For the first half of 2010, almost two thirds of money managers are bullish, according to Barron's. In fact, 54% are bullish, and 5% are "very bullish." Responses suggest that the Dow Jones Industrial Average is expected to gain another 5% by the end of the year.

According to Barron's, "Today's bullish investors see the major stock indexes making steady progress through next June, amid signs the U.S. economy is on the mend after a searing recession."

Madoff should have asked for protective custody
Instead he asked for bail
The judge sent him home in bracelets
When he should have sent him to jail

Madoff admits stealing $50 billion with no remorse over 30 years
Investors and foundations lost millions and are raining tears

A thousand questions cannot be answered
How could this scandal go on so long?
Undetected by the regulators and investors around the world
Who didn't think always winning meant something was wrong

They turned a blind eye while they were charmed by a smile
From a friendly man with a key to the city and connections that could beguile

The Securities and Exchange commission did not do its job
Incompetence in the highest office for three decades
Giving the swindler Bernie Madoff a license to rob
And pretend he was a genius trader when few were ever made

Here's an interesting but completely useless data point: A survey of 254 money managers conducted by Russell Investments found that 42% of them believe that U.S. stocks are undervalued, up from 34% three months ago. Two-thirds are expecting stocks to provide a positive return this year, although that number is down from three months ago, probably due to the market's rough opening to the year.

What does it all mean? Beats the hell out of me. If anything, this survey could be viewed as a contrarian indicator. The 42% who believe that stocks are undervalued have, presumably, already bought close to the amount of stock that they can -- their money won't be flowing in to give the market a boost. All that those bullish money managers can do now is hold or sell.

The Wall Street Journal quotes (subscription required) Erik Ristuben, managing director, client investment strategies at Russell Investments, as saying, "clearly don't believe that the likely scenario is going to be as bad as what's already priced into stocks."

But the problem is that what the majority of money managers believe is already priced into stocks! If they're feeling bullish and buy, the market goes up.

So this survey, like nearly every market predictor, should probably be discarded as useless. I certainly wouldn't go buy stocks because 42% of money managers think they're undervalued.

If you're like most people, you probably have a larger percentage of your investment money in cash than you had two years ago. While some investors are taking their chances in this recent market volatility, many are choosing to wait on the sidelines until the "All Clear!" call comes in (whenever and however that's really communicated -- but that's another blog post).

Well, these investors sitting on cash are not alone. Bloomberg reports this morning that mutual funds have been desperately selling stocks and moving to pretty sizable cash hordes. In a survey conducted by Merrill Lynch and reported by Bloomberg, managers have been feverishly adding to their cash positions and consequently, "cash relative to total assets also rose to a five-year high as managers found fewer stocks to purchase and anticipated redemptions."

This brings up a couple of issues. Let's be clear: mutual fund managers want to manage volatility like all investors. The problem here is that if I hand my money over to a small cap manager because I believe he's pretty proficient in picking stocks, I don't really want him moving into cash. That's my job as portfolio manager of my own investment account. I'm essentially paying him to be in the market -- not move out of it.

According to Russell Investment Group's quarterly Investment Manager Outlook discussed in today's Wall Street Journal (subscription required), 17% of money managers think U.S. stocks are overvalued, the highest number since the survey began three years ago. Some commentators believe that the number suggests that the 5-year long bull market is starting to wane.

I don't know about that. If you're a follower of the strategies outlined in David Dreman's Contrarian Investment Strategies, the appropriate reaction would be to buy. Think about it this way: What drives stock prices up? New money coming into the stock market. When money managers are bearish, that means that they've most likely cut back on their U.S. equities exposure. Many have probably even gone short on some of the indices. In other words, the record 17% of managers who are bearish can't do anything more to deflate the market. On the other hand, if they change their minds they will have to buy back in, which of course could only help to boost stocks.

Still, 17% bearish isn't that big of a number and given that only 353 managers were surveyed, it would probably be an overreaction to trade based on this news.

But here's an interesting item: "As troubles continued in the sub-prime mortgage market, real estate remained the least-favorite asset class, favored by just 12% of managers."

Is it time to take another look at REITs?