Financial Myth #1 Money on the sidelines

Myth #1: There is need for outside money in order for stocks to rise.
False: Not necessary. Counter example:
Mr. Jones owns A shares. Closed Tuesday at $10. Mr. Smith owns B shares. Closed Tuesday at $10. Wednesday is a beautiful day. Everyone is optimistic. Or maybe important positive financial news. Mr. Jones would like to purchase B shares. Mr. Smith would like to purchase A shares. The exchange takes place at $11/share. Thus each investor is 10% wealthier and the market is up 10%...No new money came into the market! Just new confidence and optimism.
Now expand the example to include other kinds of assets and additional players.
Same scenario can unfold. All the players exchange assets at higher prices. Bonds Up, gold Up, real estate Up. No new money came in to the game.....
Conversely if the weather and news Wednesday morning is negative. The shares
exchange hands at $9. Markets declined 10% and every body feels much poorer. No money was taken out of the market. (uninformed people of course ask. Where did the money go??).
Similar analysis applies to the real estate markets: ten people. each one buys a
house and sells a house to a neighbor. all at higher prices from the previous sale. no new money. everybody is richer and happier...
Now add people with cash in the bank. Include people with any and all other classes of assets. they decide to buy stocks. A seller for each buyer. The seller uses the proceeds of his sale to either buy a different asset class or puts the money in the bank. In any event, eventually someone puts the money in the bank or buys Treasury securities which are viewed as the equivalent to money. Treasuries can be borrowed collateralized or quickly sold quickly....
Bottom line: positive or negative psychology determine price not necessarily cash on the sidelines!