As the Dow Jones appoaches 13,000 and continues to break through multi-year highs, reports over the last several months suggest that the smart money, including major trading houses and hedge funds, is heading for the exits. The latest report comes to us from none other than government bailout darling Goldman Sachs:
Earlier today we got our first clue that the smart money has stopped “distribution” and is now offloading to retail after we saw the first equity fund inflow, however tiny, in months, and only the second one out of 37 outflows since April, as reported by ICI. The second and far more important one comes from today’s Goldman sales roundup, which confirmed that following today’s latest borderline ridiculous meltup, retail investors looking for the sucker at the poker table, wouldn’t be able to find one. Here’s why. Quote Goldman: “As has been the recent trend, our cash flow remains better to sell, both from long-only and hedge funds.” And there you have it: smart money (well, relatively so) has “recently” been using every melt up chance it gets to dump the bags with the E*Trade baby. Third and final proof: “ETF flow however skewed toward better buying.” At this point retail investors may want to ask themselves: what do they know that the others, who are actively selling to them, don’t.
Source: Zero Hedge
In late November 2011, it was reported that a silent run on the banks in Europe had already begun:
As is generally the case in the financial community, the big investors which include large sovereign wealth funds and behemoth financial institutions, are one upping the public by getting out while the gettin’ is good. While mainstream media makes it seem like we are moving in a positive direction with respect to Europe, one thing should be clear: it’s a sham. This the same thing we were being told two years ago, a year ago, a month ago, a week ago. Nothing could be further from the truth.
Business Inside reports that a run on Europe has begun, and large institutional players are liquidating their exposure to European bonds and other assets:
Until recently, the concern about Europe has been mostly theoretical–a potential train-wreck that would occur if/when the world’s lenders decided that the continent’s problems extended beyond the basket case known as Greece and cut lending to Europe’s “core.”
Well, that concern is no longer theoretical.
The world’s lenders are increasingly deciding that it’s better to be safe than sorry, and they’re pulling their money out of Europe.
Source: The Daily Sheeple
The big money players and investment firms know what’s happening in Europe, as well as the United States.
In just the last couple of days it has been reported that Greek officials arrived in the US to discuss default fears as they approach a March 2012 deadline to make good on bond payment commitments made during their last bailout cycle. For bondholders and lenders who bought into the recovery falsehood and invested money into Greece when they were first threatened with a sovereign debt default a couple of years ago, the possibility of a 50% (or more) haircut on their investments is quickly becoming reality. This has spooked investors all over the world. They know billions of dollars are about to vanish. On top of that, we have the debt of Italy, Spain and Portugal to contend with – a situation that is significantly worse than that of Greece alone.
What we’re seeing from across the Atlantic ocean is that we have massive amounts of outflows, as no one is willing to risk their money in European Union related debt (except the Federal Reserve, of course). Like we saw in the midst of the meltdown in 2008, the outflows are headed straight over to the United States into what many consider to be the last bastion of investment safety – good ‘ol U.S. Treasury bonds. This will have a direct impact on the US dollar, which according to The Daily Crux, may be set to explode to the upside in the very near future. Additionally, stock exchanges are showing technical signals which tend to appear right before market breakdowns.
On top of that, we are hearing that earnings reports for US companies will be lower than expected, with negative news reportedly outweighing positive news by a ratio of 3.5 to 1. This will put added pressure on stocks.
All of these signs suggest that, not only are investors pulling out of European bonds, but also global equities. The report from Goldman Sachs above may be confirmation of this developing capital flow trend.
Confidence in the stability of credit and equities markets around the world may very well be evaporating.