LIPPER SENIOR RESEARCH ANALYST DON CASSIDY ON KTLK AM-760
Thursday, Oct. 11
Q. Well, Don, usually around this time each month you have the news onwhat fund investors have been doing with their accounts -- buying orselling funds...A. Right, and for September the results should not be a big surprise giventhe scary world and market news.
Q. So, do you mean investors took money out of their stock funds -- orshould I ask HOW MUCH did they remove?
A. You hit it on the nose. We had a one-month all-time record net outflowof $32 billion from stock funds in September. That tops the prior recordwhich was just shy of $21 billion last March at that little panic bottom.
Q. Isn't this about three months in a row that money has been drainingout?
A. Exactly. And this is the first three-peat, so to speak, since thethird quarter of 1990, when Dow Jones fell 20% as we started preparationsfor the Gulf War.
Q. Where did the money go, Don? Under the mattress?
A. I'd say the vast bulk of it went into MONEY MARKET funds, which took inover $57 billion, which is a huge amount there. Especially large sinceSeptember is a tax-paying month and people normally draw net dollars out ofMoney Market funds then.
Q. What happened to BOND funds?
A. They had a small inflow, about $7 billion, but that was WAY below the$16 billion for August. People were just diving for cover in the foxholes.They sold long-term bond funds and bought short-intermediate term ones.Probably war and inflation and federal deficit driven.
Q. Not sure we will like the answer, but what happened in theColorado-managed fund groups?
A. It should not be a surprise, that they had a net outflow too. Wefigure it at about $4.5 billion. Remember, a lot of the funds here have amore aggressive type of flavor to them than the average fund, and peoplewere looking for safe rather than courageous ideas.
Q. So, were people socking it away in the LOCAL money funds as they didnationally?
A. Actually, no. They pulled about $1.2 billion OUT, which means theequity and bond funds had about a $3.3 billion drain.
Q. Tell us about the local firms' net flows, then...
A. Estimated Net Flows
Janus: -3.5 Billion (of which about $1 billion was in MMFs)
Invesco: -0.63 Billion
Marsico: -169 Million
Berger: -75 Million
Dreyfus/Fdrs: -60 Million
Westcore:-10 Million
Invt Research: +1 Million
ICON:+12 Million
Q. What's the story on ICON, Don? How are they doing it?
A. Well, they have a number of sector and region funds that have mostlyoutrun their benchmarks. They are very nimble and not afraid to sell whenupside momentum falters. That has saved them from the fate of thebuy-and-hold crowd. And obviously a lot of website notice performancequickly. We actually had Craig Callahan, their chief investment officer,as a speaker at our American Association of Individual Investors FUNDSGroup meeting last night.
Q. What do you make of all this?
A. Well, people diving for cover late is the same sort of comfort-seekingbehavior as buying tech funds last about 18 months ago. I suspect thatunless we have some more terrible terrorist events, September 21 may havemarked the bottom. People certainly capitulated they way they do atbottoms. And already, we have seen some timid net INFLOWS in October asthe market has rallied a bit. "Buy high, sell low" all over again.
Q. So should people absolutely buy and never sell?
A. They may TRY to do it, but they seem to give up at bottoms. S&P 500Objective funds had a net OUTflow of $1.7 billion in September, after asmaller outflow at the March bottom. Personal opinion, but I think buy &hold got people into their current mess -- of holding all their sick techstocks much too long. The question is B&H WHAT! Not everything works wellforever. Polaroid, a Nifty-50 stock of a generation ago, declared Chapter11 last week.
