Sidelined Cash Levels Remain High

Investors continue to hold high levels of cash relative to the value of the market. The below charts graphs cash as a percent of the Wilshire 5000 ($DWC). A part of the increased percentage level of cash can be attributable to the decline in the market's value.

Source:

Charles Schwab & Co.

Interestingly, the increased cash levels are being controlled within institutional money market funds.

Source: Investment Company Institute (pdf)

Going back to January 2008 the Investment Company Institute reports total cash in money market funds has increased 17.39%. Individual money market fund assets over this same time period are essentially unchanged while institutional money market fund assets are up 28.46%

Comments

[Egg:]

Riddle me this:

Let's say there is a trillion in "cash on the sidelines" and that cash wants to buy stocks. Well, for that trillion to buy a trillion in stocks other people must sell a trillion in stocks. So then the sold trillion dollars worth of stock now becomes "cash on the sidelines." Hence, net zero effect.

Therefore, cash on the sidelines will ALWAYS stay on the sidelines (except through secondarys and IPOs.)

Jun 28 02:53 AM

[logicalthought:]

Okay, I'll answer your riddle:

Unless the trillion dollars worth of sellers decide to pull out of the market completely, they'll redeploy that cash into other stocks, thus bidding up their prices. It doesn't all end until the "last" trillion dollars worth of sellers decides that the market is overvalued, and thus removes its cash from the market.


On Jun 28 02:53 AM Egg wrote:

> Riddle me this:
>
> Let's say there is a trillion in "cash on the sidelines" and that
> cash wants to buy stocks. Well, for that trillion to buy a trillion
> in stocks other people must sell a trillion in stocks. So then the
> sold trillion dollars worth of stock now becomes "cash on the sidelines."
> Hence, net zero effect.
>
> Therefore, cash on the sidelines will ALWAYS stay on the sidelines
> (except through secondarys and IPOs.)

Jun 28 09:41 AM

[casono55435:]

The fact that Institl cash is up 28% from 1-09 and private Investors cash i s flat seems significant.

Coments please!

Jun 28 04:16 PM

[Subhankar:]

'Cash on the sidelines' is an enduring myth in the secondary markets. I agree with 'Egg'. 'logicalthought' should think of another pseudonym. A re-reading of Dr John Hussman's articles on the subject is also recommended.

Jun 29 02:16 AM