Hello Joey T-C:
Another factor--Mutual Fund Forecaster, a popular newsletter, reported in their June 11 issue that mutual funds were at negative 3.5% cash position as estimated by their proprietary model. It would be more normal to have a modestly positive number for mutual fund cash, which had ranged unusually high above 4% in 1991 and also in 1993. MFF noted that that (3.5%) is near the record low of January 1981 which was followed by a two year market decline. I think this factor winds up the recoil spring if the public investors feel poorer and then act to liquidate part of their mutual funds. This has the ring of the Chinese curse to it...the times are 'interesting' for us....
There is a great pot of paper wealth in mutual funds now, more than twice disproportionately what has been history in the 80's. It still remains to be seen just how sticky these investments and their advisors are in a real bear market. It could be a greatly moderating factor if the mutual funds funds remain invested no matter what. Greed, fear, pride, and arrogance will have more say though in enough holdings to make a difference.
Therefore, I think the flywheel is great, and the inertia greater than ever. However, the flywheel WILL be moved in a down market--and there will be more than minor rending scattered just about everywhere. 18 months or less, me-thinks.
Best regards,
m |
