CASH REMAINS KING IN THIE ENVIRONMENT

The rally off the bottom in October, from mainly beaten up names, has come under pressure. We are still looking for constructive action in leading stocks and major indices before we begin buying again. However, the market action continues to be news driven and changes literally intra-day these days. That means risk/reward is not in the investors favour right now.

With this much uncertainty and risk it is better to just stay out, as the mental capital wasted can be exhausting. Most investors will find this type of environment very frustrating, as the time and effort put in it does not net any return or worse, ends negatively. Even with a tight model such as ours, you can get “nickled and dimed” in this market. The key is not staying in long enough to get “quartered”. It is in times like these that capital preservation is paramount.

News headlines have ruled recently. This week, Fitch, a prominent bond rating firm, sent out a word of caution about downgrading its outlook on U.S. banks unless the debt issues in the Eurozone are resolved "in a timely and orderly manner." Moody's downgraded credit ratings on ten German banks at the same time.

On the home front, we have seen Canadian banks sell off this week, lending to the conclusion they may not be completely insulated from all that is going on. In the meantime, the tug-o-war between the up trending effects of quantitative easing vs. negative headline news continues to play out. Resolution one way or the other will eventually occur, and could occur sooner than later, but for now, it is best to sit on the sidelines. It is during such times of "doing nothing" that minimizes one's losses.

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