Tags: Greed | cash | fear | king

USA Today: Fear Is In, Greed Is Out

Thursday, 06 Sep 2012 11:09 AM

By Michael Kling

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Greed is out and fear is in for investors. Stocks are out of style and cash is king, USA Today reports.

Although cash generates returns from zero to close to zero, at least it won't disappear.

Blame the fear on the technology stock bubble over a decade ago, the 9/11 terrorist attacks and the computer trading debacles like the 2010 flash crash. Most of all, blame the 2008 financial crisis. Investors have gotten the message that it's a dangerous world out there.

Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation

Cash hoarding is at a record $9.43 trillion, held in money market accounts, certificates of deposit, and bank savings accounts, according to Crane Data information cited by USA Today.

The wealthy are also thinking safety. The top one percent put 56 percent of their free cash into savings and money market accounts in the first quarter, up from 24 percent in 2007, USA Today reports, citing a survey by American Express Publishing and Harrison Group. The rich are putting 44 percent in financial markets, down from 76 percent five years ago.

"Their speculative impulse is way, way down," Jim Taylor, Harrison Group vice president, told USA Today.

Individual investors pulled $395 billion from stock mutual funds from 2008 to 2011, according to Investment Company Institute data cited by USA Today. They sent over $775 billion into bond mutual funds, which are perceived as safer.

Investors are so fearful that they're buying 10-year Treasury bonds, which have negative rates of return when inflation is taken into account.

Companies are also apparently risk-averse. Companies in the Standard & Poor’s 500 Index are holding a record $1 trillion in cash, according to USA Today.

Investors remain skeptical of stocks even though the stock market has rebounded and is at a four-year high. The S&P 500 has jumped 108 percent since March 2009.

The aging population could be a factor, as older investors are more interested in dividends and capital appreciation.

Experts believe the trend away from stocks and toward bonds will continue as investors seek safety, according to The Wall Street Journal.

“Having experienced a second financial shock in a decade and after experiencing a sharp loss in wealth from the decline in home prices, investors have decided to be more prudent about investing, seeking the safety of bonds,” Anthony Crescenzi, a senior bond strategist for Pimco, told The Journal.

Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation

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