View from the Observation Deck

1. Once upon a time retail investors wanted to know what the so-called "smart money" was buying. How times have changed.
2. The green line in the first chart shows large blocks of capital consistently flowing into the stock market over the past five years. The vast majority of said flows was institutional money.
3. The second chart shows money flowing out of the stock market over the same period. The vast majority of those outflows are from retail investors.
4. We believe that retail investors, in general, have demonstrated a genuine lack of confidence in the stock market.
5. The pain of enduring two bad bear markets in less than a decade was too much for some, in our opinion.
6. Perhaps the last straw for them was experiencing the "Flash Crash" on May 6, 2010 (see green line on 2nd chart after 6/5/10).
7. During the flash crash, major stock indices plunged about 7% in a 15 minute span only to rebound sharply within minutes.
8. For those retail investors taking a wait and see approach, the S&P 500 has posted a total return of 19.0% since the flash crash (5/6/10-6/5/12).
9. Retail investors have redeemed hundreds of billions of dollars from U.S. equity funds over the past five years and shifted a large percentage of it to bonds, according to data at ICI.org.
10. They have done so despite the fact that the S&P 500 has posted a cumulative total return of 103% since the end of the bear market on 3/9/09.