Net sales of mutual fund shares dropped to the lowest point in the three years 2003-2005, with net sales of $257.5 billion. (See: Federal Reserve flow of funds account F214.)

Net sales of mutual funds fell almost 14% from 2004 to 2005.

Of net mutual fund sales, the amounts invested in corporate equity fell from 52.7% in 2004 to 49.9% in 2005. (See: Federal Reserve flow of funds account F122.)

The drop in mutual fund sales helps explain why stock buybacks became less effective in 2005.

Weak fund sales in combination with historical over-valuation of stocks and the impending retirement of baby boomers, are a portent of weakness in the U.S. equity market.


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