Scroll down for seasonal statistics.

The following is an email explaining why current outflows from mutual funds are not bullish under current circumstances. This follows my having earlier said that these kinds of outflows normally occur around bear market bottoms.

I had unique the experience trading during the great bear market of 1973 and 1974. Towards the end of that bear market the public was leaving the market in droves because they just could not afford to lose any more money. In the bear market of 2000 throughout 2002 people lost all of their savings because of falling stock prices. A member or the family lost about $250,000. Another lost even more.

During a true bear market, people get out of the market because of continued losses in order to try and salvage what little money they have left. Nowadays people are not getting out for the same reasons. In a true bear market negative sentiment builds because of months of bad market experiences.
Today money is coming out of the market because people need it for other things and that is where it is.
In the U.S. our income distribution is more lopsided than it has ever been in. The upper 5% receive over 30% of all income. Most discussions about income inequality degenerate into useless conversations about fairness and calls for more social programs. These discussions never get close to the biggest problem. When one class of people have all of the money, an economy becomes unstable and subject to abrupt downturns. This happens because demand is more elastic in groups that have discretionary income. The economic downturns have nothing to do with fairness but only with economic principles.
In a democracy, when government gets large, the citizens with the money and power to control government get laws passed that put them in favorable positions in the economy. That is how the income distribution gets distorted. This was the situation prior to the depression of the 1930s also. In order for an economy to work efficiently markets must be free to clear. Government becomes a tool for those with adequate power to prevent and minimize their losses. In other words government is used to prevent markets from clearing. As this process continues the economy becomes more and more inefficient. Finally growth becomes impossible and a depression results.
Today ordinary citizens are consuming their savings because they are at a disadvantage financially. This means money is coming out of mutual funds.
Those of us who are short may lose all of out money but it won’t be because this is the start of a new bull market.