Wednesday, January 31, 2007

Fun With Fund Flow Data

Today, Investor's Business Daily ran a story on fund flows compiled by the Investment Company Institute. It said that shareholders pulled $2.47 billion from domestic funds in December, while foreign funds pulled in $13.12 billion.

That is a huge, glaring disparity. Foreign markets have outperformed the domestic market for the last four years, so it makes sense that there is a lot of performance chasing going on.

But we all know how this story ends. A sharp correction in the international markets could spark a big reversal in fund flows. This is another sign that the bull market here isn't over. When we see a reversal of the above trend, and domestic markets pull in gobs of money and outperform for several years, then I will pay heed to those who like to call market tops.


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