{"id":1440810,"date":"2023-11-27T17:05:00","date_gmt":"2023-11-27T22:05:00","guid":{"rendered":"https:\/\/bugaluu.com\/news\/?p=1440810"},"modified":"2023-11-27T17:05:00","modified_gmt":"2023-11-27T22:05:00","slug":"the-wall-street-journal-perpetuates-the-ridiculous-cash-on-the-sidelines-myth","status":"publish","type":"post","link":"https:\/\/bugaluu.com\/news\/the-wall-street-journal-perpetuates-the-ridiculous-cash-on-the-sidelines-myth\/1440810\/","title":{"rendered":"The Wall Street Journal Perpetuates The Ridiculous ‘Cash On The Sidelines’ Myth"},"content":{"rendered":"

The Wall Street Journal Perpetuates The Ridiculous ‘Cash On The Sidelines’ Myth<\/span><\/p>\n

\n

Authored by Mike Shedlock via MishTalk.com,<\/em><\/a><\/p>\n

The sideline cash theory has been debunked countless times but here we go again. And ironically, money supply is falling.<\/p>\n

<\/a><\/p>\n

Investors Are Hungry for Risk\u2014and Holding Record Cash Sums<\/strong><\/h2>\n

Please consider\u00a0Investors Are Hungry for Risk\u2014and Holding Record Cash Sums<\/a><\/p>\n

Investors are plowing cash into stocks and bond funds. Invesco\u2019s QQQ exchange-traded fund, which tracks the tech-heavy Nasdaq-100 Index, reported its largest weekly inflow in history the week of Nov. 13. Funds that track high-yield bond indexes\u2014the higher risk portion of the corporate bond market\u2014reported their two highest weekly inflows on record in the middle of November.\u00a0<\/p>\n

Meanwhile, institutions and investors together have a record $5.7 trillion parked in cash-like money-market funds, many of which are yielding above 5%, according to the Investment Company Institute.\u00a0<\/p>\n

\u201cFor the first time in a long time, cash is a competitor,\u201d said\u00a0Ali Dibadj, chief executive of Janus Henderson Investors. \u201cBut I think as soon as short-term rates start to tick down,\u00a0you\u2019re going to see large flows to other assets<\/em>.\u201d<\/p>\n

At retail brokerage Webull, Chief Executive\u00a0Anthony Denier\u00a0has seen firsthand the newfound appeal of cash to everyday investors. Webull began offering a 5% yield on cash held at the brokerage earlier this year to remain competitive with money-market funds.\u00a0<\/p>\n

\u201cAll that cash that customers have been piling into their brokerage account the last six months to earn yield, they\u2019re finally starting to use it this month and we\u2019re seeing it put into action<\/em>,\u201d Denier said.<\/p>\n

David Littleton, chief executive of asset manager F\/m Investments, said he thinks the record sum in money-market funds is contributing to the velocity of the rally in beaten-down assets like small-caps.<\/p>\n

\u201cWith the new inflation outlook, people either got greedy or they got fearful they were going to miss out on a rally, and you saw a 5% up move in the index,\u201d said Littleton. \u201cThere\u2019s definitely some cash waiting for these moments, but I don\u2019t think you\u2019ll see it all move overnight<\/em>.\u201d<\/p>\n

Impossible for Money to Flow Anywhere<\/strong><\/h2>\n

The CEOs of Janus Henderson Investors, Webull, and F\/m have no idea how markets function.<\/p>\n

It is impossible for money to flow from cash into stocks or bonds because for every buyer of an asset there is a seller of that asset so the amount of cash on the sidelines never changes due to such transactions.<\/p>\n

Individuals can differentiate\u00a0where they hold cash<\/em>\u00a0moving it from a checking account to a money market fund that yields more interest, but that is the full extent of it.<\/p>\n

Buying stocks, bonds, or even houses with cash does not impact the amount of sideline cash. It simply transfers the cash from one holder to another holder.<\/p>\n

Based on sideline cash theory, there could never be a bear market. But we have them.<\/p>\n

Sideline Cash is a Function of the Fed and Banks Lending<\/strong><\/h2>\n

The Fed can increase or decrease M2 Money Supply via repos, QE, and QT. And banks can lend money into existence at will.<\/p>\n

The irony in all of this sideline cash nonsense is that as a result of the Fed\u2019s QT, money supply is actually shrinking.<\/p>\n

No Such Thing as Sideline Cash<\/strong><\/h2>\n

There is not a record amount of sideline cash.<\/p>\n

More accurately, there is no such thing as sideline cash because\u00a0in aggregate<\/em>, it is impossible for cash to move from the sidelines to any place else.<\/p>\n

Mind the Gaps<\/strong><\/h2>\n

Cash aside, please mind the gaps.\u00a0A\u00a0Powerful Stock Market Rally Leaves Four Stacked Gaps But They Will Close<\/a><\/p>\n

As an individual, you can decide to buy stocks, but your cash will them become someone else\u2019s cash.<\/p>\n

Technically speaking, this is one of the worst setups in history to buy stocks. <\/strong>See the above link for discussion, noting the partially filled gap I mentioned is now filled.<\/p>\n<\/div>\n

Tyler Durden<\/a><\/span>
\nMon, 11\/27\/2023 – 12:05<\/span><\/p>\n

\u200bhttps:\/\/www.zerohedge.com\/personal-finance\/wall-street-journal-perpetuates-ridiculous-cash-sidelines-myth<\/a>\u00a0<\/p>\n

\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"

The Wall Street Journal Perpetuates The Ridiculous ‘Cash On The Sidelines’ Myth Authored by Mike Shedlock via MishTalk.com, The sideline cash theory has been debunked…<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1440810","post","type-post","status-publish","format-standard","hentry","category-news","wpcat-1-id"],"_links":{"self":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1440810","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/comments?post=1440810"}],"version-history":[{"count":0,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1440810\/revisions"}],"wp:attachment":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/media?parent=1440810"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/categories?post=1440810"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/tags?post=1440810"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}