Abstract vs. Real

A blog I wrote a while back brought up the subject of the success of QE2 becauuse of abstract thought rather than real returns. For instance, does anyone argue that QE2 turned the economy around? Yet here we are, only a few months departed from a monstrous equity rally equipped with buyers in abundance. Only after QE2 ended did the selling really enter high speed, as if QE2 was saving the economy in a real way. Rather, the abstract thought of central bankers and politicians saving the world was enough to cause a ferocious rally that lasted 9 months, give or take.

After the news this A.M. I started thinking along the same lines. Whether or not the dollar infusions solve the crisis in the EU, the motivation of CB’s world-wide may be enough to start a frenzy for risk-based assets all over again. For that reason, I bought starters in ENTR and ARUN; two attractively priced tech stocks with high short interests.

However, I’ll openly admit that the world’s financial worries are far more obvious now, after the recent economic data has failed to excite investors and companies are starting to slash EPS estimates. It’s as if central bankers expected life support stricken companies newly awakened by caseloads of free cash to turn around and spend that cash for the betterment of society, rather than keep it for their own survival…IN A CAPITALIST WORLD. Yeah, right. As long as the money is literally handed over for free, we’re going to be plagued by high unemployment. If people don’t have jobs, they don’t have income. If they don’t have income, they won’t spend money. If they don’t spend money, companies can’t sell anything and it’s a huge deflationary spiral. Especially here in the western world, where we haven’t saved a dime for decades and can’t really depend on savings like the Chinese could.

I’m still at 50% cash.

UPDATE: Sorry for the late update, but I sold SKF this morning on the news. Also, I bought some DECK for the $100 Roll!!