Market is tracking money flow.
Meanwhile back at the bridge of the good ship HMS NASDAQ (aka Titanic)
Bridge to engine room "All ahead full".
Engine room to bridge "But Capt'n we're giving it all we've got, besides what if they'res more icebergs out ther?. We're still a bit north, donchathink?" (ed. of fair value!)
Bridge to Engine room "Water level below deck is dropping, the course is clear (according to the Fed weather agency and Maria B) besides we've got some time to make up....bla bla bla"
Funny market, driven by greed and fear.
mad2
biz.yahoo.com
Monday April 30, 6:04 pm Eastern Time
Investors Pull Money From Stock Funds
By Patricia Vowinkel
NEW YORK (Reuters) - Investors, unnerved by a dramatic decline in U.S. stock markets, pulled a record $20.6 billion from stock mutual funds in March, a mutual fund trade group, the Investment Company Institute (ICI) said on Monday.
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The big outflows in March capped a quarter of discontent for investors. Stock mutual funds took in just $2.56 billion in the first quarter, the lowest level on a quarterly basis since the fourth quarter of 1990, the ICI said.
Compare that with a year ago. At this time last year, stock mutual funds were raking in cash, taking in a record $140.1 billion in the first quarter of 2000 as stock markets soared.
But the stock market's sharp declines late last year and again earlier this year, prompted disenchanted investors to pull a revised $3.30 billion from stock funds in February. With outflows in March as well, it marked the first back-to-back monthly outflows since 1990 when Iraq invaded Kuwait.
The tide shows signs of turning in April, however, after a surprise interest rate cut by the Federal Reserve -- its fourth in as many months -- triggered a rebound in the stock market.
Stock funds took in an estimated $8 billion in April, based on activity through April 27, and flows could finish the month with inflows of $12 billion to $15 billion, according to TrimTabs.com, a data service based in Santa Rosa, Calif.
``An up market does attract new money,'' said Charles Biderman, president of TrimTabs. ``Flow follows performance and while investors are not putting money in at the pace they would have before the last six months (market) swoon, they still respond by putting money in when the market goes up,'' he said.
At T. Rowe Price, April is shaping up to be a ``solid rebound,'' a company spokesman said, with March's outflows from stock fund changing to inflows in April.
The brighter outlook follows a gloomy February and March when one company after another announced layoffs and warned that profits would fall short of expectations.
The Standard & Poor's 500 index fell about 6 percent in March and the Nasdaq composite index fell about 14 percent. That came after a 10 percent drop in the S&P 500 last year and a bruising 39 percent drop in the Nasdaq as the dot-com bubble burst.
Stock mutual funds turned in their worst performance in more than two years in the first quarter, with U.S. diversified stock funds down 13.09 percent.
With the market's disappointing performance, investors took more money out of stock mutual funds than they put in.
New sales, or the new money going into stock mutual funds, fell about 47 percent in March from year-ago levels to $84.2 billion, up slightly from $80.7 billion in February, the ICI said.
Redemptions, or the money investors took out, totaled $93.5 billion out of stock funds and investors switched another $11.2 billion out of stock funds and into other products.
Although the March $20.6 billion outflow from stock funds was the largest one-month outflow in dollar terms, it represents just 0.56 percent of the industry's assets. In comparison, when markets around the world crashed in 1987, U.S. stock funds lost about 5.0 percent of assets in the month.
And if risk-averse investors have already fled the market, funds could see more normal monthly inflows of $15 billion to $20 billion, said Carl Wittnebert, research director at TrimTabs.
Vanguard Group, the second-largest U.S. mutual fund company, said flows into its stock funds have picked up in April to about $2.2 billion, compared with about $975 million in March. Vanguard said flows into bond funds in April were about $450 million.
``Sales have picked up and redemptions have diminished,'' said Burt Greenwald, a Philadelphia-based fund industry consultant, commenting on the April activity. ``But my own feeling is that you're not going to see the kind of volume you saw through 1998, 1999 and the first quarter of 2000.''
Charles Schwab Corp. (NYSE:SCH - news) also saw a turnaround in April. Investors poured a net $1.5 billion into the more than 3,700 mutual funds in the company's fund Marketplace through April 27. That compared with net outflows from stock funds amounting to $1.4 billion in March.
Noting that bond funds saw a tiny inflow in April, a spokesman said, ``it was a reversal of fortune for those two categories.''
Investors disappointed with equities poured about $6.9 billion into U.S. taxable bond mutual funds in March, the third straight month of sizable inflows, the ICI said.
The flow of money into municipal bond funds fell to $1.04 billion in March, down from a revised $1.89 billion in February. Municipal bond assets rose to $286 billion in March, up from $283 billion in February.
Money market mutual funds began to lose some of their luster. Money market funds offered primarily to institutions reported an outflow of $15.89 billion in March after taking in about $33 billion in February. But money market funds offered primarily to individuals took in $29.35 billion in March compared with $21.64 billion in February. Money market mutual fund assets rose $16.75 billion to $2.036 trillion in March.
The collapse of many fast-growing technology stocks and the poor performance of growth funds last year taught many investors the need for diversification.
Michael Cooper, a financial consultant and vice president of investments at Salomon Smith Barney, said he has been explaining to clients the merits of having a diversified portfolio.
``Are you properly diversified among 8 or 10 industries and not just putting all your eggs into one basket?'' is the question Cooper asks clients.
Although some clients have been intent on concentrating in technology investments, Cooper said he reminds them that the products the companies make change rapidly and the business is very competitive.
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