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Pastimes : All Clowns Must Be Destroyed
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To: pater tenebrarum who wrote (30702)5/3/2000 9:48:00 AM
From: Tommaso  Read Replies (2) of 42523
 
The incredible thing is that both AMG data and TrimTabs have reported continuing healthy inflows to funds all through this period of volatility. The flows are on the order of 10 billion dollars a week. As long as that keeps up, the fund managers, on average, can hold those razor-thin balances.

There must be a lot of people still hooked on the idea that steady contributions to a retirement fund can ride out any and all market declines. I don't know what it will take to break that psychology, which has been so reinforced by the Fed in the last two years.

I have often compared this situation to nineteenth-century banking in the US. People would put money into a bank, imagining that they would get a steady 6% return for the rest of their lives in a gold-backed currency (or at least in post-civil-war greenbacks), but then the bank loans would go bad, the bank would fail, and they would lose everything. I think a lot of the public imagine that there is some kind of implied backing to the stock market by the government. I have met people who think that "mutual fund" means some government-supported institution and imagine that they are much safer there than those who merely buy stocks.

I think it will take an entire year of no-profit, or loss, to begin to shake loose this misplaced confidence. High interest rates on CDs might help it along--and once fund managers start liquidating to cover withdrawals, the decline will make April's slump look very small.
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