Wall Street is known for many things. One that gets much less attention than it deserves is its myths.
For almost since the middle of this so-called recovery we've heard about all the cash that's sitting on the sidelines and in corporate coffers just waiting to pile into the market when we reach some sort of so-called normal.
Well, maybe that calls for another of those not so fast.
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While the "cash on the sidelines" myth has infuriated many, it remains a staple excuse for why there's always a buying opportunity in stocks when the market dips. However, as Ned Davis Research warns "we can't find much cash on the sidelines... and when we do it seems mostly offset by debt/liabilities," crushing yet another pillar of strength for stocks.
Ned Davis notes there is a lot of talk about all the cash on the sidelines from pessimistic investors that could power the market higher. There is some public caution and overall savings have risen somewhat, but I am having a hard time finding evidence that cash (potential demand) is anywhere near the market value of stocks (potential supply).
In fact, the only place Davis really finds a lot of cash is from nonfinancial corporations. This cash is being used aggressively to buy back stocks plus mergers and acquisitions. My only problem with corporate cash is that it seems to be financed not out of profit growth, but rather debt offerings. Either way this produces demand, but it can also hurt balance sheet quality (as we have detailed previously)
More: zerohedge.com/news/2016-10-17/market-myth-shattered-ned-davis-warns-theres-no-more-cash-sidelines
For almost since the middle of this so-called recovery we've heard about all the cash that's sitting on the sidelines and in corporate coffers just waiting to pile into the market when we reach some sort of so-called normal.
Well, maybe that calls for another of those not so fast.
----
While the "cash on the sidelines" myth has infuriated many, it remains a staple excuse for why there's always a buying opportunity in stocks when the market dips. However, as Ned Davis Research warns "we can't find much cash on the sidelines... and when we do it seems mostly offset by debt/liabilities," crushing yet another pillar of strength for stocks.
Ned Davis notes there is a lot of talk about all the cash on the sidelines from pessimistic investors that could power the market higher. There is some public caution and overall savings have risen somewhat, but I am having a hard time finding evidence that cash (potential demand) is anywhere near the market value of stocks (potential supply).
In fact, the only place Davis really finds a lot of cash is from nonfinancial corporations. This cash is being used aggressively to buy back stocks plus mergers and acquisitions. My only problem with corporate cash is that it seems to be financed not out of profit growth, but rather debt offerings. Either way this produces demand, but it can also hurt balance sheet quality (as we have detailed previously)
More: zerohedge.com/news/2016-10-17/market-myth-shattered-ned-davis-warns-theres-no-more-cash-sidelines
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