My predilection is to remain on the sidelines. Even if we should have a little higher to go.

I bit into this rally in its infancy, back in October. Myself and a few others grabbed the entire length of it, and my accounts show that. There is zero reason to sit around, crying about a few percent missed out on.

Now, the jobs numbers looked good, and so did a host of other things that came out yesterday. But we are still running on Christmas, and this isn’t the first time we’ve had some good jobs numbers that got sold.

Meanwhile, I am watching an exact repeat of what happened last year. Horrible economic numbers that begin in Europe and spread across economic forecasts, causing panic. Eventually, something sets off the euro (bonds, elections, riots), and suddently, the dollar starts to get strong.

Right around the same time, manufacturing and industry reports start bleeding from their faces, and energy use plummets. I don’t know if the two (euro and manufacturing) are directly related, or if it’s just some sort of sick, divine joke. But the two factors intertwine into a web of chaos that bloodlets indices for a quick 10% washout. And by that, I mean, nobody owns the indices, so if you’re stuck with the wrong positions, you get creamed by 20-30%.

I’m staying off the field. I’ll let those of you who were short and doubting until mid January put your neck on the line here.

Positions: 30%+ cash, AEC, CLP, CCJ, BAS, RGR, physical silver

Hedges: EUO, SCO

I can feel the heat radiating from the stretch of my back where contact with the plush leather of the chair catches and redistributes the warmth from my coursing blood. But other than this sink of warmth, the room itself is cold and muggy. A soft grey catches scattered intervals of sunlight, taunting my home with rain.

But signs of spring are beginning to set in; just Saturday, I placed out the containers of growing herbs I keep indoors over winter. They stretched out longingly in the not-quite 70 degree weather, soaking up the rays covetously.

There are few things so satisfying as stretching out in a living room on a warm spring day, the doors all open letting the soft breeze indoors, while sipping on a gin and lemon highball made with freshly muddled mint you’ve just snipped off the plant yourself.

But Michigan being her gruff self, it would appear we have at least another week of melancholy weather to attend to before the truly enjoyable stuff sets in.

In markets, I’m naturally irritated by the rally trying to kick back off again. No one likes to miss out on gains, and the appearance of defeat gets under my skin especially. But I can’t bring myself to run back into the market. I made a small purchase of BAS after their earnings, and a buy of RGR before that, but that’s been it.

Holding down with this cash takes a firm level of dedication. It is not easy and constantly tempts to be spent. This is part of maturity and patience – something which plenty of people never seem to develop. It’s made easier though when remembering last year, and the year before, when anyone caught long without a cash position was cudgeled relentlessly going into the summer.

I am eyeing the green numbers of the tape with a wary stare. For now, the only piece missing for a selloff is the presence of enough longs to precipitate it. Will the financial institutions help push their clients into that disposition just as prudence indicates the opposite?

After all, you can’t have a fox hunt without a fox.

Here is all you need to know. About 40 minutes ago, the Energy Department reported that oil stocks were up another 900,000 barrels. Inventories currently stand at 4.2% higher than last year, which if I recall were higher than the year before that. Prices are rallying, because the move is “less than expected”. That’s great, but this is just the beginning.

At the same time, gasoline demand has fallen through the floor. Recession is setting in in Europe. China has been disappointing. And US exports are set to get hit in unison.

My expectation is that May – August will be horrible; an exact repeat of the last three years. I’ll revisit these assumptions midway through any selloff, or if one fails to materialize. As for the Fall; I’ve been caught off guard plenty of times over the last few years, thinking “this is the end”. And each time, trillion dollar money balls and hope manage to squeeze me – this year was the exception to the rule.

Well, I’m sick of the rule, and much preferred the exception. So I will likely consider buying into the Fall. But we need to monitor everything and be very careful. This year is exceptional in its uniqueness; a number of very unusual motions will set in starting 2014, including Obamacare and the end of the line for pension gap coverage is looming. Throw in tax hikes and the waves of retiring Baby Boomers leaping every year for the next decade, and I’m not happy.

But I can be crazy if I need to be. Surely, the Fed is aware of all of these problems, and monetary easing is the preferred course of action over letting panic set in. So even though I’m afraid for what’s coming, sometimes you need to let go of reason and embrace the lunatic’s way out.

I have to hand it to the EU countries. We are now years into this crisis, and still they manage to keep their bonds funded. Spanish bonds are easing back down from the 5% mark that had me on my toes. It would appear that the flare up has been contained…for now.

But that’s not the name of this game. They can save themselves as many times as they like. It would be better to ask, “what are the odds they save themselves every time one of these crises kicks up.” Much like a kid juggling eggs in his mom’s kitchen, the prudent bet is that he drops them. The moments leading up to the inevitable wrath bearing down on him are of entertainment value only.

Gasoline prices are imploding. That is merely a factual statement. I can’t decide what to think about it yet. Lower gasoline prices are inherently good for the consumer, it is true. But following the economic reports we’ve been receiving, and right out of Christmas and the optimistic projection parties that come with that time of year, and I’m not entirely sure of the thing being good.

My preference remains withdrawn defensiveness. Lots of cash, hand picked hedges. And only names of quality that I don’t mind being left holding without a bid.

The euro dropped from its elevated state in the immediate aftermath of the Cyprus crisis, much as the newest blogger to iBC, Kong, anticipated it would. I am maintaining my EUO position though, for the moment to see if the euro will re-collapse around the 1.30 price level.

My immediate gut reaction is that the Cyprus move has sewn black seeds that will sprout at unanticipated times. If we get a summer selloff, either on disappointing data misses from the economists, or else a sudden blowout in European debt; in either case the consequences could get out of hand quickly.

Oil continues to blow out, also. I believe this move will be exacerbated, but especially so if Europe continues to appear all set. It’s my impression that oil prices surged into the Cyprus bailout because Europeans were using the black gold as a liquid market to transfer funding out. Couple that with disappointing economic data and an oil boom in the US and oil has $80 written all over it. SCO is my method of tapping into this trade.

Cash levels remain high, and so far I’ve only nibbled on some RGR.

AEC and CLP are performing very well, remaining in powerful rallies. That trade is coming to fruition.

Everything else I own is sucking wind, and I’m glad I’ve had the hedges to counteract that.

Let’s get some blood now.

I must say, that when you’re sitting on a massive cash position and adequate hedging, it’s just not possible to become excited about stuff. The raucous of the 9th floor has shifted its melody from the deep baritone of market concerns to a soft reggae; that is almost nauseatingly soothing.

But though the 9th floor is quixotic in its machinations, the ground below is a bustle of activity and noise demanding my constant energy and more than replacing the displaced frustration and effort. 2014 is separated by a chasm, and in many respects I am an engineer of the bridge needed to span it. You do not realize it yet, but if our team fails in our endeavors, your life is going to be absolute hell when we careen off the edge. Actually, it may be a forgone conclusion at this point anyway.

My current positions are as follows:

I have 20% cash.

10% of my book is short the euro by way of EUO. 10% is shorting oil through SCO.

12% of my book is in physical silver.

20% of my book is in CCJ. The rest of is pretty evenly divided between AEC, CLP, BAS, RGR, AGQ and BXG.

I estimate my position is equivalent to a 55% cash position, since the inverse ETFs are so especially potent.