Wednesday, June 20, 2012

TrimTabs: Funds Continue to Flow Out of U.S. Stocks

Funds flow tracker TrimTabs is reporting discouraging news for equities, saying investors continued their flight to the perceived safety of bonds in the first quarter while corporate insiders are withdrawing support for their own stocks as buybacks fell to a three-year low.

In a press release on separately managed accounts, TrimTabs noted that net inflows of $34 billion in the first quarter reversed outflows of $104.6 billion in the two previous quarters.

But the direction of U.S. equity assets has been decidedly negative for three quarters running, with $158.1 billion leaving U.S. stocks, more than twice the $61 billion in assets moving into bonds ($31.9 billion) and foreign equities ($28.9 billion). Fixed income and foreign stocks attracted the most assets in the most recent quarter, but the accent was heavily on bonds, which attracted $59 billion—more than three times the level of foreign equities ($16 billlion).

"Separate account managers see limited potential for capital appreciation in stocks and they are putting a premium on current income in a low-yield environment," TrimTabs CEO Charles Biderman said in the release.

Meanwhile, Bloomberg Businessweek is reporting TrimTabs and Bloomberg data showing a 58% decline in stock buybacks since levels seen during market lows in 2009. Investors disagree about whether this is bullish or bearish, with bulls arguing companies are putting their money in productive capital investment while bears worry the withdrawal of support will hurt stocks as the U.S. recovery stalls and Europe falters over financial contagion and recession.

TrimTabs principals have long maintained that liquidity flows signal investors have shunned efforts by the Federal Reserve and politicians to manipulate investors into buying risky assets. A report in January said consumers have mainly been putting their funds in safe deposit accounts.

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