On bearish journalists and bullish asset managers

"Any intelligent commentator will over time feel more comfortable from the bear position, just as most traders trade from a bullish bias.  There are more negative things that can be said in an intelligent way. The hidden order of markets that generally make things work is not easily described by a journalist.  The only consistently intelligent bullish commentary I've read has been from Niederhoffer and McKinsey. There is more money to be made buying assets than selling them short.  However, that doesn't prevent dedicated short sellers from making money."

This is an excerpt from an email I sent to a friend over four years ago. It's still rings true today, even if asset managers with a bullish bias have not has positive returns in recent years. There is only so much money that can be allocated towards selling assets short. If it is ever the case that short funds seem almost as popular as long funds, it probably means that it is time to load up the truck and buy equities.
2 responses
Interesting idea, apologies for what is probably a n00b question but how would you know the balance between long and short positions for a market?
The amount of money long is the market cap of the market plus the total short interest. The amount of people short is basically the total short interest. The stock exchanges often publish the short interest: http://www.nyse.com/press/1297249828950.html.

There is other data out there on related topics such as how many people are buying options or selling futures. Ane while it is true for every buyer there is also a seller, there is a large demand for selling out of the money puts because they are profitable so when there is a lot of volume in out of the money puts it means that there is a greater demand for people to protect themselves from market drawdowns. When market short ETFs become popular, it also means that retail investors are very interested in shorting the market even though someone else out there is buying futures to counter that position.

For futures, the CFTC releases a "commitment of traders" report indicating how many of the people short futures are speculators and how many are hedgers. Recently they've been providing additional information by breaking down buyers and sellers to producers/processors/merchants/users vs swap dealers vs managed money vs other.