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Pastimes : Ask Mohan about the Market
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To: John Hunt who wrote (8968)11/22/1997 2:11:00 PM
From: Tommaso  Read Replies (2) of 18056
 
I was looking at the net inflow to equity mutual funds, which I think may have been less than what all those IPOs soaked up.

The shifts here seem hypersensitive to market moves. So far it has just happened that the markets have recovered enough after each drop so that after a week or two people start putting money in again, but I wonder what will happen if there are two or three definitely down weeks. There are hundreds of billions of dollars, too, in all sorts of accounts that can be shifted in and out with a phone call. For example, the enormous CREF stock funds are supposedly liquid and available for transfer into money market or bonds at the end of each day. What would be the reaction of investors if they were told that they would have to wait a week, two weeks, a month? I think it would be a large-scale effect like what happened when the circuit-breakers stopped trading the first time. And because here are no tax effects, holders would be anxious to bail out with the highest possible returns--and all losses, in effect, are worse because there's no tax advantage.

Just more old bear growls!

I do think that put buyers might begin to wonder what would happen if the put sellers can't come up with cash. Is there any similar risk for short sellers?
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