US investors busy making other plans

What does "Bric" really stand for? No, no - not Brazil-Russia-India-China, as intended by the bloke who coined the acronym, Jim O'Neill of Goldman Sachs, Wall Street's biggest bank by assets.

In fact, according to the ever-amusing zerohedge.com, it means "Bloody Ridiculous Investment Concept". O'Neill, as chief carnival barker, has been flogging the idea to clients and potential customers for the past decade - but the bank's latest results suggest people are tiring of his pitch.

Profit at Goldman Sachs fell 56% in the fourth quarter, dragged down by a fall in revenue in all segments including O'Neill's asset management division, which dropped 16% compared with the same quarter in 2010.

While it is hard to feel sorry for O'Neill - who so bitterly dismissed the hope of South Africa ever becoming a member of the Bric bloc - the results clearly signal a change in the appetite of US investors. Going by the statistics, they are bailing out of risky assets - and that includes US stocks.

As recorded by zerohedge.com, in the week after Christmas America's moms and pops withdrew $7.1-billion from US equity mutual (unit trust) funds - the 20th consecutive outflow "since a tiny inflow in mid-August, which if excluded would mean 36 consecutive weeks of outflows beginning in late April, or roughly the time when the market peaked".

What are we to make of this? After all, retail investors are notoriously wrong on most major market movements - buying high and selling low in the kind of panicky illogic that makes professionals chuckle indulgently (and do the opposite). Have smaller investors once again vacated the market at exactly the wrong time?

Since the new year began, markets have behaved - to the sceptical eye - in the most sinister fashion possible: they've slowly, nicely, gently been going up, with none of the whiplash volatility that gave everyone night sweats in 2011. Volumes, too, have been low, prompting one or two pundits to term the baby-bull January market a "melt-up".

Nobody wants to speak too soon, but the horrors of the past 12 months seem far away. Nothing has changed, of course. All the old nasties are still there, including looming Eurogeddon, but we're told that every possible hazard has been "priced in". It's been "discounted by the market". Taken care of.

I don't know about you, but this kind of talk gives me the creeps. When the experts start sounding smug about the unnatural calm, as if tickled by the vain notion that they and their mates have somehow contrived to cool the whole engine down, it's enough to make anybody run for the exits.

Before we take any hot-headed decisions, a quick recap. Retail investors in the world's biggest economy have for the past nine months or so fled the general equity market, preferring cash, bonds, property and gold. This may, or may not, be a mistake - depending on how confident you are in the guesses of asset managers like Jim O'Neill.

Just before the festive break, the Goldman Sachs guru published Viewpoints From The Office Of The Chairman, which you can access easily via businessinsider.com. A brief summary:

"There are plenty of economic, political, social and policy risks for 2012. They are not all negative. It is quite conceivable that not only the US will continue to surprise on the upside, but others could too. This includes some of the Bric and other growth markets like Brazil and even India." (O'Neill also fancies the chances of his new acronym, Mist: Mexico, Indonesia, South Korea and Turkey.)

"The S&P500 is more likely to be above 1400 this time next year than below 1000." This is a vital one: the US bellwether index has historically been extremely tightly correlated with both the JSE and SA government bond yields - and hence also the rand-dollar exchange rate. You go, Jim-boy ...