The money-on-the-sidelines argument has reached deafening and self-confirming as anchoring bias among any and every swollen long-only manager seems to have made them ignore the realities of the situation. David Rosenberg, of Gluskin Sheff to the rescue with good old fashioned facts - as much as they might disappoint the audience. Barton Biggs quote in the USA Today article points out how bullish he is and how cash levels are very high and "idled money is ready to be put to work". However, as Rosie points out equity fund cash ratios are at a de minimus 3.6%, the same level as in the fall of 2007 and near its lowest level ever. The time when cash was heavy and 'ample' was at the market lows in 2009 when the ratio was very close to 6%. Bond fund managers, it should be noted this includes the exuberant HY funds, are now sitting on less than 2% cash so if retail inflows continue to subside as they did this week, buying power could weaken over the near-term. What David points out that is more interesting perhaps is the converse of most people's contrarian dumb money perspective - the household sector appears to have used the rally of the past three years, for the most part, to diversify out of the equity market (getting out at price levels they could only dream of seeing again). As we have pointed out again and again, the retail investor has been a net redeemer in equity funds for nine-months running and has been rebalancing since the March 2009 lows in a clearly demographic shift towards income strategies as the memory of two bursting bubbles within seven years is seared into most private investors' minds.

