Losing the Forest

"Losing the forest for the trees" - current long traders

Looking at the big picture, it is not a good time to get long.  Sure, the market has likely not made a top because the odds of having topped are low when the market is so close to its 52 week high.  But what about risk reward?  The higher we go, the more risk there is for a set amount of reward.  At 1325, the market is not cheap, no matter how many cheerleaders say 13 times forward pro-forma S&P 500 earnings is cheap.  That is not cheap.  Maybe if pro-forma earnings included repeated one-time losses it would be more factual.  But that is not the case.  And maybe if profit margins weren't so high, it would be cheap.  But unless we have repealed the laws of competition in the new capitalism, these are unsustainable profit margins. 

Having said all that, I think we will grind higher into the fall, after this dip, but hell no, I am not buying to catch a few percent when I know a cliff dive awaits at the other end, probably in 2012.  But it could happen sooner, and that's why I am not buying these little dips.