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Watch the Money Market Balances

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November 19, 2008 – Comments (1) | RELATED TICKERS: COP , MEE.DL , GE

WAY under the radar was a story last week that reported Money Market balances  hit a record $3.5 Trillion (yes, with a "T") last week.  That's before the various stock selloffs this week.  To give you some frame of reference, this amount could buy the Top 20 U.S. Companies (based on Market Cap:  http://www.theonlineinvestor.com/large_caps/) and STILL have $700 Billion left over to play around with.

 Why is this important.  Well, it is possible that the world is NOT coming to an end.  I know all signs point to Armageddon, but what if life goes on?  At some point, people will get tired of earning less than 1% in their "Safe" money market accounts and decide that buying shares in U.S. companies makes more sense.  What happens when even a small portion of that balance (let's say $1 Trillion or so) begins pouring back into the market?  Well, let's just say Supply and Demand is a law like gravity that cannot be broken.

 How much longer will people continue to move their remaining assets at "fire sale" prices to money market accounts?  I couldn't tell you - people's ability to remain irrational far exceed my ability to stay solvent, I'm afraid - but record Money Market balances do seem to point to capitulation.

 Happy Investing!  I like COP, MEE and GE - these will do well if the world doesn't end.

1 Comments – Post Your Own

#1) On November 19, 2008 at 12:30 PM, BradAllenton (31.60) wrote:

I am 75% in cash. I have it in a MM and am getting 4%. I will never get tired of that yield as long as the market continues to fall out of bed. I started to move my money in 2006, shifting my exposure and I am very glad that I did.

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