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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One Response to “With All the Cash Gone… Now What?”

1. Johnny Graphite Says:
   November 3rd, 2009 at 4:15 pm

   It’s kinda scary that we’ve moved higher so fast.

   Reply

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