Investors have been breathing a sigh of relief in recent weeks as European data has been coming out fine despite the crisis. It now appears that the crisis might not have had enough time to trickle into the data as this mornings releases are showing renewed weakness. In general, data from around the World shows a global economy that is stalling. When the economy is slow, the economy becomes accident prone as the weak spots are exposed.
The global imbalances will not go away and will eventually need to be dealt with. That does not mean that we cannot ignore them for extended periods of time as the 80% rally has shown. But do not forget that they are there. That is the reason that I err on the side of caution and turn market neutral once the pessimism has cleared. If we were in a bull market in a healthy economy I would press my longs until we saw extreme optimism.