Tuesday, September 21, 2021

My Favorite Graphic -- September 21, 2021

Link here.

Just released.

This chart lags a bit. This is current as of August 31, 2021.

It's hard to see, but the money in US money market funds at the end of August, 2021, was slightly more than what they held at the end of July, 2021. 

This money sits idle.


4 comments:

  1. why did they jump in January 2020, if that's what they did? the graph isn't easy to understand if one hasn't seen it before...

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    Replies
    1. I don't under macro-economics at all. I may be well ahead of my headlights posting this graphic and commenting on it.

      But in my simple mind, among the investor class or among those who have much more disposable income than the average person, there are only two places to park money: in the money market funds or the equity markets.

      This chart suggests, from a historical basis, a huge amount of cash on the sidelines; a huge amount of idle cash. This is what we see in Germany. Folks are worried about the economy or worried about their own situation and want to preserve capital even if they are not making any money (interest or dividends).

      The huge jump in 2020 is certainly amazing, it seems, but this was the plague year. Everything suggested the economy was going to tank. I've long lost the bubble on the GDP numbers for the plague year -- by quarter -- but whether or not the economy failed, folks were not going to take a chance. They started stashing money in money market funds.

      It is amazing that Americans found that much money to put in the money market funds because the equity market was also doing well. But that's a different question.

      Was this all money that was not being spent on travel?

      So, I don't know where all that money came from, but there certainly seems to be a lot of cash on the sideline.

      The bigger question for me: what was going on sometime after January, 2018, when the curve moved sharply upward through January, 2020 (before the unprecedented jump)? What was going on in the last two years of the Trump administration and/or what was going on in the two years leading up to the presidential election. Were folks afraid of Trump being re-elected or were they afraid of someone like Biden being elected? I have no idea but that move from January, 2018, to January, 2020, is incredibly interesting.

      Again, I have no understanding of macro-economics. I can't explain the chart. But one has to admit, regardless of what the chart is tracking, regardless of what the "x" axis or the "y" axis is/are, it's an amazing graphic. We don't see many graphs that look like this.

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    2. well, that certainly cleared it up!

      given what the graph shows, should there not be several large spikes for each time the IRS sent out a Covid stimulus check? the US savings rate jumped to more than 30% a couple of those times

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    3. Were those the stimulus checks based on income? I honestly don't recall. If they were based on income, I assume many (most?) of the recipients were not in the investor class.

      Speaking of which, on a completely different note: seniors (those older than 65 years of age, or retirees, etc) who have a gazillion dollars and are in the high-income-tax brackets, it's time to start transferring that money to heirs who are in lower-income-tax brackets instead of growing one's estate ever larger.

      I think a lot of boomers (my demographic) need to think whole-listically -- think of the entire family with regard to overall taxes. All my life I've always concentrated on my own "1040" but now that I'm thinking about "1040's" of extended family members, it's a whole new world.

      The really, really rich have trust funds, etc., but I'm not in that pool, but there are options that make a lot more sense than trust funds. There are some "IRA-like" products that have literally no limit on how much one can fund, and the products grow tax free and there are no RMDs. Unless one is a billionaire.

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