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Fallout: The Financial Crisis

Where are people stashing their cash?

Ashley Milne-Tyte Oct 10, 2008
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Fallout: The Financial Crisis

Where are people stashing their cash?

Ashley Milne-Tyte Oct 10, 2008
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TEXT OF STORY

Kai Ryssdal: This might be a good moment to remember that for every seller out there, there is a buyer — somebody willing to pay a price, usually a lower proce these days, granted, for the shares that are on offer. But riddle me this: All those sellers, what are they doing with the money they’re taking out of the market? From New York, Ashley Milne-Tyte reports.


Ashley Milne-Tyte: Investors really are putting the cash in a safe place — they hope. Dennis Gartman publishes investment report The Gartman Letter.

Denis Gartman: Basically it’s going to what would be the institutional equivalent of the mattress. It’s going into a demand deposit account.

In other words a regular old bank account. They’re seen as particularly solid now the government has promised to insure each one up to $250,000. Philip Blumberg of Blumberg Capital Partners says parking money in the bank isn’t just good for the banks but for the entire economy.

Philip Blumberg: The banks begin to restore some of their liquidity and we start to see loans again.

That, he says, is all part of the government’s grand plan. Traditionally when stocks slide, investors flock to Treasury bills. Eric Nelson is chief investment strategist with Burns Advisory Group in Oklahoma City. He says that so-called flight to quality stopped recently.

Blumberg: The Treasury had an auction a few days ago and it was actually under-subscribed. Yields had to go up to attract more buyers. I think what you’re now starting to see is almost a complete movement into just cash and money market account type options.

Investors shifted $27 billion into money market funds this week, quadruple the amount of the week before. That’s according to EPFR Global, which provides data about funds. Nelson says investors would be better off hanging on to shares for the long haul. He says money markets and T-bills may be safer, but their yields will soon be outstripped by inflation.

In New York, I’m Ashley Milne-Tyte for Marketplace.

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