CHARLES: CASH ON THE SIDELINES.
LAST WEEK, THERE WAS AN ARTICLE
IN THE "WALL STREET JOURNAL"
IMPLYING THERE ARE TRILLIONS OF
DOLLARS SITTING ON THE
SIDELINES, READY TO POUR INTO
THE STOCK MARKET.
NOW, THE ARTICLE FOCUSED ON
MONEY MARKET FUNDS, BUT SOME
WOULD ARGUE YOU SHOULD CONSIDER
THOSE FUNDS, CHECKING AND CASH,
SAVINGS, SHORT-TERM CDs, ALL OF
THAT AS A BIG POOL OF CASH THAT
COULD FIND ITS WAY INTO THE
STOCK MARKET.
IF THAT'S THE CASE WE ARE
TALKING $20 TRILLION.
I KNOW IT'S UNLIKELY $20
TRILLION WOULD POUR INTO THE
MARKET.
SOME EXPERTS ACTUALLY SAY
THERE'S NO MONEY ON THE
SIDELINES BECAUSE SUCH TALK
FALLS INTO THE CATEGORY OF
FALLACY OF COMPOSITION.
IN OTHER WORDS, MONEY IN THOSE
INSTRUMENTS ARE THERE FOR A
REASON AND THOSE PEOPLE WOULDN'T
SELL THEM EVEN FOR HIGHER STOCK
MARKET RETURNS, PLUS THEY SAY
EVERY BAIE
EVERY BUYER IS MATCHED BY A
SELLER SO THE CASH THAT GOES
INTO BUYING A STOCK GO TO THE
SELLER WHO JUST SOLD THAT
POSITION.
THESE THEORIES ARE INTRIGUING.
HOWEVER, THERE IS A TON OF CASH
ON THE SIDELINES.
IN FACT, GLOBAL MONEY MANAGERS
HANDLING THREE QUARTERS OF A
TRILLION DOLLARS HAD CASH AS
THEIR LARGEST POSITION.
ALSO FOLLOWED BY DEFENSIVE
INSTRUMENTS LIKE REITS AND
CONSUMER STAPLE POSITIONS.
I THINK THE SIDELINE MONEY
EFFECT HAS ALREADY BEGUN TO FIND
ITS WAY INTO THE STOCK MARKET
FOCUSING INITIALLY ON THE BIG
2019 WINNERS.
WE ALL KNOW IT'S CALLED WINDOW
DRESSING.
IF THE UPSIDE MOMENTUM
CONTINUES, A FLOOD OF MONEY WILL
POUR INTO THE MARKETS OFF THE
SIDELINES AND FOLKS, THAT IS NO
FALLACY.
WITH MORE I WANT TO BRING IN
SHAH GILANI.
WE TALK ABOUT THIS ALL THE TIME.
THERE'S A BUNCH OF MONEY SITTING
ON THE SIDELINES AND AT SOME
POINT, IT'S GOT TO GO TO WORK,
PARTICULARLY PROFESSIONAL MONEY
MANAGERS.
>> YEAH.
THEY ARE WAY BEHIND THE CURVE
HERE.
ESPECIALLY MONEY MANAGERS THAT
HAVE BEEN ON THE SIDELINES WITH
TOO MUCH CASH FOR TOO LONG AS
RATES ARE WHAT THEY ARE NOW.
THEY ARE GOING TO CONTINUE TO BE
LOWER FOR LONGER.
THESE MONEY MANAGERS ARE
CONTINUING TO BE BEHIND THE
CURVE.
NOW, WE ARE SEEING THAT
INCREASINGLY, I AGREE WITH YOU,
I THINK WE STARTED TO SEE MONEY
COME IN OFF THE SIDELINES IN THE
LAST COUPLE WEEKS.
I THINK WE WILL INCREASINGLY SEE
IT THROUGH THE FOURTH QUARTER
ALL THE WAY INTO THE NEW YEAR.
THESE MONEY MANAGERS ARE SO FAR
BEHIND THE BENCHMARKS THEY ARE
MEASURED AGAINST THAT THEY ARE
GOING TO HAVE TO START BUYING.
