“The new bubble is going to end up like the old bubble,” says Mr Biderman.
From this article:
Buttonwood
Our mutual friend
Feb 24th 2004
From The Economist Global Agenda
Why is so much money pouring into mutual funds?
economist.com
Excerpts:
"According to Strategic Insight, a research firm, a net $60 billion flowed into equity and hybrid funds in January alone, on top of the $233 billion that investors popped into such funds last year."
"... investors’ appetite for risk is very high by historical standards at a time when valuations are already stretched, to put it mildly."
"Flows follow returns, and investors generally pull their money out of markets that are and have been falling and put them into those that are going up. This means that they sell assets when they are cheap and buy them when they are more expensive."
"The same has been true for equity funds. Shares were at their cheapest that same October, and again in March of last year. In the six months from October 2002, equity funds pulled in a paltry $1.3 billion. By contrast, inflows into equity mutual funds last month were even higher than the previous record of $56 billion, set in February 2000. Those with longer memories than a goldfish might recollect that the stockmarket, or the most exuberantly irrational part of it that hadn’t fallen already, peaked a month after that first record was set, and fell with a series of sickening thuds for another two-and-a-half years. The worst of times, as it were, swiftly followed the best of times." |
