Mutual Fund Cash Hits All Time Lows

With the market now deep in what BofA has called a "Icarus Rally" melt-up phase, it is not surprising that retail investor cash levels are among the lowest ever as Joe Sixpack scrambles - as he always did just before the market crashes - to buy everything that institutions have to sell (and as we showed last week, they have a lot to sell). Recall that in its Q2 earnings call, discount retail brokerage Schwab confirmed that retail cash levels are near the lowest ever:

Now, it's clear that clients are highly engaged in the markets, we have cash being aggressively invested into the equity market, as the market has climbed. By the end of the second quarter, cash levels for our clients had fallen to about 11.5% of assets overall, now, that's a level that we've only seen one time since the market began its recovery in the spring of 2009.

And while low and mid-level retail "traders" may be all in, what about high net worth/private clients? We presented the answer after last week's Morgan Stanley earnings call:

Question: Hey good morning. Maybe just on the Wealth Management side, you guys had very good growth, sequential growth in deposits. There's been some discussion in the industry about kind of a pricing pressure. Can you discuss where you saw the positive rates in Wealth Management business and how you're able to track, I think, about $10 billion sequentially on deposit franchise?


Answer:  Sure. I think, as you recall, we've been talking about our deposit deployment strategy for quite sometime, and we've been investing excess liquidity into our loan product over the last several years. In the beginning of the year, we told you that, that trend would come to an end. We did see that this year. It happened a bit sooner than we anticipated as we saw more cash go into the markets, particularly the equity markets, as those markets rose around the world. And we've seen cash in our clients' accounts at its lowest level.

That pretty much covers "retail" which - at the low, medium and high end - is now all in and just waiting for the rug to be pulled. What about institutions? After all, as bulls never tire of repeating, this is “the most hated bull market ever”. Well, that's also bull shit, because as the Intl-FC Stone chart below shows, the number of fully-invested institutional "bears" out there has never been higher after a decade of financial repression turned cash into trash. In fact, money market funds assets account for just 17% of the assets of long-term funds, a historical low. Similarly, the cash balance of equity mutual funds is at an all-time low 3.3%.

In other words, not only is there no institutional cash on the sidelines, but the level of cash is the lowest it has ever been, and what cash does remain is barely enough to push stocks higher.... unless of course the institution doing the buying gets to print its own cash, such as the SNB, BOJ, or whoever Trump appoints at the Fed to keep the illusion of a rising S&P going indefinitely.