This column was originally published on Street Insight on Jan. 23 at 2:07 p.m. ET. It's being republished here as a bonus for readers. For more information about subscribing to Street Insight, please click here .

I have heard and read numerous bears insinuate or flat-out state that they are the only ones who are bearish, which is one of the surreal aspects of the current U.S. "negativity bubble."

My colleague Doug Kass says to look at what investors are doing, not what they are saying. However, I look at both. I would argue that gauges of herd sentiment, more than any other single investor tools, have been the best at timing the market over the long term. The trick is interpreting these gauges properly.

Few Looking for a Real Rally

As far as what investors are saying, the UBS survey of investor sentiment recently rose to a three-year high. Although I don't closely follow this indicator, its findings are very interesting. Notwithstanding the rise in the headline index, I would hardly call the overall survey "bullish," much less "excessively bullish."

Only 37% of those surveyed expect the Dow Jones Industrial Average to rise this year. Of that 37%, only 11% see a gain of more than 10%, while 22% predict a meager gain of 1% to 4%. Another 46% expect the Dow to remain unchanged for the year. I believe that this survey, which began when the bubble was bursting in 2000, exemplifies how deep-seated and ingrained the pessimism really is.

So let's examine what investors are doing. Both the general public and professional investors alike are shorting with reckless abandon, as short interest is very near another all-time high. Last year, inflows into U.S. stock mutual funds were the lowest in 17 years, and that was in a rising market. Moreover, the percentage of U.S. mutual fund assets in domestic stocks fell to 78% last year, the lowest since at least 1984.

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