Regardless of what you hear or read about the state of the stock market, one thing seems to make more and more sense today: The value of cash on hand can't be undervalued today. Whether stocks are priced to perfection -- in this instance, perfection is not ideal -- or the market still has another rally left, it's a very tough buyers' market these days.
Volatility seems to be creeping back in. To the long-term investor, volatility is a friend not a foe, but only if you have lots of gunpowder -- also known as cash -- laying around. However, to the legions of traders who exist in the market, volatility signals a chance to get out of the market.
Politically, the global scene doesn't create the underpinnings for a calm market. The Middle East situation (specifically ISIS) threatens to engage the U.S. in another full-scale military campaign. Further East, Russia's stance is creating its own set of problems. Hong Kong is starting to heat up with protests. As a student of history, I understand that there will always be a degree of turmoil that exists in an ever-more capitalistic global society. Still, that doesn't mean stocks will behave kindly.
Economically, we have a tug of war in the U.S. Measures such as the unemployment rate keep declining even though the labor participation force is not improving. Corporate balance sheets are getting stronger but companies are utilizing those resources for buybacks and dividends as opposed to capital expansion or job creation. Each day that passes is a day closer to the day when interest rates will climb higher. Even news that bond guru Bill Gross has left Pimco and is now joining Janus (JNS) was enough to send Janus shares up nearly 50% but what could be more intriguing is any effect on bond yields as Pimco clients who decide to go with Gross liquidate and redeem.
I don't believe in gloom-and-doom scenarios. I simply like to consider facts. More importantly, I like to follow former Loews (L) CEO Lawrence Tisch's advice: When there is nothing to do, then do nothing. Stock market inactivity is indeed an active conscious decision. When the market is not offering up any attractive bargains, use it to your advantage. Time and time again, we find that some of the absolute best opportunities in the stock market occur when one can provide liquidity to someone else who needs it.