The Liquidity Society By Michael J. Panzner

April 01, 2008

TV pundits and Wall Street "strategists" believe that "cash on the sidelines" can only mean one thing: it's time to be bullish. In their view, such a build-up of liquidity has always signaled a pent-up demand for stocks.

But what if the money's there (and growing) because individual investors, in particular, are beginning to realize that:

• Equities are a riskier asset class than they thought (or were led to believe by their brokers and the rest of the financial services industry)
• True diversification means having a portion of their portfolios in an asset class called "cash"
• Portfolio volatility may not be such a good thing, especially for those who are in or near retirement

If any or all of these apply, then the recent cash-raising, which the "experts" -- I use that term loosely -- believe is bullish, may actually be pointing to a secular change in attitudes towards the stock market. If so, such perspectives could weigh on share prices for the foreseeable future....

more

http://www.financialarmageddon.com/2008/04/the-liquidity-s.html