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The Dow 13000 Illusion

March 16, 2012

From Tyler Durden at Zero Hedge:

[J]ust last week another $1.4 billion in cash was pulled from domestic equity funds, nominal Dow 13,000 be damned. The truth is that the banks are desperate to start offloading their risk exposure to retail investors, and instead of selling, are furiously trying to send the market ever higher just to get that ever elusive “investor” back: just look at how much the market rose by last week, CNBC will say: do you really want to be out of this huge rally? Alas, the damage has been done: between the Great Financial Crisis, the Flash Crash, a massively corrupt regulator, rehypothecating assets that tend to vaporize with no consequences, and a central bank which effectively has admitted to running a Russell 2000 targeting ponzi scheme, the investor is gone.

So, where is the money?

Presenting: America’s combined cash hoard, which between total demand deposits, checkable deposits, savings deposits, and time deposits (source H.6), is at an all time high of $8.1 trillion.

And what if:

[W]hile the Fed may have control over Excess Reserves, or so it believes, via the interest charged on overnight reserves, it will have absolutely no control over the herd mentality and the avalanche of money, should it proceed to rotate not so much out of bonds into stocks, but far more importantly, out of electronic cash (which for all intents and purposes is the US M2 these days), into the stock market.

It’s inflation, bitchez.

From commenter Amagnonx:

Banked money is sitting within arms reach of the biggest thieves the world has ever seen – they no longer need any justification, nor rationalization – if people leave it there long enough, it will get stolen.

From commenter Vampyrotheuthis:

Joe Sixpack being underwater is the reason we will not see the retail trader come back. Every penny Joe makes goes into paying the bills or debt. It is not going into the market. The big boys can try and pump all they want, the sheeples are broke.

Consensus in the comments seems to be a major correction will be manufactured, at which point everybody jumps back in the market.

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