[brownsfan019]

After working for years in the stock brokerage business advising individual clients on financial affairs, I would say that 'dumb money' entered somewhere along the way and is probably still entering. 'Dumb money' refers to the people out there that just call up a broker and invest in whatever he/she says, buys stocks b/c everyone else at work is making a killing, etc. Dumb money almost all the time goes long. They don't know or understand shorting.

Now, when this dumb money flows into mutual funds, pension funds, IRA funds, etc. that is where some serious buying comes into play. Mutual funds and most pensions are not allowed to go short by their own rules. So, when people start dumping money into funds, the fund managers have to do something with it b/c their pay is based on beating their peers and/or indexes. You can't beat the index that is constantly going up if you are sitting in cash.

I think this is the very reason why over time, the markets ALWAYS rise and will ALWAYS continue to rise. If the flow of dumb money ever stopped, it would be a different story, but people have to invest for their retirement somewhere, right? And with an incredible shift of funds from one generation to the next happening now, younger adults are receiving funds and do not want the 5% cd at the local bank.

So, you have money going into mutual funds, stocks in a variety of ways and the overwhelming majority of this money is long and long only.

To help put that in perspective - in the office and FIRM that I worked for, any individual stock we sold to a client was a long position and long position only. Almost every fund and money manager we sold was long and long only. When money starts coming in, you have to get into the market as soon as possible b/c you don't want your client missing out on the move... I'm not saying that's the best way to do business, but it was in fact how things were managed.