patrick.net

I think it stays in the stock market until stocks or housing move up enough for people to feel comfortable jumping in. Smart (unemotional) money went in already (stocks or housing). Unfortunately we still have the emotional buy high, sell low (greed/fear) element in play that will never change.

Tough choice when only given two options to a pretty dynamic economy. As the economy improves, I would theorize that profits will travel back through the stock market helping individual investors. Real esate, both commercial and residential will see more activity but prices for both will stay flat until the moderate inflation brought about from the extra money supply and low interest rates catches up. Overall, residential real estate is still slightly overpriced but affordable with these crazy low rates. This will resemble a normal market as the price/payment are in line with affordability but interest rates can't really go much lower so prices will have to give some more in California if interest rates are to rise.

Welcome back , Malcolm!

The recovery is on the way. Green shoots! I see green shoots- in about 2025!

Some day all citizens of the world will realize that wealth = MANUFACTURING
The countries that do have green shoots
The counties that don't have land that will be bought by China

What fraction of the $3.6T in money market accounts is really available for investing in housing, stocks or otherwise?

Much of the money is day-to-day operating cash parked there by corporations and individuals. Some of the money is already borrowed money (and perhaps borrowed several times over).

I think it is doubtful that ALL of this cash is waiting for an investment.

You may also all recall that 3.6T is almost exactly the balance of MM funds last year today, one week before the Lehman bankruptcy caused a massive run on the MM funds. At that time, one year ago, was the balance also waiting for investment? Something to ponder ...

This is an economist's nightmare. Fed has doubled the money out there in less than a year. Depending on your theory of how money moves through the economy, this could have the effect of nothing (if there's slack and low velocity) all the way to doubling the price level. Double. That's no joke.

To avoid Depression II, Fed and Govt have thrown so much money out there it's unbelievable. It'll be a trick worthy of Man on Wire to see them deflate the bubble without getting too hot or too cold.

Time will tell. But that's where the money came from, and to balance out prices of goods, assets, and cash, the price level would double.

I agree with you, Thordeer.

Another reason I don't keep money $$$ in cash because I know it's getting ripped off by the government & Fed because they are printing so much paper money. It's crazy to hold the $1 bill when you know it's really mean $.50 cents in reality. I'm putting mine in gold, U.S. stocks & foreign stocks.

It's crazy to leave money in money market or CD, the government is stealing from you via Inflation.
IT'S SIMPLY CRAZY TO PUT MONEY IN THE MONEY MARKET OR CD ACCOUNT BECAUSE THEY GOVT & FED IS STEALING YOUR HARD EARNED MONEY BEHIND YOUR BACK VIA TAX, BAILOUT PLAN AND INFLATION.

Who are they bailing out? You, me????

No, they are bailing out the executives from big companies and irresponsible borrowers.

Wake up people!

Stocks.

Looking back the past 2 years. Stock market win. Luckily, I was right and my money stayed there during that time. :)

Money is never sitting idle. WSJ writer is wording it incorrectly. thunderlips11 says

Wall Street Journal August 28, 1930:

There’s a large amount of money on the sidelines waiting for investment opportunities; this should be felt in market when “cheerful sentiment is more firmly entrenched.” Economists point out that banks and insurance companies “never before had so much money lying idle.”

http://newsfrom1930.blogspot.com/

Only 9 more years to go...

I personally pumped some into business. And put some into stocks to diversify some. Re isn't investment, all money is made on initial sale.

Thordeer says

This is an economist's nightmare. Fed has doubled the money out there in less than a year. Depending on your theory of how money moves through the economy

Why do you need theories on money in an economy? Take a look at U-6.

http://research.stlouisfed.org/fred2/series/U6RATE

No job or wage growth, no overall inflation. This isn't rocket science.

This is not to say we won't get pockets of inflation -- oil, food, healthcare.

Oil is driven by extrinsic supply/demand and we are steadily (if slowly) losing our center place at the oil table to China.

Food . . . if & when the dollar weakens more food will be exported for the same dollar input. This is inflationary to us, since we will have less domestic food supply, and our weaker dollar will buy less food to import.

Healthcare, well, let's just say this sector's got us by the balls and ain't letting go.

nostromo426 says

Some day all citizens of the world will realize that wealth = MANUFACTURING

wealth is a sloppy term that can mean many things.

At its purest it is the state of being well.

The next step is goods that satisfy wants and needs, stuff that makes us "well".

Then it is is the capital skills and goods that assist in this production of wealth.

Then it is the money and financial instruments that we exchange for wealth.

At any rate, manufacturing is in fact a core wealth-creating activity. But if Chinese are willing to work for peanuts, theory says we should let them.

But modern theory is kinda silent on what to do in the face of massive trade deficits. Mercantilist theory says we're getting screwed.

People keep reading how there is a huge shadow inventory of houses that will be foreclosed, which will drive down prices.
People remember how realtors and other pimps lied to them and tricked them.
People remember seeing how much money their friends lost on real estate.
As interest rates inevitably rise, houses prices will fall some more.
But, you never know what people will do with their money, people are fickle, this is shown over and over.
Logically, people would buy stocks since the stock represents a piece of profit of a business. Owning Apple, Exxon, Verizon, etc. stock means you have a claim of a portion of their profits.
Owning a house means you have paid off the mortgage. Until you own it, you are renting the money to keep the house in your name. Stop paying the interest on that money for a short time and it's all taken away.
Stocks rock for the long run. But, hot women don't like rubbing themselves all over my Vanguard statements, they like sitting in houses, cars, and restaurants, paid for by us.

Iwig aren't you the one here who constantly preaches living beyond the means by burdening our children with more debt. I wonder if you even care.

Troy, I suggest "ignore"