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Stock Mutual Fund Cash Levels Drop To New All Time Record Low

Tyler Durden's picture




 

As John Hussman correctly highlighted many moons ago, there is just one problem with the whole "cash on the sidelines" statement - it is completely and utterly wrong. Yet while we agree with it in principle, what is also true is that if you don't have cash, you can't buy stuff, period. Or in this case, equities. Yes, one can sell existing holdings to raise cash, but in an environment such as ours, in which underperforming the levered beta tsunami (or, unlike in 2010, the modest wakeboarding wave) means immediate termination, and where margin debt barely moved off its all time highs even as the general market (and especially fixed income) crashed in a repeat of late 2008, it seems nobody is willing to sell anything, come hell, high water or pink slip. Which is why, semantics aside, the fact that the mutual fund space just saw its total Liquid Assets drop to a new all time record low of 3.3% (down from 3.4%), or about $150 billion on $4.54 trillion in stock assets, is not good, no matter how one defines cash or sidelines. And with so little cash to bid up stocks even as they plunged (i.e., contrary to the expectation cash did not go up), the very troubling question arises yet again: just where will the purchasing power come from (and no, it's not retail: retail is long gone).

 

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Wed, 08/31/2011 - 22:07 | 1621402 SilverDosed
SilverDosed's picture

Silver Bitchez

Wed, 08/31/2011 - 22:13 | 1621423 Pladizow
Pladizow's picture

Is'nt cash on the side lines a flawed argument, as for every buyer there is a seller, so the same amount of money remains on the sidlines?

That is, if I have cash and buy one share, then I have the share and the seller now has my cash, which is back on the sidelines.

Wed, 08/31/2011 - 22:28 | 1621457 spiral_eyes
spiral_eyes's picture

Musical chairs, bitchez.

China has all the liquidity.

Hail your new masters.

http://azizonomics.com/2011/08/31/chinas-endgame/ 

Thu, 09/01/2011 - 02:30 | 1621898 Michael
Michael's picture

OT

I just thank God Obama won't create any new good paying jobs for his democrat sheeple, due to the unfair trade agreements the democrats passed.

NAFTA, CAFTA, and GATT/WTO are going to give the democrats everything they deserve. NOTHING!

Thu, 09/01/2011 - 02:42 | 1621922 Michael
Michael's picture

The real problem is;

People had gotten used to 0% financing for 5 years.

Now they got to put 20% down and pay about 5%.

It's really that simple.

 

Thu, 09/01/2011 - 03:32 | 1621951 Michael
Michael's picture

Normalcy in the financial world will completely change.

Thu, 09/01/2011 - 07:02 | 1622090 New_Meat
New_Meat's picture

mikey, u b talkin' to u self

Thu, 09/01/2011 - 05:41 | 1622017 MarketTruth
MarketTruth's picture

Cash on sidelines? Maybe they are buying physical gold and silver instead of staying in the ever-worth-less US dollars.

Wed, 08/31/2011 - 22:19 | 1621441 Snidley Whipsnae
Snidley Whipsnae's picture

"it seems nobody is willing to sell anything"

Are people starting to avoid fiat? Lots of people are sitting on 'assets' that they could sell, but won't.

I see a lot of barter going on at swap meets, flea mkts, but not as many cash transactions.

Is this caused by a lack of cash, cash hoarding, tax avoidance, or sellers preference for goods over cash? I don't know, just reporting what I see... Anecdotal observation from the real world.

Thu, 09/01/2011 - 07:04 | 1622086 Bicycle Repairman
Bicycle Repairman's picture

It's the common man's answer to all this financial bullshit: black market.  It is how the common man cuts out the FED, etal.  If the FED thinks it has problems now, just wait until the black market becomes part of everyman's daily experience.  This was a major reason for Volcker's actions in the early 1980s.  The common man was exiting "the system".

Wed, 08/31/2011 - 22:12 | 1621421 Blorf
Blorf's picture

Well, the Fed will need to herd everyone into bonds prior to the next auction. Sept 6th, right? I think I'll be shorting the SP500 going into the weekend. Nothing like a little panic to drive everyone back into T Bills.

Wed, 08/31/2011 - 22:47 | 1621503 Cash-NonCash
Cash-NonCash's picture

SPY puts look to be your new favorite flavor, how do you go wrong?

