TD Ameritrade CEO Warns "Never Seen Client Cash Levels This Low"

Morgan Stanley said last year that client cash levels are at record lows.

We noted previously that the cash balance of equity mutual funds is at an all-time low 3.3%.

And now, with his share price at 52-week highs after beating earnings, TD Ameritrade CEO Tim Hockey confirms this extreme level of complacency in today's earnings call...

"While cash levels are up slightly sequentially to approximately $150 billion, cash as a percentage of total client assets remained at historic lows at 12.7%, down slightly from last quarter due to the growth in the value of investments and as a result of strong net buying from our retail clients..."

And it's not just retail...

" both of our[retail and institutional] businesses, we're seeing historically low levels of cash to assets under management.

These are record low levels of cash...

"if you're asking this low level of client cash we've never seen, but there is absolutely a cycle that client cash as a percentage of assets goes down partly because markets go up. And so, they take advantage of that, but also it's just a numerator-denominator thing."

Does it feel toppy?

"If you're asking whether markets are at a high end of the cycle, it certainly feels like this, bull market is long in the tooth. But by the same token, it doesn't seem to be a catalyst for change and there seems to be a drifting up...

Clients are extremely active...

... we're certainly seeing them at very high levels of optimism. And so, we'll continue to monitor that.

... client logins accounts trading and all posted healthy increases and retail clients were net buyers of 6.9 billion, this resulted in very strong trading 726,000 trades per day on average, which is up 49% from a year ago.

In fact activity in January has been even stronger with 975,000 trades per day on average through the 17.

In other words, not only is there no institutional or retail cash on the sidelines, but the level of cash is the lowest it has ever been.



itstippy Occident Mortal Tue, 01/23/2018 - 12:15 Permalink

The financial system is global; cash reserves held offshore aren't just sitting around gathering dust.  They're in the system somewhere already.  Pulling them out from where they are now for buybacks and dividends will remove them from whatever position they're currently playing.  Moving them around won't add money to the system.

Central Bank printing is where it's at.

In reply to by Occident Mortal

TacoNasty YUNOSELL Tue, 01/23/2018 - 12:41 Permalink

Yup. It doesn't matter what stock prices or cash levels are. The central banks will continue to just create more cash to purchase shares. The have an infinite supply of money. So, stock prices can go infinitely higher. The Swiss central bank would buy AAPL shares at 15 Billion USD a share - no question. Imagine how stupid you'll feel if the Swiss are buying APPL shares at 15B USD each twelve months from now and you don't have any to sell?


There is nothing to worry about. Especially, in the short term. There is no way the US Government will allow the stock market to fall more than 3% before the 2018 Midterm elections. In fact, they will probably push it up at least 10% to boost Republican votes.

In reply to by YUNOSELL

Jack's Raging … Tue, 01/23/2018 - 10:49 Permalink

Investments come from savings derived from productive assets. When you "financialize" (skim) all activity, then tax anything that survives, all under an umbrella of debasement, there isn't a lot of surplus capital to bring to a rigged casino. Furthermore, QEn told everybody a long time ago that you need to ride the wave. Anybody who had any money is already invested.

ejmoosa Tue, 01/23/2018 - 11:03 Permalink

The problem for investors is that when stocks become overpriced, their greed overcomes them and they refuse to sell those overpriced stocks out of fear over missing out on the last 10 cents of the rally.

cheech_wizard Tue, 01/23/2018 - 11:08 Permalink

We've pretty much hit peak idiocy when my retired step-brother calls me on the phone and asks me what he should do with his 2600 shares of a Canadian marijuana grower. He got in at $0.37 and tells me it is now over a $1.25.

I gave him the only sound advice I could think of off the top of my head. Sell enough to reclaim your initial investment and some mad money, then ignore the rest and call me back in 6 months. 

Standard Disclaimer: I threw the 6 months into the conversation because he actually woke me up this morning to ask my advice.


northern vigor Tue, 01/23/2018 - 11:42 Permalink

Ha, I did it...I apologize. 

I've been pulling cash out my TD account for years and putting it in glass jars. No particular reason other than TD has been offering me one twentieth of one percent interest and this is my way of screwing them a bit. 

Small Governme… Tue, 01/23/2018 - 12:50 Permalink

TD Ameritrade has never seen cash levels this low because brokerage customers are leaving them in droves.  When TD Ameritrade acquired Scottrade, it treated the acquired customers poorly.  I was one of them.  I bought shares, and moved my entire account to Schwab.  I had another account with Schwab for many years, and Schwab treats customers well.  Ask Schwab how much cash customers are holding, and you will obtain an answer representative of the market.  TD Ameritrade is a FUBAR, and truly not suitable for use as a measure of market fundamentals.