Let's talk about the warning of cash flowing into money markets.... - Belle of the Ranch

Well, howdy there Internet people. It's Belle again. So, today we're going to talk about cash flowing into money markets and what it means.

So, we've covered indicator after indicator that isn't great news for the real economy. Meaning, the economy that you and I actually exist in. And we've talked about how that economy differs from the economy that establishment billionaires like Trump talk about. It's given rise to the discussion of K-shaped economies and E-shaped economies.

But now we have an indicator that suggests even the economy for rich people that often gets simplified as the stock market is going to be leaving the bullish market. There are always indications saying the market is headed for a downturn, but some have really high correlation. One bad sign is when cash that would normally go into the market goes somewhere else at a lower return.

Money moving into money market funds is one of those. To get why this matters, you have to know what money market funds actually do. The main purpose of a money market fund is to preserve the principle. It's not where you get rich. It's where you protect what you already have. It's a type of mutual fund that invests in short-term low risk debt securities so it puts the money in things like US Treasury bills and commercial paper.

In non-economic speak, this is where you park money. It's low risk but not risk-free and it doesn't make much. So if money is flowing into this kind of investment, it's generally a sign of trouble because rich people want their money making money, not just sitting around bringing in a little bit more than a savings account. Right now money is flowing in. According to the Fed, money is moving that direction.

If all of that is just foreign or you're more of a visual learner, I'll have a link to a chart from the Fed showing how much money is in money market funds. You'll see a blue line that represents the money in money market funds. Then you'll see these gray bars in the background. Those are periods of recession.

Money flows into the funds before or during recession and the line goes up and it flows out right after one and the line goes down. That's a visual representation of rich people protecting their money as economic seas get choppy by putting it into the funds. They pull it out right after to as Warren Buffett said buy when there's blood in the streets. You can see it repeat for 40 years.

The peaks are dotcom, recession of 2008, COVID, and well, now. You're seeing all of these economic think pieces saying that Joe Sixpack just doesn't understand the economy and they're overreacting. Joe Sixpack isn't moving his investments into money market funds. That's a whole different category of people realizing that Trump's economy is a lot of smoke and mirrors.

Anyway, it's just a thought. Y'all have a good day.