Charles Biderman from Trim Tabs was just on giving a weak argument for a potentially strong catalyst to lift stocks. Depending on what data you look at there are trillions of dollars in money markets waiting to enter the stock market. That is a lot of buying power and every so often the argument is made for that money coming in and lifting equity prices.
I don't think this stands up. Mark and Erin called Biderman on why this matters now and some other things. I think the theory relies on the fact that this cash was in the market before and is earmarked to go back into stocks. I've never read anything that makes the connection.
There are a lot of retired people where I live and while truly wealthy may not describe my neighbors the word comfortable does and very few of them have stocks on their radar. Whether they should or not is another matter the fact is they don't.
An analysis that relies on cash pouring in from the sidelines is destined to work like a broken clock.
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2 comments:
The comment regarding "sidelines cash" is ridiculous. For every transaction that takes cash off the sidelines, there's the other side of the trade that puts cash on it's sidelines.
Pyschology about future values has to change, and that's what drives prices, nothing more.
"For every transaction that takes cash off the sidelines, there's the other side of the trade that puts cash on it's sidelines."
Not necessarily. The seller may decide to take cash off sidelines and put it to work outside of the stock market.
There is a correlation between the stock market cap, and the amount of cash on the sidelines. However, the market direction is more of a function of cash inflows/outflows than the total amount of sideline cash.
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