Eventually something will catch up with the market, someday. But that is hardly saying anything.
What is important about your chart is its lack of predictive value. In other words the correlation between a cash level and the market level say 1-2 years hence is not good. All I would say is that it is one long term negative factor.
Also, cash flow into mutual funds is probably more important than cash levels. In other words, if cash flow is very high, the cash level is less important (easily increased from cash flow) than if the cash flow is low. In fact, if one were to know independently that cash flows have been increasing for years, as I suspect is the case, then a declining cash position is a logical result, for the reason I gave.
I am concerned that Year 2000 issues will eventually knock off this market. For one thing this will become an ever hotter press topic and probably scare people into being more conservative. Second, although most large companies have dealt with Year 2000 in 1998, incompetent government and little companies without resources have probably not.
Therefore, my guess is that big outfits will have problems with little suppliers and with government.
One story my wife heard is that of a tiny retailer in nowhereland
which had a charge card system which would not accept cards with a 2000 expiration date.
Fear of the impact of these problems may have an impact on the stock market, which would lead to a (reduced) wealth effect on the real economy.
Put all of this together and I suspect we will have a small recession a bit down the road. |
