We refuse to participate.

We suppose this is what it looks like when so much money is chasing so few goods.  Stock inflation is what we have in today's market and has been pushing prices higher for some time.  Corporations are flush with Obama's and Bernanke's cash as well as those high flying traders on Wall Street and stock prices are headed higher.  Everyone waiting for the correction might be waiting awhile.  As for waiting that is basically what we are doing with our cash in our trading fund as the risk is too great to take nothing but low risk positions.  We have some options out, but with fairly wide moats to protect us from a black swan event.  A black swan event is what will eventually draw a blow against what we consider wild speculation in stock prices.  This could very well be what people saw in 1929 when the lid finally blew off that market, just that there the issue was not fueled with so much un-backed currency floating all around. 

Remember that just last week Japan joined the US and Europe in cranking up the printing press and flooding the markets with money so the last few days of up and more up is being fueled by that as well.  The one fly right now in the ointment is the increasing concerned members of the Federal Reserve about all this money printing.  Even today we had a "leaked" Fed minutes that more members have voiced concerns.  If you think you have seen a sell off imagine a more disciplined Fed pushing rates up and causing Obama's spending plans to come crashing down upon him and more importantly upon us. Young folks beware. 

Note that nowhere here have we mentioned "main street' is flush with cash.  Most small businesses are concerned about the regulatory environment and Obamacare costs to hire anyone or make an expansion.  Add in the seriously depressing tax hikes just passed by the Federal Government and you get high unemployment, low job growth, and a weak main street economy.  The only thing holding that together is the huge amount of those federal dollars gushing forth from Obama via food stamps. welfare, disability, and other federal largess. The point is that all this cash is making the rich richer and no one else despite what Obama says otherwise. 

We have watched our holdings in mutual funds prosper and we have slowly and regularly moved highly appreciated stock holdings to bond holdings as Bill Gross noted in his comments today. We find comfort to be in the same camp as Mr. Gross. Originally we thought this movement not wise, but changed opinions last month when it became clear that corporation earnings this quarter would be lower than expected.  Now about 60% stocks and 40% bonds we expect it to flip in the next few weeks or even days if this continues. As for our trading positions we have all but halted trading unless the opportunity is so sweet and with a wide enough moat we can sleep at night.  Current positions are being allowed to expire without renewal too. 

Maybe we will be proved wrong, but we invested during the great 1980's Reagan bull market and that was accompanied by rapidly increasing corporate profits, slowly dropping interest rates, and jobs increasing 500k monthly and labor participation rates going up.  None of that is happening now.  Dougie Kass who has called a good number of the movement in the current market says he is standing on the sidelines with jaw wide open. If you are buying we caution the old rule buyer beware unless it is a serious value buy.  If you can find one let us know.