Friday, September 12, 2025

Another Not-Ready-For-Prime-Time Note -- This Time, The MMF "Wall Of Cash" -- September 12, 2025

Locator: 49093MMF.

My favorite chart.

Question

Later, 2:37 p.m. CT: has there ever been a time when there was a significant (and lasting) drop in the amount of money held in MMFs? Link here.

Update

September 26, 2025: MMF increases by $31 billion in most recent weekly data update. Link here.

Later, 2:16 p.m. CT: read the original post first, before reading this update. This is what I think will happen if the Fed cuts 100 basis points before the end of 2025 and and all else remains unchanged (i.e., no major geo-political news issues or major economic changes affecting the mindset of investors):

  • who holds that $7 million in MMFs: upper income folks; investors; folks who are not living beyond their means; folks who have a positive cash flow and able to put money into savings/investing; 
  • for those folks who hold $7 million MMFs, how do they feel, emotionally? Overall they feel "relatively rich" or "very well off." They may not like the headline but when they do the math they will realize there is not a big difference between 3% and 4% when it comes to a Fed cut or a MMF;
    • 90% of Americans are financially illiterate and won't change their investment habits
  • what will these "very well-off folks" do based on how they feel? They will continue to put money into their savings / investing accounts even as they buy more stuff; 
  • why will they do that, put more money into savings/investing? because that's what they do! LOL. I didn't say they would necessarily put more more into savings/investing, I just say they will continue to add money to their savings / investment accounts because that's what they do.

More could be said but I doubt anyone reads past this line.

Original Post

A reader sent me the link to this article:


My "not-ready-for-prime-time-reply":

Most important bullet in that summary:

But Wall Street’s “wall of cash” theory, which contends lower interest rates will lead to a flood of cash into stocks and drive a new rally, has been debunked many times.

On another note, I don't know how anyone can see anything negative about the "wall of cash." But that's the nature of CNBC, ZeroHedge, others with regard to scare headlines. Two exceptions at CNBC: Scott Wapner and Jim Cramer.

But having said that, one can use that article to try to figure out where to place money in equities.

Finally, I'll bet that a year from now there is still $7 trillion in money market funds +/- 10%.

So, let me ask my imaginary friend, ChatGPT.

ChatGPT prompt:

Investing: "Wall Street’s “wall of cash” theory, which contends lower interest rates will lead to a flood of cash into stocks and drive a new rally, has been debunked many times." Is there any historical evidence since 1951 to corroborate this "theory"?

ChatGPT reply:

Since 1951, there’s no consistent historical evidence that lower interest rates alone unleash a “wall of cash” into stocks.

  • Sometimes lower rates coincide with bull markets (1980s, post-2010).

  • Other times they coincide with bear markets (2000–2002, 2008).

  • The decisive factor is whether investors believe growth and profits will rise.

My imaginary friend and I are on the same page of music. LOL.
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