I am materially in cash now, a position with which I feel comfortable and that allows me to trade opportunistically in the weeks ahead.

I am embracing today's panic and look at it as opportunity.

I remain of the intermediate-term view that stocks will decline by between 5% and 15% in 2014 and that bonds will outperform stocks by a reasonably wide amount.

It is important to emphasize that regardless of view (mine is negative), one can be long short term with an intermediate-term negative view and/or short short term with an intermediate-term positive view.


One From Column A and One From Column B

Originally published on Thursday, Jan. 23 at 7:43 a.m. EDT.

I returned home from dinner last night at about 8:45 p.m. EST along with the announcement that China's flash PMI for January printed at 49.6 compared to the consensus of 50.3 and to the final December reading of 50.5.

The S&P futures were up 4 handles and Nasdaq futures up 14 before the release, and over the next 20 minutes, those index futures dropped by 12 handles and 20 handles, respectively. The steam came out of the Asian stock markets, too. (As of this writing, both futures have rallied a bit but remain below the pre-PMI announcement (S&P futures down 8 and Nasdaq futures down 7).

Most brokerages reported, subsequent to the China economic release, that the release would not impact the U.S. stock market. I found that general reaction (of the China data point as not being market impactful) as not surprising, for the markets have been forgiving toward any negative news over the past 12 months. Nevertheless, the view that both good news in China (is positive for global growth and stock markets) and that bad news in China is also positive for the markets and economy, as it signals a shift from neutral to a more dovish monetary policy, seems disingenuous to me, considering the size of the potential impact of an economic slowdown in the region (and its credit market implications).

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