THEY WILL BUY MOMENTUM STOCKS,
APPLE, MICROSOFT, ALL THE STOCKS
THAT HAVE ALREADY DONE WELL,
MADE NEW HIGHS, WILL CONTINUE TO
PLOW INTO THOSE AND START BUYING
VALUE STOCKS, ESPECIALLY
DIVIDEND, GOOD DIVIDEND YIELDING
STOCKS.
THE MARKET'S GOT I THINK ANOTHER
PERHAPS 10% TO GO HIGHER.
BASED ON THIS CASH POTENTIALLY
COMING IN.
THERE'S A LOT OF IT.
I THINK THERE'S AT LEAST A
TRILLION AND A HALF READY TO
COME IN.
WILL IT COME IN ALL AT ONCE?
I NO, I THINK IT WILL COME IN
OVER THE NEXT YEAR OR TWO BUT IT
WILL COME IN REGULARLY.
CHARLES: WHAT DO YOU SAY TO THE
EXPERTS OR PEOPLE WHO SAY THIS
WHOLE CONVERSATION IS RIDICULOUS
BECAUSE THERE'S NO SUCH THING AS
SIDELINE CASH?
>> I THINK THAT IS IN ITSELF AN
ABSOLUTE FALLACY.
OF COURSE THERE'S SIDELINE CASH.
YOU LOOK OVER AT THE MARKET
SINCE JULY, IT'S BEEN PRETTY
MUCH A SIDE WAYS MARKET UNTIL WE
BROKE OUT AND MADE NEW HIGHS
ACROSS ALL MAJOR BENCHMARKS.
A LOT OF MONEY MANAGERS WERE
TAKING MONEY OFF THE TABLE THEN,
THEY WERE TAKING MONEY OUT OF
STOCKS THAT THEY HAD NICE
PROFITS ON, AS MARKETS LOOKED
LIKE THEY WERE MAYBE GOING TO
SLIP, AS WE ARE GOING INTO THE
SIDEWAYS PATTERN, THEY THOUGHT
IF WE BREAK SUPPORT LEVELS BELOW
IT'S TIME TO TAKE OUT SOME CASH.
LET'S NOT FORGET, THIS HAS BEEN
THE MOST HATED, MISTRUSTED BULL
MARKET IN HISTORY.
THIS IS SINCE 2009.
NOTHING HAS CHANGED.
IT'S HATED EVEN MORE, IT'S
MISTRUSTED EVEN MORE.
THAT MEANS IT'S GOING TO GO A
LOT HIGHER.
CHARLES: WE HAVE SEEN BOND
YIELDS START TO SPURT HIGHER,
THE TEN-YEAR, 1.93.
IS THERE A POINT, YOU KNOW,
WHERE NOW BOND YIELDS START TO
BECOME COMPETITIVE AGAIN?
YOU REMEMBER THAT BOND YIELDS
ARE SO HIGH THAT THEY MAY START
TO BE COMPETITIVE WITH RESPECT
TO EQUITIES?
ARE WE THERE YET?
>> NO, I DON'T THINK WE ARE
ANYWHERE NEAR THERE YET, BECAUSE
THE YIELDS ARE NOT HIGH ENOUGH.
DIVIDEND YIELDING STOCKS AND
DIVIDEND YIELD ON THE S&P 500 IS
HIGH ENOUGH WHERE INVESTORS
RECOGNIZE THEY ARE BETTER OFF IN
EQUITIES BECAUSE THEY HAVE
UPSIDE APPRECIATION FOR
EQUITIES.
PEOPLE ARE MORE AFRAID OF BEING
IN BONDS AND THERE BEING SOME
CORRECTION IN THE BOND MARKET,
YIELDS GOING HIGHER, PRICES
GOING DOWN, THEM GETTING HIT.
THE FLOW HAS BEEN INTO STOCKS
AND I THINK IT WILL CONTINUE TO
BE THAT WAY.
CHARLES: SHAH, THANK YOU,
ALWAYS.
AGAIN, ALWAYS JEALOUS.