Outflows from equity funds, particularly global equity funds, subsided early this month, suggesting the little guy thinks the worst of the sell-off is over. Based on the retail funds we track daily, we estimate U.S. equity funds lost $13.5 billion ($1.5 billion daily) on the first nine trading days of December. The pace of outflows this month is down 12% from the estimated $1.7 billion daily pace in November.  The biggest myth on Wall Street is that there is lots of sideline cash waiting to flood back into the stock market. Since the start of September, data from the Investment Company Institute and TrimTabs indicates all long-term mutual funds posted an outflow of $300.4 billion ($199.3 billion from equity funds and $101.2 billion from bond funds). This amount does not count what investors have pulled out of hedge funds, stocks and bonds directly. We think such direct outflows were equal to at least $150 billion, half again the $300.4 billion outflow from all long-term mutual funds. According to the latest Federal Reserve H.6, $336.4 billion flowed into demand deposits, savings deposits, small CDs and retail money market funds since Sept. 1.  If individuals pulled $450 billion out of stocks and bonds and added only $336 billion to savings since the start of September, where did the rest of the money go? Most of it probably went to pay bills and pay off mortgages. Moreover, the $120 billion that went into small certificates of deposit by definition are not likely to be available for equity investment any time soon. Withholdings are decelerating rapidly, which means take-home pay for the average worker is falling. And equity extraction from homes is down about $30 billion per month relative to last year. Some of the money coming out of equities and bonds is replacing the money that is no longer being extracted from home equity.  Portfolio managers are apparently convinced global equity markets have bottomed because they are putting lots of money into exchange-traded funds (ETFs) to gain sector exposure quickly. Since corporate liquidity is worse in consumer discretionary than in any other sector except financials, it is interesting that consumer discretionary is where portfolio managers are piling in. Smart investors usually sustain their biggest losses when they think they have detected a major market bottom and go long expecting a bull market.  Confirming the increasingly bullish sentiment toward equities, the American Association of Individual Investors reports that bullish sentiment among respondents to its sentiment survey rose to a four-week high of 38% this week, up from 27% last week. Meanwhile, bearish sentiment fell to a five-week low of 40% this week, down from 48% last week. Bond funds continue to experience massive redemptions. We estimate bond funds lost a whopping $25.2 billion ($2.8 billion daily) on the first nine trading days of December, and outflows of at least $1.5 billion occurred on all but one trading day. Outflows this month are running 87% above the estimated $1.5 billion daily pace in November.  U.S. equity ETFs issued $10.6 billion ($2.1 billion daily) last week. Futures-related ETFs issued $8.1 billion, non-futures related ETFs issued $2.5 billion and short ETFs issued $1.4 billion. The leading issuers were Spiders (amex: SPY - news - people ), which issued $5.4 billion (6.6% of assets); iShares Russell 2000 (amex: IWM - news - people ), which issued $1.7 billion (16.8% of assets); and UltraShort Real Estate ProShares (nyse: SRS - news - people ), which issued $525 million (30.5% of assets).  The leading redeemers were SPDR KBW Regional Banking (nyse: KRE - news - people ), which redeemed $135 million (20.4% of assets); UltraShort Financials ProShares (nyse: UYG - news - people ), which redeemed $88 million (4.6% of assets); and Ultra QQQ ProShares (nyse: QLD - news - people ), which redeemed $44 million (3.5% of assets).  Excerpted from the Dec. 15 issue of Trimtabs Weekly Liquidity Review. Charles Biderman is CEO of TrimTabs. For more analysis and more detailed institutional quality market liquidity data, visit TrimTabs.com.
Small investors and money managers alike are feeling a little happier about stocks this week, but that's not good.