TD Ameritrade CEO Warns “Never Seen Client Cash Levels This Low”

Morgan Stanley said last year that client cash levels are at record lows.

We noted previously that the cash balance of equity mutual funds is at an all-time low 3.3%.

And now, with his share price at 52-week highs after beating earnings, TD Ameritrade CEO Tim Hockey confirms this extreme level of complacency in today’s earnings call…

“While cash levels are up slightly sequentially to approximately $150 billion, cash as a percentage of total client assets remained at historic lows at 12.7%, down slightly from last quarter due to the growth in the value of investments and as a result of strong net buying from our retail clients…”

And it’s not just retail…

“…in both of our[retail and institutional] businesses, we’re seeing historically low levels of cash to assets under management.

These are record low levels of cash…

“if you’re asking this low level of client cash we’ve never seen, but there is absolutely a cycle that client cash as a percentage of assets goes down partly because markets go up. And so, they take advantage of that, but also it’s just a numerator-denominator thing.“

Does it feel toppy?

“If you’re asking whether markets are at a high end of the cycle, it certainly feels like this, bull market is long in the tooth. But by the same token, it doesn’t seem to be a catalyst for change and there seems to be a drifting up…

Clients are extremely active…

… we’re certainly seeing them at very high levels of optimism. And so, we’ll continue to monitor that.

… client logins accounts trading and all posted healthy increases and retail clients were net buyers of 6.9 billion, this resulted in very strong trading 726,000 trades per day on average, which is up 49% from a year ago.

In fact activity in January has been even stronger with 975,000 trades per day on average through the 17.

In other words, not only is there no institutional or retail cash on the sidelines, but the level of cash is the lowest it has ever been.