Thu, 09/01/2011 - 00:06 | 1621660 sun tzu
sun tzu's picture

They could just print a few hundred billion and buy up the bonds

Wed, 08/31/2011 - 22:14 | 1621426 chump666
chump666's picture

Watching Asian volumes now, that is vapor trading going on.

Wed, 08/31/2011 - 22:19 | 1621442 lolmao500
lolmao500's picture

And that's why the FED needs to do QE3... and it needs to be at least 2 trillion.

Wed, 08/31/2011 - 22:43 | 1621497 Cursive
Cursive's picture

@lolmoa

Alex, what is - 

just where will the purchasing power come from 

Wed, 08/31/2011 - 22:20 | 1621443 rosiescenario
rosiescenario's picture

Well, this must mean the market will rise further since it will make the PPT very nervous that mutual fund withdrawls at this time could precipitate a death spiral...can't let that scenario come into play.

Wed, 08/31/2011 - 22:21 | 1621448 buzzsaw99
buzzsaw99's picture

The "cash on the sidelines" meme is just the bankers drooling like a dog looking into the butcher shop window.

Wed, 08/31/2011 - 22:22 | 1621451 XRAYD
XRAYD's picture

Looks like Joe and Judy have been putting their "idle" cash to work buying stock funds and ETFs or groceries!

 

 

Wed, 08/31/2011 - 22:34 | 1621463 ben_bernanke
ben_bernanke's picture

The same place it's been coming from: The Fed printing money. This isn't complicated. They are MAKING THE CASH. If you want to get your hands on any of it, I'd recommending getting long the market as soon as possible.

Wed, 08/31/2011 - 23:02 | 1621540 Sam Clemons
Sam Clemons's picture

Seems that increasingly larger amounts are going into gold and silver and not the stock market. 

Plus, its not printing money remember?  As the Bernanke said, it is just a ledger entry, so much better.

Wed, 08/31/2011 - 22:39 | 1621472 Manthong
Manthong's picture

So what happens when, after the next big scare (or plunge) a few million petrified boomers all press the sell button in their retirement accounts and try to go to cash all at the same time?

Thu, 09/01/2011 - 00:08 | 1621664 sun tzu
sun tzu's picture

The fed will come to the rescue and stop the plunge dead in its tracks like they did last summer and this August. 

Thu, 09/01/2011 - 01:38 | 1621827 Alpha Monkey
Alpha Monkey's picture

So what happens when, after the next big scare (or plunge) a few million petrified boomers all press the sell button in their retirement accounts and try to go to cash all at the same time?

Well first they will get front-run by the HFT and attain the lowest possible price for their assets.  Then, after the dollar is strong again, the fed will launch QEX and repeat the process of dollar destruction and bank balance sheet clearing.

Wed, 08/31/2011 - 22:40 | 1621483 Osmium
Osmium's picture

Cash on the sidelines = The Bernak printing money ad nauseam.

Wed, 08/31/2011 - 22:40 | 1621486 jakethesnake76
jakethesnake76's picture

Serious Question WTH is the money going it has to be going some where?? i know there is trillions in bad loans around the world but where is all the money at ???

Wed, 08/31/2011 - 23:00 | 1621538 DavidAKZ
DavidAKZ's picture

Secret Exemptions Allowed Speculators to Distort Futures Markets

http://www.youtube.com/watch?v=t3Xl0L21PjU

 

See also, 'The Warning' on PBS re role of CFTC

Thu, 09/01/2011 - 00:18 | 1621691 drbill
drbill's picture

There's always a lot more credit than money. The money never really existed. It was an illusion created by the expansion of credit.

All busts are proceded by a large expansion of credit, i.e. the boom. The larger the credit expansion, the bigger the bust. Welcome to the Second Depression.

Wed, 08/31/2011 - 22:41 | 1621489 Carpathia
Carpathia's picture

In the real economy, everything is slowing down dramaticly.  I see it in my business.  The NFP print this Friday is going to be way below the consensus of +50K.  I suspect -150K.  This will surely panic people into the coming treasury auctions.  It also sets up Obama's speech next week.  He clearly had an advance read and delayed the speech for a reason.  Divided government makes any intervention impossible.  Obama has chosen to start the campaign and rant against the dastardly Republicans.  He has not chosen leadership.  It probably is too early for any consensus to emerge.  Leadership is probably not yet possible.  The Bernank made clear that fiscal stimulus is to be preferred, but absent it he will not let the ship go down on his watch.  Lagarde also pleaded for EU (German) fiscal stimulus but that too ain't gonna happen.  Trichet has already crossed the Rubicon with his purchases of sovereign debt in the secondary markets.  None of them are prepared for "this sucker going down" on their watch.  This is about to get very interesting.  September/October is the real deal.

