Has The Simple Retail Investor Become Smarter Than Sophisticated QIBs?

Submitted by Tyler Durden on 05/16/2012 19:35 -0400

• E-Trade

There was a time when retail investors were mocked and derided by all: after all whenever the big boys needed to unload they jest blew the whistle, and like obedient lap dogs retail would buy at the very peak of the market because "stocks are a once in a lifetime buy", leading to what some call distribution, and others, a plunge. Not any more. In spite of the recent 20% surge in stocks, following a pattern absolutely identical to the one from September 2010 to March 2011, for the entire 32 week duration of the artificial central bank induced rally beginning October 5, there were a total of 3 weeks of inflows into the market, totaling a whopping $2.8 billion. The outflows: 29 weeks for a total of $96.6 billion, with $2.4 billion pulled out in the most recent week. And as speculated that in the absence of the traditional greater fool (that would be you dear reader hidden behind your E-Trade platform) stepping in, the prop desks, prime brokers, and hedge funds had no other choice... but to sell to each other, in the process exposing sophisticated 'Qualified Institutional Buyers' as nothing more than glorified, stock-peddling Pied Pipers who are good at only one thing: manipulating the less sophisticated crowd. Which works until it doesn't.

Several years years ago, various media organizations tried to starve the banks by telling their followers and readers to pull their money from the banks. They failed. This time around, nobody is forcing Joe Sixpack investor to pull his money out of the stock market - he is doing it on his own, having realized the true nature of the rigged casino. And in the process may be inflicting a more crushing blow to the banks than withdrawing a few billion in checking accounts ever could.