Why The Withdrawals?

http://www.futureofcapitalism.com/2011/01/why-the-withdrawals

The New York Times has an editorial about the news that "2010 was the fourth year in a row that individual investors withdrew more money than they added to funds that invest in American stocks. Some $80 billion was withdrawn in 2010, on top of nearly $240 billion in the three years before that." The paper attributes the news to "doubt about the economy" and "a loss of faith in financial markets."

Well, if the investors are moving the money out of American stock funds and into international stock funds, gold ETFs, or bond funds, it doesn't necessarily demonstrate "a loss of faith in financial markets," just a belief that American equities are overpriced. Nor does the Times consider the possibility that at least some of the withdrawals are demographically driven, as retiring baby boomers move from saving for retirement to spending down that savings. Nor does the Times consider the possibility that among those selling stock funds are those 9.5% of Americans who are unemployed, and who might be using their savings to fund living expenses. All of these factors would remain considerations even if lawmakers followed the Times's advice and piled even more government regulations onto stock funds.

by Ira Stoll  |  Jan 10, 2011 at 9:04 am Related Topics:  Capital Markets Regulation receive the latest by email: subscribe to the free futureofcapitalism.com mailing list