Wed, 08/31/2011 - 23:51 | 1621632 jakethesnake76
jakethesnake76's picture

 September/October is the real deal. No kidding

Wed, 08/31/2011 - 22:48 | 1621506 RobotTrader
RobotTrader's picture

 

 

Larry Pesavento says the markets are extremely unstable, investors are very nervous, and he's expecting a crash starting tomorrow.

Listen towards the end of the podcast:

http://www.tfnn.com/hour02.html

 

Wed, 08/31/2011 - 22:52 | 1621520 HedgeAccordingly
HedgeAccordingly's picture

vapor trading tonight.. ES up half a percent... makes perfect sense with the dollar up and all. Im with you on the rush the school into the T bill thesis 

Wed, 08/31/2011 - 23:12 | 1621561 Cdad
Cdad's picture

Add to that..the Australian market being up.  No sense...no sense at all.  But the bear in me is not bothered by this, as I suspect the criminal syndicate is just playing around with the few hours it has left until more recession news grips the markets, ISM, NFP, etc.  

The close on the US session was quite revealing.  

Thu, 09/01/2011 - 00:50 | 1621741 chump666
chump666's picture

Check it now on this;

*LME copper fell 0.3 percent on Thursday

re: China futures, took out the Shanghai and knocked down the ASX200.  Both were bull traps early trading on vapor meltups.  Watch shorts on Copper, they start piling up, you'll get major market weakness on Aus

Again, Brazil rate cut is the bear signal from hell...

Wed, 08/31/2011 - 23:04 | 1621542 tony bonn
tony bonn's picture

who needs cash on the sidelines when bernankula stands ready as the equity buyer of sort of last resort....

Wed, 08/31/2011 - 23:53 | 1621553 Cdad
Cdad's picture

These are the stories I relish, Tyler, and I thank your for bringing them.  These things, funds flowing away...forever away from the criminals on Wall Street reveal the REAL damage these guys have done.  They have broken faith with the people, and their capital has now gone away.

And it continues to go away.  For weeks now, you can see it on the close...Mutual Fund Redemption.  It continues and will continue until such time as these criminals who have broken faith, and are now engaged in looting the American Treasury, are removed, their institutions broken up, the layers upon layers of now useless employees laid off.  Capital does not form in a corrupt system.  

This is why, of course, the Bernank has been printing and printing...to fill the void...to prop up the dead and zombified system of crooks.  Were we still engaged in free markets, of course these bankers would be facing a very different fate.

One day...one day the system will want the capital back.  And then the system will finally cleanse itself, collapsing into oblivion so that it can be rebuilt from the ground up.  

Until then, the Greater American Depression rolls on...

Wed, 08/31/2011 - 23:22 | 1621585 Ramboy
Ramboy's picture

While cash may be at historic lows, shorts are at or near historic highs.  Panic covering is where the buying comes from.

 

Europe will soon find out that banning shorts eliminates an entire pool of buying.

Wed, 08/31/2011 - 23:47 | 1621626 I am a Man I am...
I am a Man I am Forty's picture

Soros, Michael Burry, and Mark Cuban - they have cash on the sidelines, and Buffett has some, that's all i can think of, gary shilling probably too, oh, and marc faber, j paulson probably has some cuz he had to sell all those shit positions like "see no" forest

Wed, 08/31/2011 - 23:51 | 1621634 bill1102inf
bill1102inf's picture

The United States of America has at least - 6000 Nuclear Weapons.

 

We are the only country to use them against an enemy.

 

We used 2.

 

We invented them along with 90+% of the technology that the world uses today.

 

We may use them again in the near future.

 

Just sayin.

Thu, 09/01/2011 - 00:04 | 1621656 sellstop
sellstop's picture

Of course there is no cash on the sidelines. Who holds cash in a retirement account. It is in bonds. If bonds start going down the money comes out of bonds and goes into the stock market. Everybody knows that yields are low. All the stock market needs is some catalyst that sparks the public imagination and we will be off to the races.

