Cash still pouring into M1. The increase in idle cash is challenging the spikes we saw at the time of peak panic in 2008 and the debt ceiling debate induced panic in September 2011. People are apparently sitting on sidelines awaiting the election outcome and resolution of the “fiscal cliff”.

No wonder corporations are guiding toward weaker earnings . . . people are withdrawing cash from the real economy and capital markets and stuffing it into insured bank accounts.  We saw this happen in 2008 and last year.  It is an indicator of a high level of fear and uncertainty in the economy.  Cash in M1 is now 15% of GDP, the highest since 1995 when there was another debt ceiling debate and gridlock in Congress and a battle between a Republicans House and a Democratic President.  An economy in recovery should have M1 in the order of 10% or less of GDP – that implies that there is ~$800 billion in idle cash that could be used to grow the economy.  Resolving the public’s fear on the direction of the economy and the “fiscal cliff” could trigger a improved recovery in the economy and a strong gain equity markets.  Spikes in M1 in the past have proven to be opportune times to invest in equitiesJeb Terry, Sr. October 23, 2012

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