Could you explain how the "mountain of cash on the sidelines" would decline? When I buy a stock, my money moves from my hands to the seller's. Now he has the mountain of cash. Still there. Doesn't go away by being invested in the stock market. "cash on the sidelines" is usually the last argument to lure people to buy stocks when everything else fails.
You are quite right that the money doesn't disappear. But if the demand for that cash started to decline and the Fed did not take offsetting measures to absorb the unwanted cash, then the attempt to reduce cash holdings would drive up the price of just about everything.
I was just about to ask what you meant by difficult to imagine but I believe you answered it in the Q/A. How is the Fed going to unwind $2T in assets + manage the money supply if the market makes a move quickly?We all know the Fed is generally behind the curve and are terrible forecasters. So how does Bernanke tell the US on national television he is 100% confident he can do the job? Spooky!
Thank you,Scott. Excellent posts today as always. I appreciate your insights which have helped me stay invested in equities. It is difficult to keep invested in times of fear and panic; your Blog has been invaluable.William
The mountains of cash are not on the sidelines, but in the skyboxes -- cash is scarce on the sidelines...
Dr.: What are skyboxes?
Excellent commentary by Scott Grannis. Per usual.
Scott Grannis..."then the attempt to reduce cash holdings would drive up the price of just about everything".Scott, don't you think that is exactly what Mr. Bernanke and the FED want? Especially rising home and equity prices? Maybe not so much food and energy.
Lets find something besides housing to bubble this time.
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