Bubbles and liquidity

Had an interesting conversation last night with two friends. One of them is a developer of multi family apartment buildings, and the other a career technologist. We got talking about the stock bubble of the late 90's, which was quickly followed by the residential real estate bubble in the early part of this century. The liquidity that drove both of these has not gone away. Look at the massive amounts of money in hedge funds and private equity looking to be put to work. One of the guys asked where the money is going to go next, and I ventured my best guess that it was the stock market. Has anyone noticed that the dow making new highs is hardly mentioned in the mainstream media? Does anyone care about the stock market, or a better question, does the average joe have any money outside of a 401k plan or a retirement plan in the stock market? While I dont have any statistics (they exist but I dont know where) on the percentage of Americans invested in the stock market, I think the average American has largely eschewed the market ever since they got their lunch handed to them a few years ago thanks to lucent, enron, etc. I have a few friends who will never, according to them, put money back into the market. The painful memories of the late 90's are indelibly etched in their memories.

Why do I write this? Because I believe this is one of the reasons the market can go higher. We have massive amounts of liquidity, the Fed is still accomodative, and we have by no means seen the general public embrace the market en masse. My guess is we can see a couple more years of solid gains until a rising market is too much to bear and it draws them back in. Meanwhile, money is to be made by those brave souls who can forsake past memories and step back in, albeit cautiously, because after all, we do live in uncertain times.