Haim,
The New era indicators point for a strong upmove as a result of liquidity and ongoing cashflow into MM Funds.
using AMG DATA's information for cashflow into mutual funds and money market:
4 wk moving average ------ Mutual fund ----- Money Market
for wk ending (in millions)
2/4/98 ----------------------- $2,642 -------------- $2,537
2/11/98 ---------------------- $2,315 -------------- $2,784
2/18/98 ---------------------- $1,612 -------------- $5,069
2/3/99 ----------------------- $347 ---------------- $10,401
2/10/99 ---------------------- $830 ---------------- $5,518
2/17/99 ----------------------($567) --------------- $6,217
I think the data shows that liquidity which supported the run up is on a declining trend, insufficient to drive the market up substantially. The wealth effect created by the AMZN and YHOO millionaires work both ways. Many of these "investors" are less wealthy than before, with the late comers actually in the hole. With negative savings rate, a lot of the funds that moved into money market may be ear marked for debt reduction, rather than waiting for the next buy-on-dip.
Tax season is upon us, I also have to wonder how much of the money market funds are ear marked for paying capital gains for the lucky sellers last year, not to mention the mutual fund tax burdens to the unsuspecting ma and pa investors.
I guess I am not as optimistic as you that liquidity will once again overcome the negative underlying currents of this market.
Ramsey |
