A year after Charles Biderman's provocative post first appeared on Zero Hedge, in which he asked just who is doing all the buying of stocks as the money was obviously not coming from retail investors (and
came up with one very notable suggestion), today Maria Bartiromo invited
the TrimTabs head once again (conveniently in CNBC's lowest rated show,
during Christmas Eve eve, at a time when perhaps 5 people would be
watching) in an interview which disclosed that after more than a year of
searching, Biderman still has no idea who actually buying. In response
to Bartiromo's question if the retail investor, who left after the flash
crash (thank you SEC), Biderman responds what every Zero Hedger has
known for 33 weeks: "Retail investors are not coming back to the US. Those
investors that are investing are buying global equities and are buying
commodities. We are seeing lots money going into commodity ETF funds:
gold, silver..." and the even more unpleasant summation: "individuals
have been selling, companies are net selling, insider selling and new
offerings are swamping any buyback and any cash M&A activity since
QE 2 was announced. Pension funds and hedge funds don't really have that
much cash to invest. So what nobody's asking is what happens when QE 2
stops: if the only buyer is the Fed, and the Fed stops buying, I don't know what is going to happen...When
I was on your show a year ago I was saying the same thing: we can't
figure out who is doing the buying it has to be the government, and
people said I was nuts. Now the government is admitting it is rigging the market." Cue Bartiromo jaw dropping.
As for the simple math of where the money is actually going:
"Money flows come out of income, take home pay of everybody plus money that came from real estate is down about $1 trillion a year. It peaked in the
3rd quarter of 2008, at $7 trillion, that's take home pay for everybody
who pays taxes plus the money that came from real estate. It has now
bottomed at $5.9 trillion. We are still down $1.1 trillion in
money that people have to spend each year, that 16%. And some of the
money that is leaving equity markets we think is going to pay bills."
Much more CNBC non-grata truthiness in the full clip, in which Biderman suggest what Zero Hedge readers realized over a month ago, that in June QE3 will likely have at least a partial municipal bond focus.
Update: Charles has just sent in the following addendum to his CNBC appearance:
Due to time constraints, what I didn’t get to address on CNBC today is what will happen after the Fed is either successful or not successful with
QE2. The Fed is rigging the market by digitally creating money that is
used to buy financial institutions assets — currently Treasuries, last
year all kinds of toxic waste. What will happen when the Fed stops
buying assets?
What the Fed is hoping is that QE2 actually worksand the economy starts growing at 3+%. If that happens, unlikely as it
is, then the Fed will end its QE activities. But for the stock market,
if the only source of buying power, the Fed, withdraws its support, the
market is likely to plunge to well below fair value. At that point
perhaps some new source of money , i.e., China, et al will be able to
buy US assets on the cheap.
The Fed is legally mandated tomanage the economy, not the stock market. If the Fed’s QE is successful
and the trickle down impact of higher equities creates a sustainable
recovery, the Fed will gladly sacrifice the stock market to its legal
mandate to manage the economy.
A more likely outcome is thatwhile stocks will be higher by the end of QE2, economic growth will not
be sustainable without government aid. That would then require
additional QE. Stock prices could then keep rising for a while. At some
unknowable now moment in time, unless the economy starts to grow again,
no amount of QE can work forever in keeping the current stock market
bubble from bursting.
