Strengthening Constitutional Self-Government

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A Mountain of Cash, Ready to be Invested?

As the Stock Market dropped almost 300 points today (circa 3.7%), you might want to note that there is more cash "available to buy shares than at any time in almost two decades, a sign to some of the most successful investors that equities will rebound after the worst year for U.S. stocks since the Great Depression.

The $8.85 trillion held in cash, bank deposits and money- market funds is equal to 74 percent of the market value of U.S. companies, the highest ratio since 1990, according to Federal Reserve data compiled by Leuthold Group and Bloomberg." What does this mean? Some smart guys think that it may be "a sign the Standard & Poor’s 500 Index will rise after $1 trillion in credit losses sent the benchmark index for American equities to the biggest annual drop since 1931. The eight previous times that cash peaked compared with the market’s capitalization the S&P 500 rose an average 24 percent in six months, data compiled by Bloomberg show." You’re in the weeds now, so might as well read the whole thing. It may be time to invest.

Discussions - 7 Comments

Well, Peter, I've been saying something like this for five months now, but today I had to make another margin call (thankfully for a small account so it wasn't much). I wish Tom Silver were still here to tell us what to do.

Well, this bailout stuff is the reason people with big dollars won't invest. Would you throw out a bunch of money when the gov't might rage in like a bull in a china shop and make the market do something wild? I guess it depends how good you are at poker

Why are you looking to the markets when the markets are looking to Washington. The markets are taking their lead from the administration, from Congress, which means from the Democrats.

How can you gauge which way the market is going when non-market forces are in the saddle? And in addition, when those forces are themselves unclear which way they're likely to go.

We'll get a much more firm understanding of what's in store for us in our economic futures when he indicates whether or not he is serious about his campaign promises regarding global warming. If he decides to go forward with that, we're screwed, and we're screwed royally.

It will be the equivalent to breaking Excallibur and tossing away her scabbard.

Money can be made swing-trading short. But is that how you want to make money, betting on the misfortune of others, on the misfortune of your fellow American. That's the type of behavior of a Soros.

Dan, et al: Thanks. Perfectly reasonable comments (including about Tom). I have no idea (I know you're not surprised!) how this all works...I just found this cash business interesting and it MAY be useful. Truth be told--except for the credit crunch--I don't see a depression anywhere around me; haven't talked to a manufacturer yet who is hurting (save one, who makes oil pipelines).

I hope to God you are right. However, here are a few things I am hearing from the fringe that should be considered.( who have been the most accuarate so far)

1. Some of the cash is going to run to gold, there is already a sort of run on it and it will be over 1000 soon. If things get worse in the near future I think there will be a bubble that makes it go almost to 1500. The problem is though, that redeaming that or getting out will be hard if rapid inflation occurs and the idea of using gold to make purchases is not practical for the average person.

2. I agree that I have not seen manufactuers going out, however, I have seen a lot of layoffs locally. The bigger problem is the layoffs going on in China. If it gets massive there then Walmart may not be able to stock its shelves. If millions are fired there you may see riots.

3. The great Oil caper. It turns out there is no oil shortage. OPEC took their profits from the past two years and invested in leveraged securities that promised the big returns. We have seen that these collapsed. Now OPEC does not have the revenues coming in to pay this, meaning that OPEC nations will likely go bankrupt. Yay, no money to terrorists, but its a big problem for the global economy.

4. The government has promised other nations in debts and the people in entitlements more than the entire world's GDP. For the first time recently we, as a nation, have more debt than income. The spending in the stimulius will bankrupt the states, what? The Feds are only funding 60% of the burden for the progams leaving the states to foot the bill for the rest. These states are already bankrupt, plus, oil again. Gas taxes were progressive in some states so that leaves a huge shortfall. What will the states do, start squeezing every drop they can and thats not good for anyone.

5. Are you ready to submit yet? If the answer is no then prepare for it to get worse until conservatives say a world government run by banks is good. that a world cashless currency tied to you id card is good. That total martial law is good. I'll use an old expression, if it was a snake it would have bitten you. I hope everything I have said is totally wrong and off base.

Brutus: Thanks for all that. Interesting stuff. The possible dislocations (political, not merely economic) in places like China is especially useful to note. Much mischief is possible.

Leading economic indicators have been good for the last two months. Do you suppose what our president and Congress have done could kill that? We might have pulled out of the recession by this summer. Instead, our economy is going to be protected to death.

Brutus, I hope you are wrong, too. Is it possible that the failure of the Chinese government to control their economy will bring down that government? Not that such a thing would be good news for America in the short run. However, your last statement that world government would be run by banks seems on its head to me. The way it looks from here is that governments are taking over banks. I have read of plans to "simplify" our banking and tax system, so we only need one card for everything. In essence, all of our finances and even our identities are in one card. Isn't that simple?

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