I’ve always been a little reluctant when people argue that cash is building up on the sidelines, so it is time to buy.? First, this is an ill-defined concept.? What cash are we measuring?? For every seller, there is a buyer.? Thus, I am reluctant to be bullish after articles like this, or like this.

There is enough derivative activity going on that the cash level may not represent buying power, because they represent cash that must be held to control derivative positions.? As for individuals, they are moving from individual stocks to mutual funds.

Cash levels are hard to interpret, and have not correlated well with market movements.

With that, I warn you to be careful.? With the GSEs in flux, there are many things, good and bad that can take place.? Until the plan is announced we won’t know how it is proceeding.? What will be guaranteed and what will be wiped out?? Who will bring lawsuits against the government for damages?

There is a mantra at present: if the government takes over Fannie and Freddie, mortgages will get cheaper, and the housing market will revive.? Well, that is true until foreign governments adjust their lending practices.? Will Treasury rates remain the same when Fannie and Freddie fund off the Treasury?? I would expect that Treasury rates will rise, but agency spreads would fall more.

Be careful in this environment.? Many are being dogmatic about what will happen with stocks, given the bailout of Fannie and Freddie.? I would be a seller on strength, on most lending financials.