Why retail investors have taken their marbles and gone home

Barry Ritholtz see signs everywhere that retail investors have left the building: low trading volumes and decline of popular media aimed at the small investor, like CNBC.

The reasons why are complex, but Ritzholtz hazards ten possible reasons:

1 Secular cycle: As we have discussed before, there are long-term cycles of alternating bull and bear markets. The current bear market that began in March 2000 has provided lots of ups and downs — but no lasting gains. Markets are effectively unchanged since 1999 (the Nasdaq is off only 40 percent from its 2000 peak).

The way secular bear markets end is with investors ignoring stocks, enormous P/E multiple compression and bargains galore. Bond king Bill Gross and his Death of the Cult of Equities is a good sign we are getting closer to the final denouement.

2 Psychology: Investors are scarred and scared. They have been scarred by the 57 percent crash in the major indexes from the 2007 peak to the 2009 bottom. They are scared to get back into equities because that is their most recent experience, and it has affected them deeply. While this psychological shift from love to hate to indifference is a necessary part of working toward the end of a secular bear, it is no fun for them — or anyone who trades or invests for a living.

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Image from a game of marbles, 1919