Asset protection

Why There Is Literally No “Cash On The Sidelines.”

Posted by Lance Roberts

on Monday, 4 January 2021 7:43

In the later stages of a bull market advance, the financial media and Wall Street analysts start seeking out rationalizations to support their bullish views. One common refrain is “there are trillions of dollars in cash sitting on the sidelines just waiting to come into the market.” 

For example, Barron’s recently penned the following:

“There is record amounts of cash sitting in checking accounts of American households—and for optimistic investors, it’s just one more reason the stock market should keep pushing higher. 

Yahoo! Finance also jumped on the claim:

“It should also come as no surprise that there’s never been so much cash sitting on the sidelines — nearly $5 trillion, as a matter of fact. This is significantly above the record $3.8 trillion in cash set back in January 2009 during the financial crisis!”

McKinsey & Co also published the following graphic.

cash on the sidelines, Why There Is Literally No “Cash On The Sidelines.”

See. There are just tons of “cash on the sidelines” waiting to flow into the market.

Except there isn’t. CLICK for complete article

The Wall Street Journal’s Best Columnist Absolutely Nails It

on Wednesday, 30 December 2020 10:20

“The professional class of politicians, media people, scientists and credentialed chatterers care about business in the abstract—“small-business bankruptcies” concern them; they have a sense some people will lose livelihoods. But they have no particular heart for them. They never betray any appreciation of the romance of opening a place and being your own boss and offering a good product and being part of the town and being a success. They don’t understand the sacrifice it takes. Or that the shuttering of a store is, literally, the death of a dream.”

Peggy Noonan, WSJ columnist

on Wednesday, 30 December 2020 10:17

“The policies of the government in power, and the proclivities of the current prime minister, are not particularly oriented towards the hard work of generating economic growth, and that can make things difficult for the Department of Finance,”

– David Dodge, Former head of the Bank of Canada

“The lack of transparency around the government’s intentions in its economic and fiscal forecast is not acceptable in a democracy. I think everyone should be concerned about this.”

– Don Drummond, Former Chief Economist, TD Bank Financial Group and several senior positions, Department of Finance

on Tuesday, 29 December 2020 9:59

There is nothing government can give you that it hasn’t taken from you in the first place.
~ Sir Winston Churchill

Why The Second Stimulus Won’t Have Much Economic Impact

Posted by Lance Roberts

on Thursday, 24 December 2020 7:36

In October, I discuss how the “2nd Derivative Effect” would mute the impact of future stimulus programs. With the passage of the $900 billion stimulus package, we can update the estimates for the economic impact heading into 2021.

While most hope more stimulus will cure the economy’s ills, the “2nd derivative effect” will be problematic. Of course, since vast portions of the stimulus package went to everything but “helping out the average American,” such ensures the impact will be far less.

Let me recap.

NOTE: This article was written prior to Trump’s rejection of the stimulus bill. The analysis is based on the bill as is currently written. I will update the analysis if the bill changes. 

Making Some Assumptions

As the economy shut down due to the pandemic, the Federal Reserve flooded the system with liquidity in March. At the same time, Congress passed a massive fiscal stimulus bill that extended Unemployment Benefits by $600 per week and sent $1200 checks directly to households.

As shown in the chart below of GDP, it worked. In Q3, inflation-adjusted GDP surged 29.91% from the Q2 reading of 35.94%. If we assume that Q4 will increase according to the Atlanta Fed GDPNow estimate, GDP will slow to just a 2.76% advance…CLICK for complete article