Real Wealth Society

Friday, April 11, 2008

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....



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