Playing It Safe With Cash

Looking at the major stock market indexes, it's hard to believe that the U.S. economy is going through a recession. With every bad news, the bulls have held their ground against the bears.

And you can be sure this has baffled many a investor. With the Federal Reserve bank firmly behind the i-banks, traders seem to have thrown caution to the wind.

Unfortunately, not every one is drinking from the Fed liquidity kool-aid fountain.

This past week, it was reported that investors have stashed a record $3.51 trillion in money market accounts. In a bid to protect their money from market doldrums, investors have settled for negative yields rather than risk their hard earned money to equity market losses.

Like most investors, I am also waiting for the coast to clear before lunging both feet into the market. While I have not completely closed my positions, I have only traded twice this year. Excluding my precious metal holdings, less than half of my portfolio consists of stocks.

Of interest to me is the fact that the funds held in money market accounts are equivalent to 20% of the U.S equity market capitalization. Assuming that most investors will plough the money back into the equities, you can be sure that the next bull market will be explosive.

For now, I'm taking it one day at a time although I am convinced that the markets will trade lower rather than higher because consumers are in a debt bubble that will only get worse as inflation continues to bite.

Until the trade volumes pick up, I will continue to tread cautiously.