What if they had a crash and nobody came?

Back when the dinosaurs were roaming the earth — ok, 1999 — I remember taking a day off and waiting to sign in at the local community center’s gym. (This is unusual enough for me to remember it.) The middle-aged guy in front of me was hitting on the receptionist, who was clearly a very polite woman. “I’m retired,” he said, in a last-ditch effort as the line grew behind him. “You know. AOL stock.”

Remember this guy?
Remember this guy?

AOL was, in fact, located nearby, so this was remotely plausible. A bubble year is a thing of miracles and wonders, and many things seem plausible that don’t seem so now. Not only were stocks soaring in 1999, but incomes were growing faster than inflation as well. (This was true to a lesser extent in 1987, another bubble year). Jobs were plentiful: The unemployment rate was 4%, low enough for the Federal Reserve to start fretting about the specter of inflation.

And people loved stocks. Investors poured a net $188 billion into stock mutual funds in 1999 and another $316 billion in 2000 — a record that stands today.

Despite a six-year bull market, however, there just doesn’t seem to be the kind of old-fashioned irrational exuberance among individual investors that would define a bubble. Consider this: According to a Bankrate.com survey released today, investors consider — wait for it — housing to be the best long-term investment. Next up? Good old cash, currently yielding zilch. Stocks are in third place, with just 17% of those asked considering them to be the best long-term investment.

Investors have yanked an estimated $17.5 billion from open-end stock funds the past 12 months, according to the Investment Company Institute. For U.S. stock funds, the outflow is a fearsome $128 billion.

Part of that is a reflection of the popularity of exchange-traded funds, which have seen inflows of $100 billion or so. While impressive, it’s nowhere near the inflows of 1999-2000.

The ICI notes that nearly all inflows to mutual funds in the past few years have been into no-load institutional funds, which is the primary designation for funds in the 401(k) retirement market. In other words, investors are dutifully shoveling money into their retirement accounts, but with no particular enthusiasm for stocks.

At this point, the real danger lies in institutional panics — a short-term correction in stocks because money managers are worried about Greece, the Federal Reserve, Congress or corporate earnings. And, while stock prices are high relative to earnings, we won’t reach bubble territory until the rest of the public storms in. And that seems to be a ways off yet.

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