Piles of Cash on Sidelines

January 6, 2009 at 3:59 am 4 comments

According to Merrill Lynch analyst, “cash on bank balance sheet has tripled in the last two months to the level of over $800 billion.”  This is collaborated by the article from Bloomberg, which states that the total amount held in cash, bank deposit, and money-market funds now equals 74% of the total market capitalization.  This is the highest ratio in nearly 20 years.  Once confidence returns, this cash will find its way back into the market and will help to fuel a strong rally.

Entry filed under: Market Conditions.

Stock Gurus’ Performance this Year It Is Going to Get Worse before It Gets Better

4 Comments Add your own

  • 1. Gary Mazo  |  January 9, 2009 at 2:27 am

    Leon, how would you comment on some predictions that place the Dow bottoming at as low as 5000 and staying at around 7000 for several years?

  • 2. etalonfund  |  January 9, 2009 at 3:42 am

    At any given time, there are various predictions of what stock market will do one, five, ten years from now. Inevitably, though, these predictions tend to be optimistic near market tops and pessimistic near market bottoms.

    Just yesterday, I read about someone predicting that Dow might reach 3,000 or even 1,500 based on expected lower earnings and lower P/E ratios. I also heard an interview on TV with a guy named Harry Dent, who just wrote his new book “The Great Crash Ahead”, where he paints doom and gloom for the next decade. What the interview didn’t mention that in his book “The Roaring 2000s”, written in 1999, he predicted that Dow will reach 40,000 in 2009.

    I do know that many stocks now are undervalued, and that this bear market will end. But I am not qualified to make a prediction when this will occur, and neither is anyone else.

  • 3. Gary Mazo  |  January 12, 2009 at 5:19 pm

    thanks, Leon! all good points!

  • 4. Cash Is King « Sensible Investing  |  February 10, 2009 at 7:18 pm

    […] February 10, 2009 For the last year and a half, that old adage was certainly true.  As the market continued its downward trend during that time, more and more people took the money out of equities and put them in safe money-market accounts (and/or mattresses), bringing total cash levels to unprecedented highs (see my previous post). […]

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Blog Author

Leon Shirman's long-term investment philosophy is summarized in his book, “42 Rules for Sensible Investing”, also available from Amazon.


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