>>WEEKLY LIQUIDITY UP DATE
Monday, October 2, 2000
LAST WEEK, LIQUIDITY TURNS NEGATIVE $4 BILLION due to $7.5 billion of
new offerings and $1 billion of redemptions in US equity funds. On the other hand,
corporate investors decided they like cash more than stock at current prices, always a good
sign -- but usually early. Last week, cash takeovers and buybacks rebounded - topping $6
billion each.
The Investment Company Institute (ICI) reported August equity inflows of $23.4 billion,
with $19.6 billion going to US funds and $3.8 billion going into International funds.
The ICI also reported that cash on hand at US equity mutual funds at the end of August
dropped to 4.4% from 4.8% the prior month. However, absolute cash remained unchanged
at $175 billion. In other words, US equity funds invested every new dollar of cash received
during August.
BOTTOM LINE: WE STAY CAUTIOUSLY BEARISH. HOWEVER, REBOUND
INDICATORS SHOWING UP.
We stay cautiously bearish, even after four straight weeks of lower stock prices. The key is
the European investor. In August, Europeans were buying US stocks and the US market
rose. That stopped in September and the US market has been dropping ever since. A
whopping new offering calendar last week is not helping.
Fund redemptions are not yet big enough to signal a sentiment reversal often seen at the end
of a down leg. However, stock buybacks and new cash takeovers are improving and those
two often are early indicators.
Thomson First Call's Bob Gabele tells us that his early reading of September data says that
insider selling slowed in September. If that's so, then given the positive indicators of big
buybacks and cash takeovers, we could be nearing a bottom.<< |
