Money on the sidelines argument?

B

beefcaketrade

I keep hearing talking heads on TV use "money on the sidelines" for why there are buyers forever.

Just exactly how much money is "on the sidelines"?

And wouldn't some funds always carry a portion of cash no matter what? Heck, I'm sure you carry cash and don't have all your money invested. Because you still need to pay your bills.

It also doesn't mean these funds are not already positioned bullish or 'long' the market like the cash market. Maybe they are a derivatives based fund trading in options and futures and basically keep a huge portion of cash to support their derivatives positions as collateral for margin.

So just because maybe the big banks can look at their prime brokerage clients and go "oh yeah there is some cash left they can spend", it doesn't mean they can or will spend it?

For example, I bet a short hedge fund has a lot of 'cash' on their books. Because they just shorted a bunch of stock and is net short. I bet a futures fund that buys or sells premium or vol has a huge amount of cash. It is a permanent state they are in.

Contrasted with mutual funds. These might have almost no cash sitting on the sidelines because all they do is buy and hardly sell?

How much truth is there to that argument? I guess the old adage is true, and that is price action dictates narrative and not the other way around. So people are just making up reasons to explain something. But I'm always wondering how 'true' the 'cash on sidelines' argument really is.
 
beefcaketrade said:
I keep hearing talking heads on TV use "money on the sidelines" for why there are buyers forever.

Just exactly how much money is "on the sidelines"?

And wouldn't some funds always carry a portion of cash no matter what? Heck, I'm sure you carry cash and don't have all your money invested. Because you still need to pay your bills.

It also doesn't mean these funds are not already positioned bullish or 'long' the market like the cash market. Maybe they are a derivatives based fund trading in options and futures and basically keep a huge portion of cash to support their derivatives positions as collateral for margin.

So just because maybe the big banks can look at their prime brokerage clients and go "oh yeah there is some cash left they can spend", it doesn't mean they can or will spend it?

For example, I bet a short hedge fund has a lot of 'cash' on their books. Because they just shorted a bunch of stock and is net short. I bet a futures fund that buys or sells premium or vol has a huge amount of cash. It is a permanent state they are in.

Contrasted with mutual funds. These might have almost no cash sitting on the sidelines because all they do is buy and hardly sell?

How much truth is there to that argument? I guess the old adage is true, and that is price action dictates narrative and not the other way around. So people are just making up reasons to explain something. But I'm always wondering how 'true' the 'cash on sidelines' argument really is.
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stop listening to cnbc
 
lol I actually don't on a regular basis. But it's also on my sirius radio so I hear it occasionally when switching between channels and I may stay for a minute to hear it.

This argument is used a lot though. And the people that say it are often the analysts from the big banks that go on to talk. Presumably they have a global view of their client's positions and can derive such info as their broker.

Usually it goes like this: "markets can go to XYZ because there is still cash on the sidelines". Um... no. Maybe those cash positions are a permanent state of being for those funds. Heck, if I'm selling options only, I can be 100% in cash ALL the time. But what is my real buying power? Obviously nada if I'm already selling a bunch of options. Or maybe I trade only futures. Again, my portfolio will look like its all cash. Or what if I'm a short seller? I'd have more cash than my NAV. "Cash on the sidelines" lol.

Or unless they mean excess "buying power". But I don't think that is what they're saying when they say "cash on the sidelines".

It's just so annoying to hear them say this over and over again.
 
beefcaketrade said:
lol I actually don't on a regular basis. But it's also on my sirius radio so I hear it occasionally when switching between channels and I may stay for a minute to hear it.

This argument is used a lot though. And the people that say it are often the analysts from the big banks that go on to talk. Presumably they have a global view of their client's positions and can derive such info as their broker.

Usually it goes like this: "markets can go to XYZ because there is still cash on the sidelines". Um... no. Maybe those cash positions are a permanent state of being for those funds. Heck, if I'm selling options only, I can be 100% in cash ALL the time. But what is my real buying power? Obviously nada if I'm already selling a bunch of options. Or maybe I trade only futures. Again, my portfolio will look like its all cash. Or what if I'm a short seller? I'd have more cash than my NAV. "Cash on the sidelines" lol.

Or unless they mean excess "buying power". But I don't think that is what they're saying when they say "cash on the sidelines".

It's just so annoying to hear them say this over and over again.
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margin debt is the highest it has ever been, higher than 1999 and 2007

if fed keeps hiking deleveraging will occur; almost everybody is all in at this point
 
The notion of "money on the sidelines" is silly.

Unless the money leaves the marketplace... ie, goes into real estate or is spent.. like on hookers and blow... it's always there... just changes hands is all.
 
Keep it simple and frequently invest in the S&P 500 index for the long run. Day trade the market up or down for the income or wealth accumulation.

If the people on TV knew the market was about the crash, they would not be announcing on TV, they just actors and just say stuff to keep people watching the show.
 
SimpleMeLike said:
Keep it simple and frequently invest in the S&P 500 index for the long run. Day trade the market up or down for the income or wealth accumulation.

If the people on TV knew the market was about the crash, they would not be announcing on TV, they just actors and just say stuff to keep people watching the show.
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They provide a service. Whether bull or bear, you just want to hear either a reinforcing opinion or a different opinion. So financial TV provides that. I don't think anyone takes what people say to heart though.
 
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