thank you Chubby
Checker) is what it was all about, which means that sterilized QE is bunk, and
all that matters is of the Fed to be actively monetizing something, anything, in
order for stocks to go higher. Regardless, the only question left now is not
whether the same drift back lower by 200 S&P point that stocks
experienced after the end of QE2 will happen, but when and how
rapidly it will take place, just in time for QE4 (NOT Operation Twist-er) to be
announced in June. And finally, for those wondering how it is possible that
every month US investors can pull cash out of mutual funds without them running
out of cash, we say: observe the distinct pattern in Chart 2, which shows that
as of March mutual funds held a record low 3.3%
in liquid assets on their books.
Weekly fund flows:
And mutual fund cash:
Weekly fund flows:
And mutual fund cash:
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