With All the Cash Gone… Now What?
by Robert Williams, Publisher
Monday, November 2, 2009
Despite the recent volatility, the Dow remains 50% above the lows set back in March.
Think about it. Eight short months ago we were discussing the possibility – and, in some forums, even the likelihood – of another Great Depression. And now, some pundits are putting forth the possibility of the Dow hitting 11,000 before the end of the year.
Which begs the question, “How did we get from Point A to Point B so fast?”
The answer is simple. Cash.
Back in December, cash holdings – bank deposits and money market funds – sat at a whopping $8.85 trillion. At present, we’re holding about $3.4 trillion in cash, according to Goldman Sachs.
In other words, since December, we’ve moved over $5 trillion in cash from the sidelines to the markets.
Now keep in mind that the remaining cash balance is not entirely destined for investment. Americans will always hold some cash. In fact, Goldman analysts believe that only another $600 billion in cash will hit the markets over the next several quarters.
That doesn’t mean the rally is nearly over, however. It just means that cash has taken us nearly as far as it can. The rest is up to the economy.
Some think the rush of cash has taken us too far, too fast. Alexander Green addresses the “pullback” chatter in his article about Jeremy Grantham.
Ahead of the tape,
Robert Williams
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In addition to once being a full-time trader of equities and equity derivatives, Robert Williams has served as the lead financial analyst for a Forbes top-50 private corporation and an analyst for the endowment of a major academic institution. He's also been profiled in such books as Trade with Passion and Purpose and Alexander Green's The Secret of Shelter Island. 
It’s kinda scary that we’ve moved higher so fast.
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