windsurfar

The Rally, When It Comes, Will Be a Doozy

The problem with the "so much cash" on the sideline argument is the following,
1) Baby boom controls most of this "cash on the sideline" and they are at the age where stocks should make up less and less of an ideal portfolio, they cannot risk it on the stock market anymore.
2) Competition for capital, the next 12 to 24 months is going to see enormous amounts of government debt come to market. Trillions will need to be raised in US bonds, and Europe will be even greater, with losses from eastern European investments forcing western european countries to issue trillions of euros in to the bond market. The debt market will absorb most of this cash on the sideline, and people will be only too happy to get a risk free return, no matter how small the return, from Uncle Sam.

Cash on the sideline is a myth, it will go into bonds, it simply has to... because if these bonds don't attract this cash, then you will see some real panic! Governments without the ability to raise cash now would be a disaster.