W/R to Europe for example. The ECB reported today that loans for the month of Dec were down .7% or about 22 billion Euro. That was the 8 month in a row that loans were down y/y. So, where is their rebound going to come from? Not credit expansion, not consumer spending, not government spending, that leaves CapX and that is an "I don't think so". M3 was only up 3.3% vs November and Octs up 3.9%.
So as of now, there is no turnaround in Europe and there is a new trouble spot. Oil, both WTI and Brent, are up $10/barrel in recent days, so gasoline, diesel and heating oil cost will be up for everybody.
In my mind, the odds there will be negative "headlines" out of Europe are increasing.
Yes, I am quite skeptical of all the "happy talk" out of Europe. Expect some sort of bad news, in the coming days/weeks that will derail the Euro rally. What I think has been going on is excess liquidity (FED flooding the market) can't find enough productive uses in the US, so must flow overseas. Since the Eurozone, both equity and bonds markets, are the next largest in terms of liquidity-become the first recipient of this money flow. To "buy" Europe you have got to buy Euros first. Any negative headline(s) will bring some of that "hot" money back home and probably be parked in treasuries. So, looking for $ rally, taking commodities and stocks down and treasuries up.
Now, if there should be sustained negative headlines, commodities could fall enough to make central banks more aggressive with their QE programs, since they will not fear commodity induced inflation. So, while "hot" money is selling, it could represent a good buying opportunity to buy into stocks, commodities, TBT etc, because I do think QE programs will be inflationary later in 2013 and beyond.
Bottom line, I don't like to buy strong momentum, I'd rather prices back up to my preferred price. With recent decreases in M2, loans and M1 velocity, I can see a relative scarcity of $s. Couple that with some negative headline(s) out of Europe, and we could see quite a $ rally-setting up buying opportunities later on.
Right now, I'm sitting on a lot of cash, so it feels stupid while the market keeps rallying-although still participating with PCTI, KTCC, CCRN and a few of the NG positions. Finding little to buy, won't pay up, been in this position before and the vast majority of the time it was the right thing to do as bargains do show up later.
"Finding little to buy, won't pay up, been in this position before and the vast majority of the time it was the right thing to do as bargains do show up later."
You are more disciplined than most of us, commandor. Many buy "the best bargain available" and are fooled when it is smarter to wait for a true bargain to arise. Human nature seems to abhor money burning a hole in one's pocket. Some call it "greed".