What They're Talking About On The Street

Traders are talking about:

1) FOMC minutes: sunnier outlook, but stocks little changed. The FOMC has released the minutes of its meeting held August 11 and 12.

The good news: they have greater confidence that the "downturn is ending", and the outlook for foreign economies is improving.

The bad news: members disagree on the strength of the upturn, though they feel the recovery will pick up in 2010.

2) August Retail sales out tomorrow. We are expecting to hear that the improving economy has helped back-to-school. The biggest sales gainers should be drug stores and off-price apparel stores like Ross Stores and TJX .

Biggest losers: teen apparel, dept. stores.

3) HMOs/hospitals gain on speculation that President Obama will downplay inclusion of a public insurance option and may not even insist on it. Congress returns from its summer recess next week; the President is expected to speak to a joint session of Congress on September 9th.

4) How much sideline cash is there out there? Maybe less than many think.

It's a cliche-"there's an ocean of cash on the sidelines"-but getting a hold on how much is on the sidelines is not easy.

By one measure, there looks to be less than meets the eye. Charles Biderman at Trimtabs.com notes that investors are taking money out of low-yielding money market accounts...retail money funds since May are down $102 b or 10%.

What happened to the money? Some went into bank savings, some into bond funds. But very little of that hard cash has gone into stocks, it appears.

Meantime, margin debt was up 6 percent in July, an unusually large jump. What does it mean? It means some traders want to be bullish...they want to get fully invested....and borrowed money to invest in the markets. But that's different than using cash.

Bottom line: be skeptical of claims about oceans of cash ready to pour into stocks.

One other worry: retail investors have poured money into bond funds this year, under the theory that there is little if any risk in bond funds. Wrong! If interest rates go up, those investors will find out quickly that bond funds are not riskless.



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