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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: fedhead who wrote (17760)9/12/2000 9:27:46 PM
From: pater tenebrarum  Read Replies (2) of 436258
 
cash on the sidelines is often characterized as something that's just lying in wait, easily tempted back into the market. and the experience of recent years seems to definitely support that characterization. but, that's true only as long as the conditions conducive to a bull market continue to pertain, or put in other words, as long as the long term up trend seems not unduly imperiled. Japan is a great illustration of a market that has seen the largest pile of money sitting on the sidelines and staying firmly put there, no matter what manner of interventions the authorities have been thinking up.
in terms of risk/reward we have just experienced a year during which the less risky investments (bonds,t-bills,utilities) have yielded far bigger returns than the risky ones.
then there is the question how much money is there really on the sidelines potentially destined for the stock market. a recent (about three weeks ago) poll by Ed Hyman showed institutional investors to be at their most fully invested posture EVER....
don't forget, in the '98 crisis, mutual funds were building up cash reserves real fast...when Greenjeans gave the green light, there actually WAS money lying in wait. that's not the case now, and in a recessionary credit bubble melt-down funds could be hit with redemptions instead of enjoying inflows.
in Japan, the mutual fund industry lost 96% of its assets within 6 years of the bursting of the bubble....
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