I've stayed quiet through this recent quandry since I have found it best, for me, to sit on my hands and not get too close to the keyboard. Too much temptation to "do something". For me, when I feel need to "do something" but don't know exactly what to do...I do nothing. Anyway..
As V has said on numerous ocassions, the fund managers, when one understands their agenda, can be our friend. Of course, no one likes what is going on. We all hate "red". We hate FUD. But this crap happens.
As to the fund managers. Most equity capital is in pension funds and mutual funds run by pros. That is a good thing. These funds provide the retirement security for middle class America a.k.a.hard working Joe Sixpack and his family. Thank God for them.
Anyway, fund prices, unlike stock prices, are not what attracts investors. It's the performance...rate of return, including the end of year cash dividends that are rolled back into the fund and compounded over the years. A lot of cash has to be generated by these funds. Selling profitable holdings at the high generates this cash. Very logical.
In addition, when billions flow into these funds, it would be illogical for them to invest these "new" billions at the top of the market. So, what do they do? They sell equities like crazy doubling their billions of cash reserves. The sell-off triggers lower prices. When these prices hit bottom they now have twice as much money to buy back in and drive the prices back up.
All reports indicate that the funds are sitting on billions of cash they took in during February and March. Un-invested billions of cash. They didn't invest these billion in stocks cause the stocks in March were at all time high. Had to wait or precipitate a sell-off.
We've had a massive sell-off. The funds are flush with cash. So, what are they going to do? I've got an idea.
Suggest it might be a good idea for someone or the thread to keep close eye on mutual funds and reports of huge cash reserve build-up..especially when stock prices at the tops. Will be as good a signal, if not better than TA, when all hell is due to break loose. Of course, we'll never know exactly when, the nature, how bad or how long the "hell" will be but maybe we can all be better prepared even though we still may not know "what to do" when it happens.
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