Everything Looks Dandy - Time for Investors to Look Closer?

George Brooks  |

Brooksie’s Daily Stock Market blog: An edge before the open.

Tuesday, April 26, 2011 9:24 am EDT

DJIA: 12,479.88
S&P 500: 1335.55
Nasdaq Comp.: 2825.26
Russell 2000: 844.23

There really doesn’t appear to be any pressing reason to sell, the major stock market averages are at or hitting new highs, Q1 earnings are impressive, the economy is on a roll and global hotspots are not currently on Page One above the fold.

So why am I uneasy ? For the majority of the time since late February 2009, I have been bullish – still am, but…………..uneasy.

We haven’t yet seen rank speculation in micro-cap stocks and the last time I checked the barber, coach, tradesman, etc. aren’t contemplating leaving their job to day-trade.

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Here’s what I feel comfortable doing. What others do depends on their tolerance for risk, agility to navigate swings in stocks, funds safely earmarked for stocks, and need for a good night’s sleep.

For me, it’s to establish, and/or maintain a healthy cash reserve, but work the remainder of investible funds hard, sitting close to the exit in the event this momentary bliss grinds to a halt, either in face of a change in news or simply because the BIG money used the recent strength in the market to sell.

The game changer COULD be a reasonable agreement on the issue of the nation’s deficit reduction. Much as I would like to see it, I fear the 2012 election will get in the way and political hostilities between party extremes will stick it to us – again.

Correction. Yesterday’s blog referred to the surge in investment in bond funds for the week ending April 6 and since March 2009. I expressed concern and inadvertently went on to note that interest rates can only go down from here, raising the risk of a drop in value of bond funds. Obviously, I intended to say interest rates can only go up from here, not down. They are historically low now. While the Fed seems determined to keep interest rates low, they will eventually rise, especially if inflation persists and Fed policy swings to one of restraint. Careless mistake – not happy about that.

George Brooks

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