I like the following article at an interesting website called seeking alpha.  Check it out.  Some self-promotional stuff, but in large part, I think contributors are trying to increase the knowledge base for investors - much like what I am attempting to do here.


seekingalpha.com/article/881541

My exposure to stocks stays low right now - trying to take advantage of the rally and lock in some gains.  My cash is ready to buy on a dip.  I am not so sure we are going to get much of one, however.  There is just too much money on the sidelines with their faces pressed to the glass wanting into the stock appreciation party.

Sharks.  Fascinating creatures to many including me, they are wonderful hunting machines.  I think of the market in much the same way.  There is no resting for the market.  If you look at it as an entity, it seeks out successful ideas and punishes poor ones.  If you combine that with human nature always pushing to progress, then the market, as a whole, has no choice but to succeed.  Investors have to be very careful being "short the market" for anything other than short periods of time.  There are those investors that hang their hat on a bold prediction for a drop in the market, but as a critical investor it is important to consider their predictions as a whole.  Because the market is volatile, there will always be drops, but often the "short predictor" will stay short even after a drop and never get in.  Or, they miss the 30% rally and claim victory if the stocks fall by 10% subsequently.

This is not to invalidate solid research that seeks to sift through the winners and losers.  There will always be a place for that.  I am just not so sure that trying to be too cute with timing is that productive.

I bring this up at the peril that some would say I am trying to do the same thing here.  Guilty as charged when one considers my performance relative to my long term benchmark of 45% stocks, 45% government bonds and 10% cash.  But, like the Fed, I feel I have a dual mandate.  I  also charge myself with making money in any environment.  Considering this admittedly difficult task, I am willing to tolerate periods of underperformance versus a benchmark - so long as I am still making money.

Currently, my biggest investing difficulty is dealing with the low levels of government interest rates and the impact on future stock prices.  The low level of rates makes stocks look very cheap, but when (if?) we get some growth and rates start going up, then stocks will come off as the market adjusts the required rates of returns upward.  It is not a straight relationship, though because if we do get some growth, then stocks should benefit from this.  Inflation would hurt input costs, but then it would come down to whether companies had pricing power.  The jury is out for me on this one.  I don't know if companies will ever have pricing power (on average) again.

Given the above, stocks look pretty good government bonds will have limited upside (but also not much downside as long as Mr. Bernanke is around).  So the waters look good to wade in to mid-stomach level, I think.  Have some money on the sideline if the opportunity arises, but don't get caught being too bearish.  Long term, the shark keeps swimming.