Talking Numbers

Retail investors are betting big on this sector

Charles Biderman, TrimTabs Investment Research Chairman, says investors aren't buying US stocks. Here's where they're going instead.

Are retail investors running away from American stocks?

According to TrimTabs Investment Research, there has been "a dearth" of stock inflows compared to this time last year. In January 2013, there $10 billion inflows to US mutual funds and exchange traded funds (ETFs). In December, that number was $15 billion. However, in January, there has been an outflow of just under $1 billion.

Charles Biderman, TrimTabs Investment Research Chairman, says the one of the things has raised stock prices is that companies have lowered the amount of shares in the market through buybacks. That, in turn, was helped by the Federal Reserve Banks' $85 billion bond-buying monetary stimulus, which has begun to be tapered.

(See: CNBC's Special Report: The World's Biggest Risks)

"This outfit – I don't know if you've ever heard of them – the Federal Reserve," says Biderman. "They've been created $85 billion a month last year to be available to buy financial assets, bonds and then stocks. This year, we're seeing the Fed's tapering; they're buying less. We are seeing less money coming in from individuals and we're also seeing a slowdown in corporate buying."

Biderman says investors are now looking overseas for returns. And, surprisingly, he also sees money starting to go back to bonds.

"A lot of money is going into the developed non-US markets like Europe and Japan," says Biderman. "A lot of money is going back into bond funds."

This is in contrast the last year's fourth quarter, where money flowed in to equity mutual funds and ETFs, according to Biderman. That was based on the assumption that the economy was going to continue to grow even with a Fed taper.

(Read: Emerging market currency 'contagion' spreads)

"The only problem with that is maybe the economy isn't doing so well," says Biderman. "The real-time [data] we track based upon withheld income and employment taxes say the economy is barely growing. We've been saying it's about 100,000 a month new jobs add rate, which is not sustainable – not without the help from the wealth effect from higher stock prices."

That's the big problem, according to Biderman.

"They're tapering and the economy's going to slow," says Biderman. "I don't know what that means for stock prices. I don’t think it means good times."

To see the full interview with Charles Biderman, watch the video above.

 

More from Talking Numbers:

Here's why Tesla's shares could soon stall
Why Netflix could break more records
Cold weather is making this commodity hot

________________

Follow us on Twitter: @CNBCNumbers
Like us on Facebook: facebook.com/CNBCNumbers

View Comments (18)