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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: orkrious who wrote (81967)5/22/2007 9:35:35 PM
From: Wyätt Gwyön   of 110194
 
exalted cash-to-assets ratio of 3.6% (most recent data) - which is 0.6% less than at the 2000 Nasdaq mania high.

i think there are plenty of sentiment indicators which show over-the-top bullishness, but mufu cash ratio is not one i put much credence in. i believe there is a secular shift towards full investment by mufus, and that stands to reason: equity mufus have no business holding cash. they are already charging a point and change to underperform the market; what business do they have trying to be timers on top of that? equity mutual funds should be invested in equities, as close to 100% as is logistically feasible. investors IN equity mufus should only have a portion of their assets in them. if investors want to hold cash, they don't need to pay a point and a half to their mufu mangler for the privilege.

intelligent mufus, which is to say the passive and index fund famblies like DFA, are run at very close to 100% equity investment at all times. anything less is a disservice to their customers. investing in these funds requires an RIA, who will generally advise the client, first and foremost, to maintain some stability in cash, Treasurys or Agencys of some ilk and maturity. needless to say, investors in a basket of DFA funds have had much better returns than your typical active mangler who tries to time the market.

indicators of bullishness that seem more relevant to me are things like the private equity bubble, the China retail stock bubble, etc.

i did like Heinz' mention of the increase in leverage at GS.
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