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Fred Dunkley

Fred Dunkley

Writer, Safehaven.com

Fred Dunkley is a tech analyst, writer, and seasoned investor. Fred has years of experience covering global markets and geopolitics. 

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“Enormous Piles Of Cash” Are About To Return To The Market

Cash

With the equities markets taking a beating this week, and many falling in line with Morgan Stanley’s cry of “regime change” and prognosis that we’ve reached the “tipping point” that puts us into bear territory, it’s unsettling when another billionaire broker chimes in with a theory that “enormous piles of cash” are about to return to the market.

Everyone knows the bull run won’t last forever; however, the length of this one is truly nerve-wracking and it’s now all about animal metamorphosis—but it’s hibernating bulls and bears with horns.

Tom Peterffy, the billionaire founder of Interactive Brokers, told CNBC Thursday that he may be about to move from bear to bull soon because his customers alone have over $50 billion in cash sitting around and waiting to get back into the market.

But Peterffy—the 57th wealthiest person in the world, according to Bloomberg—isn’t making any sudden transformation. Any bear-to-bull move will have to wait until after mid-term elections, and he’s expecting a Democratic “blue wave”.

That $50 billion in cash is waiting for the same thing before it dives back into the markets.

From Peterffy’s standpoint, a “blue wave” would likely result in a Chinese government more willing to deal on trade.

“Give me post-midterm and give me another 2 to 3 percent down and I think the market will turn. So, I would not worry,” Peterffy told CNBC.

Nor is he worried about rising interest rates, even with the Fed scheduled to meet twice more this year.

But in the meantime, the markets are more than floundering.

On Thursday, the Dow lost 546 points in another major sell-off. It lost over 1,300 points in just two days. The S&P 500 lost 2.1 percent Thursday, and only the Nasdaq was somewhat spared, closing down 1.3 percent.

So, not everyone will share Peterffy’s optimism—especially when it comes to tech stocks, which are taking a beating precisely because of rising interest rates and fears that these high-flying growth stocks won’t be able to deliver in a market downturn. Related: Latin America’s Love-Hate Relationship With Crypto

Indeed, Guggenheim Partners CIO Scott Minerd told CNBC Wednesday that as the Fed continues to hike interest rates, the stock market will pull back 40 percent from its highs.

Still, as Quartz points out, the Dow would have to plunge by 7,000 points before it got back to pre-Trump levels, which prompts the question of whether the markets’ rough ride right now will have any impacting on voting.

The bottom line is that hedge funds have been liquidating positions and this is prompting further sell-offs. This is the money that Peterffy’s eyeing to jump back into the market.

Mid-term elections, then, are the critical point. Either it’s Peterffy’s “blue wave” that leads to the hoped-for return of the “enormous piles of cash” to the market, or it’s a view that the market has gained almost 7,000 points since Trump took office, and the bulls have never had bigger horns.

Others will point out that this time around, there’s a missing piece of the puzzle: Tax cuts. That’s what spurred the bull in 2016, but come November 4th, Trump won’t be bearing any gifts other than a massive trade war.

By Fred Dunkley for Safehaven.com

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