Money Market Cash Horde Grows

by: Barry Ritholtz

The WSJ noted that, according to the Money Fund Report newsletter, "Investors to money-market funds added $21.26 billion in the week ended Tuesday, bringing total net assets to a record $2.333 trillion. The previous record had stood since Dec. 10, 2002."

About 86% of the money came from Institutional investors -- $18.32 billion; individual investors contributed $2.94 billion.

This sort of data is always tough to draw conclusions from: We know there is a record amount of cash in Money Markets, but the tough question is why?

I can think of many reasons -- none of which have any quantitative support:

• Hugely profitable, cash rich corporate earnings gotta sit somewhere;

• Skittish investors don't believe the rally, leaving money "safe;"

• Big bonus pools/high earners cash not put to work yet;

• The ongoing option backdating scandal continues to plague investor confidence;

• There's always been huge cash on the sidelines, even thru the 1990's bull market;

iMoneynet, the source of this data, expects to see this cash hoard continue to rise into 2007.

Is this pile of cash significant? That is an interesting question, and one I simply do not know the answer to...