January 24, 2017
This news item from earlier this month is SO important…and such a big factor in stock prices…
Jan 7, 2017 - Large public retirement systems and open-end U.S. mutual funds have yanked nearly $200 billion from the market since mid-2014, according to a Wall Street Journal analysis of the most recent data available from Wilshire Trust Universe Comparison Service, Morningstar Inc. and the federal government.
That leaves pension funds with the highest cash levels as a percentage of assets since 2004. For mutual funds, the percentage of assets held in cash was the highest for the end of any quarter since at least 2007.
Two things to understand…
One - Those funds are a MAJOR force in the market and the fact they are holding so much cash represents an avalanche of money that, in my opinion, WILL renter equities…and therefore serve as EXPLOSIVE fuel for the CONTINUING dynamic rally we have been witnessing since the election…
Two - Those funds are run by people who are NOT geniuses…While you might think pension fund managers are market trading gurus, they are not. They are just financial industry bureaucrats who have risen through the ranks simply through longevity and attrition…and I assure you, they are routinely as wrong as the worst nitwit talking head you want to name…They hear the news. They read what everybody else on Wall Street is saying. They follow the crowd. They are investing sheep. They REACT emotionally…and as a result, only a very few EVER outperform the market…with the majority of them perennially being underperformers (but keeping their jobs due to “a rising stock market lifts all boats” sort of thing).
The point is, these guys, responsible for MASSIVE quantities of investment capital, have been mindlessly following the rest of their wrong-way Wall Street buddies…and unintelligently pulling money out of the market, which is now substantially higher, since mid 2014 (see chart following)...And I firmly believe what we are now about to see is ALL that very same money come chasing and charging back into stocks as those managers CANNOT just sit there as the Dow, S&P and NASDAQ go blowing off into new highs…THEY HAVE TO “GET BACK IN”, and in classic runaway market fashion, they will be doing so “at any price.”, at higher and higher levels.
IN A NUTSHELL…THE MARKET IS ALREADY MOVING UP, WITHOUT THEIR PARTICIPATION…AND AS THEY ARE FORCED TO THROW IN THEIR BEARISH TOWELS…AND BUY…THEY ARE ONLY GOING TO BE ADDING FUEL TO THE ALREADY BULLISH EQUITY FIRE.
The truth is, that data was only revealing how much selling they have been doing was compiled only through September of last year…And with our knowledge that EVERYBODY on Wall Street was overwhelmingly bearish in the months leading up to the election, my guess is, even MORE cash was pulled out of stocks than the above cited report has indicated.
So take another look at what they have been missing…
New Highs in the S&P…and I swear…I think this could go from here FASTER & BIGGER than any of these moves noted during the past 12 months..
And do you think the likes of Google, Amazon, Netflix, Facebook, Oracle, Microsoft, Intel, etc,, etc ETC…are going to be getting smaller and less profitable in the months…and years…to come?
And here is a quote, from today, from a Wall Street exec that I think perfectly expresses the STILL WRONG “Don’t buy it here” opinion that is representative of the ignorant group-think, at virtually all the banks and brokerages, that I was citing for the entirety of 2016…and which is STILL obviously their prevalent attitude.
When we KNOW that they’ve been saying “sell” forever, THEIR CURRENT REASON TO NOT BUY HERE is “equities are a little ahead of themselves” and they “want to see more details?” Well…let them wait. A month or two from now…and a hell of a lot higher…those same people will be screaming, “You GOTTA own it here!” It’s just the way this whole game works…
Bottom line is Business is already expanding EVERYWHERE…And on top this, we now have this rabidly pro-business President, with a Republican Congress as his loyal sidekick…and I say there is NO WAY economic activity is going to be doing anything but ACCELERATING…And all the while Stocks will be roaring higher in anticipation of FUTURE over-the-top economic statistics…and yes, one more time, IN THIS ENVIRONMENT, INTEREST RATES HAVE NOWHERE TO GO BUT DECIDEDLY HIGHER…meaning yes, once again…I BELIEVE EURODOLLARS HAVE NOWHERE TO GO BUT SHARPLY LOWER.
I CONTINUE TO RECOMMEND THE IMMEDIATE PURCHASE OF SEPTEMBER PUTS…
My recommendation IS to either use this option to add to your position…or establish a new one…And I think this should be done before some news, or upside action in the Stock Market, slaps this contract down fast and hard through the recent lows which are now just 8-9 ticks away…and then I think we REALLY will see this thing getting it going in a move that will rapidly take us down to, at least, the 98.00 level…and LONG before we get to September.
Give me a call…
All option prices in this newsletter include all fees and commissions.
The author of this piece currently trades for his own account and has a financial interest in the following derivative products mentioned within: Eurodollars