TOM HUDSON: We see a mixed market over the past couple of sessions but the stock
market is still close to six-month highs. Many investors still continue
avoiding stocks. Last year, while stock exchange-traded funds attracted $39
billion in investors` cash, investors pulled $121 billion out of stock
mutual funds. We spoke with Charles Biderman, CEO at TrimTabs, which tracks
money going into and out of stocks and began by asking him about investor
CHARLES BIDERMAN, CEO at TrimTabs: The retail investor is scared that individuals have been
selling for four years. Hedge funds have had net reductions for fours
years. So there has only been two sources of money for the stock market.
The U.S. government has been printing $100 billion a month of new money and
some of that is finding its way into stocks and companies have a huge
amount of cash on their balance sheets, so that has created an environment
where there`s no volume because there are no buyers.
HUDSON: So what are some of the economic implications, let alone the societal implications of this?
BIDERMAN: More money has been made investing in stocks than creating
companies to invest in and that can`t keep going. The real bubble is the
equity market. And unless the U.S. economy starts to grow at a very rapid
pace, we see that there`s going to be a lot of unemployed, formerly rich
portfolio managers, looking for a new career.
HUDSON: Folks on Main Street may not be so concerned with that.
BIDERMAN: People on Main Street would probably applaud initially if
the market collapsed. However, the wealth of the nation, a good portion of
it, was in real estate and now the only portion that`s been holding up is
the stock market. Ben Bernanke said the purpose of QE1 and QE2 was to keep
asset prices higher so that has created a false sense of confidence among
those with wealth in the stock market. It`s created, also, a boon in high-
end retailers. If that goes away, the sole source of improved economy is
going to disappear.
HUDSON: Sounds clearly like you`re very pessimistic.
BIDERMAN: We`re actually neutral now because at some point in the
future, I expect QE3 to be announced, which will, another bout of printing
new money, which will support equity prices. However, longer term, unless
some miracle happens and we get some sound economic policies out of
Washington and Europe — a miracle happens in Europe, I just don`t see how
we avoid the upcoming train wreck.
HUDSON: So how bad could it be?
BIDERMAN: It`s not going to be a huge disaster, but it`s not going to – however, if you`re long and in the market, it will be.
HUDSON: What`s the longer term mean, 24 months, 36 months, four years?
BIDERMAN: More than a year.
HUDSON: Does the world look worse today than it did three years ago?
BIDERMAN: Absolutely. Medicare, Social Security, government
pensions, government health care benefits, both state, local and Federal,
is over $50 trillion. How does $6 trillion in income support all that
debt? I have no idea. It`s impossible.
HUDSON: Charles thank you, Charles Biderman, CEO of TrimTabs.
BIDERMAN: Thank you.
GHARIB: Tomorrow, we continue our interviews from the ETF universe
conference and we`ll talk about the psychology of gold funds.