Long-Only Shops & Equities, Sittin’ In a Tree…

K-I-S-S-I-N-G…

To say long only funds are in LOVE with equities here is an understatement.

As of April month-end, mutual funds held less cash and more stocks than they ever had before – we’re talking 60 year lows on the data set.

If, as the chart below suggests, low cash balance ratios lead to sustained sell-offs and secular bears and high cash balance ratios the opposite, what does the current level of cash at mutual funds suggest about the future?

Note how little the ratio spiked at 2009’s panic lows vs. some of history’s other lows.

Why is the following question not the prerequisite first one CNBC asks all of its long-only guests in interviews, to the extent that they are NEVER of the belief that risk is worth paring in a portfolio?

What would make you bearish Mr. PM?

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