[jyl]

So how, in general terms to avoid getting too deeply into private matters, are the people on this thread invested, if at all, and what's the rationale? I'm not arguing with anyone, but just curious.

I'll start. Currently I am more than half in cash, with the rest divided about equally between bond funds and a short position on the Nasdaq.

My rationale on the bonds is basically what I said to tabs in my prior message - (1) Central Europe is basically in recession and the governments have limited ability to use deficits to boost their economies so European interest rates need to be lowered, and (2) the euro is rising against the dollar for reasons that I admit I do not fully understand. Because I don't understand the FX movements, I'll be pretty quick to take off the position if the dollar reverses.

My rationale on the Nasdaq short is (1) I do not think technology spending is recovering yet, (2) the Nasdaq rally in Oct-Dec '02 was too fast and too strong, (3) over the past couple months the Nasdaq has done better than the S&P, so I think the gap is going to close by the Nasdaq falling to join the S&P, and (4) after today it looks like the S&P and Dow have broken support levels so I'm hopeful the Nasdaq follows (it is very close). I'm wary that the markets are getting whipsawed around as much by war fears as by economics and earnings, so I haven't yet been willing to make this a "big" short. All I'd need is for Saddam to catch a bullet and destroy my short position.

I'm by no means a perma-bear -- I went long the Nasdaq in October and November, not aggressively enough I'm afraid. But I see too few signs of economic recovery to be want to go to a buy long and hold approach. So I'm keeping most of my money in cash and doing sort of macro-trades with the rest.

I am, by the way, undecided about the stock market's valuation. Yes, the P/E now is significantly higher than in prior periods. But interest rates are much lower. Historically P/E ratios have tended to be high when interest rates are low. This may or may not be "correct" from a finance theory point of view, but it is how things have tended to be. So I am a lot less concerned about the market's valuation than I was a year ago. What is bothering me now is that this recession is proving stubborn and the Fed is almost out of bullets (Fed rate is getting close to zero), the Federal government is IMHO not proposing effective fiscal stimulants (exactly how does giving a dividend tax break to a small class of very wealthy investors boost the economy?), and as I look around the world I'm seeing a synchronized global recession (scary).