I follow a weekly graphic in Barron's called Cash Track. It shows 4 week average flows into equity funds, money market funds, taxable bond funds and municipal bond funds.
The flow into equity funds has been negative (often substantially so) for some time. Well... it has recently gone positive.
This is telling me that many are rushing back into equity funds. Probably, fear of missing out (FOMO) is driving it as tech stocks are back on a rage.
All I have to say is to look at the housing market recently. Lots of people got FOMO and were lined up to significantly overpay for housing. Now, prices are falling. There are no longer 20 bidders lined up for each home. The party is over! It will be years before many will sell those homes for more than they paid.
Do you see the parallels?
Be smart, be well-read, be aware and be successful.
"Ben Graham, my friend and teacher, long ago described the mental attitude toward market fluctuations that I believe to be most conducive to investment success. He said that you should imagine market quotations as coming from a remarkably accommodating fellow named Mr. Market who is your partner in a private business. Without fail, Mr. Market appears daily and names a price at which he will either buy your interest or sell you his.
Even though the business that the two of you own may have economic characteristics that are stable, Mr. Market’s quotations will be anything but. For, sad to say, the poor fellow has incurable emotional problems. At times he feels euphoric and can see only the favorable factors affecting the business. When in that mood, he names a very high buy-sell price because he fears that you will snap up his interest and rob him of imminent gains. At other times he is depressed and can see nothing but trouble ahead for both the business and the world. On these occasions, he will name a very low price, since he is terrified that you will unload your interest on him.
Mr. Market has another endearing characteristic: He doesn’t mind being ignored. If his quotation is uninteresting to you today, he will be back with a new one tomorrow. Transactions are strictly at your option. Under these conditions, the more manic-depressive his behavior, the better for you."
- Warren Buffett
