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To: Michael Collings who wrote (10786)	5/10/1998 12:54:00 PM
From: PeterGx	Read Replies (1) \| Respond to of 27307

Thanks Michael: It is what I am looking for. <<Mutual Fund Cash: 4.6% (March); lowest in over 20 yearsÿ>> It looks to me that we may see a DOW 8700s before June is over(5%). Better keep tight stops.ÿ

To: Michael Collings who wrote (10786)	5/11/1998 8:31:00 PM
From: Zebra 365	Respond to of 27307

Michael, I have data showing Mutual fund cash at 4.2%. During March and April the average net inflows to Stock Equity funds were running about $800-$900 million PER CALENDAR DAY. These data imply that for a 14 day period ending May 6 there was only $1,585 million net inflows where there should have been $11,900 million net inflows to keep up the pace, or a 90% drop in stock fund cash inflows. From Mutual Fund Forecaster (May 7, 1998) : >>>Equity mutual fund managers are running out of cash, with potentially dire implications for the market. In the nearly half century in which the fund industry has reported aggregate cash holdings, stock funds have never held such small cash reserves as a percentage of total assets. The latest monthly survey (end of March) shows 4.2% cash. The problem is not so much that fund managers aren't getting enough cash to buy stocks, they are receiving more than a billion dollars a day from the public in new fund investments. The problem is that when their cash holdings are extremely low as a percentage of assets - i.e. their stock investments consume almost their entire portfolio - the market usually tops out and crumbles. As a group, portfolio managers are simply wrong in their aggregate market-timing judgments. They tend to hold gobs of cash at market lows (when they should be fully invested in stocks), and to have minimal cash reserves at cyclical peaks (when they would be better off with a lot). For example, fund cash holdings dipped under 5% in 1955, 1961, 1965, and 1972, all just before major market highs. Our Fund Timing Index (see chart) adjusts the funds' cash ratio for the current level of interest rates, taking into account the simple fact that the funds tend not to hold much in the way of interest-earning reserves ("cash") when money market returns are low, and are naturally more inclined to hold reserves when interest rates are high. Backing out this interest rate factor via an econometric model, shows that funds' "excess" cash reserves, or as it can now better be described, "excess cash deficiency." is poor to the point of crisis. The Fund Timing Index is currently -3.0%, one of the lowest readings in History (starting from 1954 when such data were first available) Note in our chart that extreme Timing Index lows in the early 1970's and early 1980's (and to a lesser extent on several occasions in the 1960's), coincided with major market tops. All in all, not a condition conducive to a continuing market expansion. The Fund Timing Index is one of many indicators condensed into our econometric model, which is used to to project the Standard and Poor's 500 Index returns for the next one-year and five-year periods. Those models currently project the S&P 500 will decline 13% over the next year and gain just 12% over the next five years. Adding on prospective dividend returns, (not much) the expected total returns are -12% and +20%, respectively.>>> I cannot attach the graph, but it correlates the S&P 500 with the Mutual Fund Timing index. The Mutual Fund Timing index has declined in a straight line from a +5% peak in 1995 to its current -3%. The last time it was this low was in early 1981 and it recovered to positive territory in late 1982, (at the start of the current 16 year bull market) and remained strongly positive for 13 years, (including the correction of 1987), until early 1995 when it started to decline. The Index moved sharply into negative territory at the beginning of 1997. This Index is one of the main reasons I have sounded more and more bearish on the general market over the past two years. This Index suggests that the next correction may not just be "a buying opportunity" as the historical corrections that have occurred over the past 40 years (associated with these low cash levels in equity funds), have taken anywhere from two to seven years for the S&P 500 to recover to its previous peak. This Index is the only bit of Data that I buy this newsletter for. If interested, subscriber services are 800-442-9000. I have no affiliation with this company. Zebra