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Good Morning. I did something really dumb yesterday. I poked a bear. In all honesty, I didn't intend to. My goal with yesterday morning's meandering market missive wasn't to thumb my nose and/or pound my chest about being "right" (I DO know better than that!). I wasn't trying to tell my furry friends how dumb they were or how wrong they have been. No, the point I was attempting to make was that blindly sticking to a view of the world in this game can be suicide. In addition, I was trying to point out that flexibility is perhaps the most important characteristic to have in the business of the stock market.

But instead, I must have overused the "W" word ("wrong") a bit much because I heard from another of my "functional bear" friends (as I understand it, a "functional" bear is able to profit from rallies, regardless of how distasteful the process may be) yesterday. In what was initially purported to be a quick conversation, we talked about the macro view of the world for something like 40 minutes and I will admit to being downright bummed at certain points during the call.

We talked first about the idea that the U.S. economy isn't exactly hitting on all cylinders right now. We laughed heartily about the appearance of the U.S. government needing to rejigger the GDP data in order to keep the appearances of a recovery alive. In the end, I did have to agree that the current economic recovery was tepid at best and clearly subpar by historical standards. We then quickly moved around the world and concluded that the U.S. my indeed be the best house in a pretty crummy economic neighborhood these days.

We chatted about Japan and chuckled about how long its been since the Nikkei had hit its all-time high (that would be 1989 for those scoring at home). We noted that between Gentle Ben and Prime Minister Abe, the two countries were currently pumping nearly $2 trillion into the respective financial systems each year. And while there may have been some eye-rolling on the part of my bearish-leaning colleague, he did admit that in the end, this cash had to go somewhere.

Staying in the east, we discussed the economic prospects of China, India et al. My friend noted that although the S&P 500 has gained more than 150 percent from its March, 2009 low, the iShares China ETF (FXI) is up less than 50% during the same time frame and is in fact down a bunch in 2013. I believe his exact words were, "so much for that 7.5 percent growth rate."

And then there was the discussion of Europe. In short, we have widely differing views on the prospects for the single currency experiment. I see the euro sticking around and a long slog to recovery for the major economies while my friend, as you might guess, has a not-so hopeful outlook. I think he said something about this getting ugly at some point.

Next, we spent some time arguing about stock market valuations. While I noted that I had penned more than 3,000 words on the subject just recently, he opined that stocks were overvalued. I countered with the idea that valuation measures were borderline useless at this point in time because of the vast divergences in levels seen over the last 50 years.

We then wandered into the weeds; talking about the prospects of the Federal Reserve's QE programs for a fair amount of time. The key issue we discussed here was might happen when the Fed decides that it is time to perhaps sell its $3.5 trillion in bonds. My friend pointed out that since the Fed will wind up owning something like one-third of all U.S. government debt (for the record, I could neither verify nor argue this figure) the question would become one of, "Sell? Sell to whom?"

But then my long-time cohort displayed his "functional bear" side. He said, "But you know Dave, none of this matters right now. And while it drives me crazy, I have to admit it. Nobody cares. They just keep buying."

He then proceeded to cite historical references of other markets that went on much farther than anyone thought reasonable. I quickly noted that none ended well.

As my daily therapeutic walk neared its close, we concluded that there was really no reason to be selling stocks at the present time but that it was indeed tough to try and put any new money to work in this environment. The bottom line we arrived at was that risk was rising. Things were not necessarily ready to go down the tubes because that generally requires some sort of a catalyst. However, we both agreed that this was not a low-risk environment.

Just before I hung up, my friend made an important point. He said that for anyone playing the "macro game" - meaning that an investor looks at the world and then invests according to what they see - this was an exceptionally difficult environment. "Things look gosh awful on a lot of fronts and yet stocks just keep movin' on up," he said.

My response was short and sweet. I agreed with his sentiment and then added that it was important to recognize that the market's focus is constantly changing. "It is clear to me that the macro view is clearly the wrong view" to be using this year. He laughed and said, "There you go again; you just can't resist using that word, can you?"

Turning to this morning... The big news overnight came out of Japan where the government revised the country's GDP higher to a reading of 2.8% (from 2.5%). The report caused Japanese stocks to jump +3.29% after a +2.47% spike on Thursday. The rest of Asian markets were fairly quiet. In Europe and here at home it appears that traders are waiting on the all-important jobs report. Consensus expectation is for a reading of 183K new jobs in the month of July. Next, it is worth noting that yields are moving higher again with the 10-year finishing yesterday at a new high for the year at 2.723%. And finally, gold bugs won't be happy this morning as the yellow metal is moving down hard again in early trade.

Positions in stocks mentioned: none

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