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For July, investors withdrew $5.5 billion from domestic equity funds, slightly more than in June, which followed $10 billion of withdrawals in May, according to a memo sent out by Tom McManus of BofA yesterday.International investing also "screeched to a halt", as the $2.0 billion in weekly inflows into funds outside of the U.S. have stopped.
This morning, short-term lending rates, the rates for financial institutions to do business with each other, shot up in Europe -- another sign of tight money.
Retailers also released generally weak monthly sales data this morning, with a few exceptions.
We blogged yesterday that the Fed's objective is to control the psychology of inflation expectations, it appears from all the points listed above that the Fed has succeeded. Both the ECB and the Fed announced they are adding reserves to the system. Look for short-term rates to start coming down in September.
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