Why Fund Managers Are Holding More Cash

The old saying “cash is king” is making a comeback. According to The Wall Street Journal, fund managers are increasingly stockpiling cash—even as markets continue a slow upward climb. A recent Bank of America Merrill Lynch survey revealed that portfolio cash allocations have risen to 5.7%, up from 5.5% just the previous month.

This increase aligns with Goldman Sachs’ recommendation to raise cash positions in anticipation of a potential market downturn. While some interpret this trend as a signal of looming recession fears, The Journal suggests it’s more about preparing for short-term volatility. One factor weighing on sentiment is Britain’s potential exit from the European Union—known as “Brexit”—which could trigger market turbulence.

However, the irony is that highly publicized risks like Brexit rarely end up being the actual causes of major market downturns. This is best explained by the efficient market hypothesis, which argues that public information is already factored into asset prices. Often, when investors worry obsessively about issue “A,” that fear gets priced in—only for some unexpected event “B” to spark the real selloff.

In short, while a market drop is inevitable at some point, the actual trigger is rarely what everyone predicts.

A Shady Political Marketing Play?

Though I usually avoid writing about politics, the unusual story surrounding Donald Trump and a questionable super PAC is hard to ignore. In April, Steven Hoffenberg—convicted in 1995 for running a $475 million Ponzi scheme—filed paperwork to launch a super PAC in support of Trump. Interestingly, the PAC hasn’t reported receiving any cash donations. Instead, it lists a $50 million in-kind donation of digital marketing services from a software company called Statware Inc.

The filing mentions plans for a “digital media marketing” campaign and something ominously referred to as “revenue sharing.” That phrase raises eyebrows—especially in the context of Hoffenberg’s past. For those unfamiliar, a Ponzi scheme works like this: investor #1 is paid with funds from investor #2, all while the scheme operator skims profits and promises inflated returns.

While we’re not claiming this PAC is fraudulent, the structure has concerning parallels. Here’s a hypothetical: Statware donates services to the PAC, which then raises funds from outside donors and directs those funds back to Statware or its affiliates. Hoffenberg could then extract compensation from the cycle. Meanwhile, donors receive vague promises of influence or return, which may or may not materialize—typical of both political giving and, unfortunately, Ponzi economics.

To be clear, this is speculative—but the resemblance is striking. And while political contributions operate in a legally gray area, the ethical questions are harder to ignore.

High-Frequency Trading Faces a New Challenge

High-frequency trading (HFT) continues to stir debate on Wall Street. The latest development? The SEC has granted full approval to IEX, a new stock exchange aiming to level the playing field.

What sets IEX apart is its approach to trade execution. Unlike other exchanges, it introduces a slight delay—called a “speed bump”—in its trading feeds. This aims to prevent a practice known as “front running,” where HFT firms use faster data access to profit ahead of slower traders.

The idea is controversial. Opponents, particularly HFT firms, argue that the speed bump complicates markets and could reduce liquidity. Proponents—like mutual fund managers and retail investors—believe it could make trading fairer by minimizing the advantage of ultra-fast traders.

Both sides agree on one thing: this change adds complexity. Whether that complexity makes markets better or worse remains to be seen—but the approval of IEX signals growing momentum for a more transparent and equitable trading environment.

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