Monday, March 08, 2010

Mutual Fund Cash Depletion Highest Since 1991

In what can best be described as a contrarian indicator with an uncertain timing trigger, Mutual Fund Cash Depletion Highest Since 1991. http://www.bloomberg.com/apps/news?pid= ... Gl.8&pos=4

Equity mutual funds are burning through cash at the fastest rate in 18 years, leaving them with the smallest reserves since 2007 in a sign that gains for the Standard & Poor’s 500 Index may slow.

Cash dropped to 3.6 percent of assets from 5.7 percent in January 2009, leaving managers with $172 billion in the quickest decrease since 1991, Investment Company Institute data show. The last time stock managers held such a small proportion was September 2007, a month before the S&P 500 began a 57 percent drop, according to data compiled by Bloomberg.

Stocks will rally this year as the prospect of higher interest rates lures cash from fixed-income securities to equity accounts, says Mark Bronzo at Security Global Investors. Data from ICI, the Washington-based lobbying group for professional money managers, show investors have pumped $369 billion into bond funds since March 2009 versus $23.4 billion for equities.

“There’s so much money in the fixed-income market and there’s so much money in money-market instruments paying almost nothing,â€