After sitting out almost all of the rally thus far and/or throwing 90% of their money into (usually) staid bond funds [Sep 16, 2009: Mutual Fund Investors Cling to Safety of Bonds, Missing Stock Rally] you can almost hear the squeals of delight from the Brothers of Goldman from here. Like the mouse to the cheese... every time.

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Quite an interesting tug of war here - Ben Bernanke has an all out war on savings / cash holdings with his destruction of savings / CD rates. But the institutional crowd simply has to be salivating as they watch the retail guy file in, lockstep. Ooooh... drama.

Via WSJ

  • Mutual-fund investors' confidence in the markets appears to be rising, with several fund categories seeing their biggest inflows of the year in the latest week.
  • Global and emerging-markets bond funds, as well as global stock funds and sector funds, saw the highest inflows this year during the week ended Thursday. At the same time, money-market funds had their second-biggest weekly outflows this year, according to Boston fund tracker EPFR Global.
  • The week saw about $3 billion flow into sector-specific stock funds, with commodity-sector funds taking in $1.1 billion, their highest inflows since EPFR Global began tracking them in 2006. Real-estate-sector funds took in $925 million, a 2½-year high. Mr. Wilson suggested that part of the attraction of these funds is as a hedge against possible inflation.

I am having flashbacks to early 2007 after reading that last blurb.

  • Emerging-markets bond funds saw inflows of $540 million, an 87-week high. Other categories with inflows were global bond funds, high-yield (or junk) bond funds, financial-sector funds, energy-sector funds and technology-sector funds.

Buy high, sell... ? wait a second here - that's not how it goes.

  • Mr. Wilson said flows into international funds, especially emerging markets, were due to investors chasing performance. Latin America stock funds are up more than 80% this year, according to Morningstar, while emerging-markets bond funds are up almost 30%, lagging behind only high-yield bond and bank-loan funds in fixed-income performance.

It appears at this time, about 75% of the money funneled into money market funds has now come out. Thankfully - after that last 25% is brought to bear, our largest oligarchs have plenty of money on loan from the Fed to do what is right for the country.

  • Money-market funds continue to see outflows, with more than three-fourths of inflows from last year pulled out this year, said EPFR Global, which estimates year-to-date outflows are $332 billion.

I don't know if old school rules work in anything anymore with all the not so invisible hands running things nowadays, but even in China - once the number of new retail brokerage accounts opening exploded higher [Jul 24, 2009: Bookkeeping - Selling China Exposure as Chinese Run In] - we had a swift, nearly 25% kick in the pants. But unlike China's central command, the United States has not made 1 hint of pulling back on any form of invisible handiness.

Color me incrementally more worried, with the caveat: if old rules have any bearing nowadays.

p.s. speaking of institutions and the retail guy, Zerohedge shows suspicious call option activity ahead of the Perot Systems buyout. Par for the course SEC, maybe look into it?