tradeking13

Expect Further Rise in the S&P 500

So what happened to that $300bln? Did it disappear? Will it reappear when people sell? No. A stock trade (in a secondary market) has two parties: a buyer and a seller. When Party A uses MMF proceeds to buy stock from Party B, they make an exchange. After the trade, party A now is holding stock and Party B has funds held in an MMF. So, was there a withdrawl from MMFs in aggregate? No. Each party is holding each others previous position. This is why it is called trading.

The $300bln was most likely drawn down to buy shares in the multitude of secondary offerings that were done this spring/summer, to buy shares in IPOs, to buy the massive amount of new corporate bonds and Treasuries issued, among other things.

Specious arguments like these (cash on the sidelines, stocks cheap according to the IBES/Fed model, etc.) usually come toward the end of rallies when the fundamentals no longer justify the valuation.

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