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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: Les H who wrote (215042)8/10/2009 2:14:40 PM
From: Les HRead Replies (1) of 306849
 
Saw this thing on Zero Hedge.

"Most interesting is the correlation between Money Market totals and the listed stock value since the March lows: a $2.7 trillion move in equities was accompanied by a less than $400 billion reduction in Money Market accounts! Where, may we ask, did the balance of $2.3 trillion in purchasing power come from? Why the Federal Reserve of course, which directly and indirectly subsidized U.S. banks (and foreign ones through liquidity swaps) for roughly that amount. Apparently these banks promptly went on a buying spree to raise the all important equity market, so that the U.S. consumer who net equity was almost negative on March 31, could have some semblance of confidence back and would go ahead and max out his credit card. Alas, as one can see in the money multiplier and velocity of money metrics, U.S. consumers couldn't care less about leveraging themselves any more."

Looks like we're getting about the same effect on money market fund assets re-leveraging as they did de-leveraging last year from October when the SPX was at 1000. Total money market assets grew by $450 billion as the SPX fell from approx. 1000 to 666. On the round trip back to 1000, total money market assets fell by $300 billion. I expect that the difference between the two can be explained by institutions continuing to raise more cash since the March low by issuing more debt.

Note: Retail money market assets have now dropped below where they were when the SPX was at its all-time high. It looks like Joe Pensioner will be eating into his savings for years.
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