Consider this interesting divergence: Despite a plethora of bubble talk, chatter about high cyclically adjusted price-earnings valuations and market tops, investors have been carrying an awful lot of cash. This is not a new phenomenon, but rather, has been a persistent condition since this most hated rally in Wall Street history began.
Before we proceed with the details, let me warn you what this column is not: It is not a "Cash on the Sidelines" argument. As we have discussed previously, there is ALWAYS cash on the sidelines. It is a lagging, not a leading, indicator. When an investor buys an asset, it means the other side of the trade sells that asset. The cash merely transfers from one account to another. I don't garner much insight from sideline cash until it reaches extreme deviations from historical means in individual investor allocations.