In my view, there is a huge pool of money that has been captured by the successful people in the inflationary era of the last 40 years. It doesn't go away, it just sloshes from one place to another. My challenge is to frontrun the sloshing....

gh

Thu, 09/01/2011 - 00:05 | 1621658 adr
adr's picture

The entire Wall Street class and the mouthpiece network CNBC has been trying to entice the retail investor to enter the market so they will once again be the ones left holding the bag but it isn't working. A 500% run on a stock in a couple months isn't good for anything unless you can sell it. he big guys have all been fine swapping stock between themselves to bid up the price so when the bag man taks the fall they will be that much richer.

They can't figure out why the plan isn't working this time. It is supposed to be foolproof. They can't figure it out because they live in a fantasy world. When you tell them people don't have money to invest they say, what do you mean they have jobs don't they. Don't they want to be rich.

The boomers are done investing and the later generations have no disposable income thanks to them. Anyone that started a 401k in 2000 hasn't seen much added value and has probably gone through 5 jobs since then. The rest of the generation is too busy emulating Jersey Shore to care about stocks. The boomers did a great job didn't they.

Thu, 09/01/2011 - 00:15 | 1621683 MrBoompi
MrBoompi's picture

You don't see much cash in 401k accounts because you're punished for doing so.

Thu, 09/01/2011 - 01:10 | 1621776 catch edge ghost
catch edge ghost's picture

If there is cash on the sidelines, it's the skinny guy, wearing no pads and only one shoe, who's obsessed with which way the wind blows.

Oh look and there's a stretcher the HFT special teams brought in for him.  How nice.

Thu, 09/01/2011 - 02:21 | 1621879 seoerlin
seoerlin's picture

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Thu, 09/01/2011 - 02:44 | 1621923 TzaristBondHolder
TzaristBondHolder's picture

it is my personal indicator that I use to tell clients to cash out IMMEDIATELY.  As a CFP/MBA/PhD - qualified Financial Planner when I see <3.5% my clients exit equities.  The market is ruled by a hearding theory and when the market is at a peak everyone is fully invested. 

 

The fact is that http://www.businessinsider.com/mutual-fund-cash-levels-drop-to-record-lows-2010-9  we are at the same level of cash as the market peak in 2007. 

 

INKOM Wealth Management

http://inkom.com.au

Thu, 09/01/2011 - 07:31 | 1622116 overmedicatedun...
overmedicatedundersexed's picture

higher food, fuel, medical, insurance, taxes,and that big scam education..thats were John Q's money is going..with few jobs to support the GDP as a cherry on top.

I live in MD where the GOV is the economy, we are doing ok. so keep those tax dollars comming ..thank you very much thank you.

ps look around at who is driving the NEW GM crap vehicles, they all don't need sun block..while they listen to the rap music.

Thu, 09/01/2011 - 08:02 | 1622167 wattsnotsaid
wattsnotsaid's picture

I've been trying to get the kids interested in investing in something other than the latest 4WD pickup truck or 4 wheeler. I even set up a Roth with my money.  But it's now damn hard to convince them I was right.  Stock market lost money and bank accounts pay a measly 1%. Why should they save for the future?  They're now starting families and everything gets spent for the kids... at least it's not a 4 wheeler....not until the kids become teenagers at least.

Thu, 09/01/2011 - 08:41 | 1622232 youngman
youngman's picture

My father was a depression era man...all he bought was bonds...and life insurance.....we grew up with the invest and hold......now I think its gold and silver.....buy your kids a silver coin.....it will do well for the next 5 years...

Thu, 09/01/2011 - 08:36 | 1622224 youngman
youngman's picture

Who needs cash on the sidelines when you have HFT computers to make the market....this is the new normal...

Thu, 09/01/2011 - 10:36 | 1622582 Grand Supercycle
Grand Supercycle's picture

S&P500 big picture remains bearish and this will ALWAYS exert the most influence. The only thing GUARANTEED is that the bearish medium/long term cycle will have the upper hand.

FX medium to long term outlook continues: Euro bearish and USD bullish.

As mentioned many times - bring on the OVERDUE USD rally.

IMPORTANT CHART HERE.
http://stockmarket618.wordpress.com

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