Despite recent gains in portfolio valuations, I question whether we are really profiting from the upward surge. To be sure, there is more money in your account, according to your last three monthly statements. And whos to argue that doesnt translate to real dollars, real well-being.

The deadly bombings in Boston last week, along with a spate of senseless killings in Newtown and Aurora, should highlight for those consumed by economics and financial market statistics the fragility of life and a sense of perspective about helping those in need at their darkest hour. How noble that on the day of the U.S. equity markets most damaging point collapse in years, our focus was on Boston and not on our wallets or portfolios.

My work has always been predicated upon using quantitative modifiers to enhance portfolio value through greater efficiency of information processing and the creation of momentum-driven asset allocation models. But because so many investors quizzically suffer from a herd mentality, they find it difficult to digest common sense solutions to diffuse problems. And yet, our methodology and its consistent point of view has enabled clients to benefit without compromising investment expectations.

Even after a global market surge that virtually wiped away the four year bear market, equities still seem to be the best game in town. Corporate and individual investors are flocking back to a haven they had abandoned in favor of bonds when, in an era long ago, yields and credit rating offered them a secure place to park money.

Although ecstasy reigned supreme last Tuesday as the Dow crossed into record territory, not everyone felt as if they shared in the bounty. It's at times like these that we must be mindful of the distinction between economic recovery and market recovery. Two phenomena which fly in tandem, on parallel tracks, are not always inextricably linked, and in this case the parallel disconnect is wide and obvious.

The single biggest predictor of financial growth is not how much money we have stashed away in secret savings accounts, but how much confidence we feel about a fair return for the deployment of those dollars. In that sense, corporations and individuals alike uniformly adhere to a quid pro quo matrix. Investing must be fair; it must be reasonable; and, win or lose, it must be swathed in aspiration that makes us feel worth making the investment in the first place.

For many months I have been commenting that the critical element most lacking from our rebound in economic development has been "consumer confidence." Wouldn't it be nice if we could not only quantify confidence but also to define it, accurately? After all, something so nebulous as one's opinion about something, also has the power to shape behavior and consequences for a myriad of financial and economic events. Besides, one man's opinion might not be shared by a multiplicity of others

Without question, the financial markets yielded better in 2012 than what most had believed possible at the beginning of the calendar year. At that time, embroiled in a U.S. Presidential election and ongoing turmoil in the Middle East, many analysts would have been happy if we simply avoided catastrophe.

It's not surprising that the markets responded with a resounding "so what" to Fiscal Cliff negotiations in Congress, and a Federal Reserve pronouncement that it intends to tie low interest rates to low unemployment for the foreseeable future, in order to maintain whatever stimulus effect low-cost borrowing might be having upon economic development.

Economics is a science in a constant state of flux. While it is true that any science is defined by its immutable laws, few disciplines are as influenced by emotion and perception as the science of "money."

Now that the election is over, and the markets are oversold, the Mideast is again volatile, and the fiscal cliff is fast approaching, most market concern rests with whos going to be the first one in the pool? Interestingly, although the stars are aligned once again to make money in the equities markets, it is still a psychological, not financial, component that governs peoples capital deployment considerations.

Fortunately, no one is compelled to invest money. They do so in a climate of tranquility, or turmoil, in an attempt to utilize their specific discipline, their risk/reward tolerances, and their expectations in order to achieve capital gains. There is no "one size fits all" system, nor is everyone suited for an all-in, win or lose, paradigm.

And so, we move on. Not simply the collective "we" of the markets, nor the political parties, nor any special agenda groupings, but, really, the global tapestry which can now divert its attention from American politics and focus once again on capitalism, peace-making and common ground solutions.

Instinct tells us that a heightened focus upon negative influences yields a self-fulfilling prophecy, a result which is either negative or perceived to be negative. Conversely, an inordinate predisposition with "good news" yields a new normal, a world where everything piggy-backs upon unrealistic expectations. Unfortunately, markets fall victim, too, to this kind of either/or thinking and sometimes rupture the performance of investment portfolios built upon an "all-in" methodology

Active investors like to think that it's alright to take risk as long as commensurate reward is a possibility. Further, they base this analysis upon whatever methodology they employ as long as the data, the systems and the game are fair for all who play. Thus, it is no surprise that last year more money was withdrawn from global equity markets than committed, and that more investors operate upon a short-term trading mentality than a longer macro-themed expression.

Overall, equity market risk is dissipating. There appears to be a stronger momentum ameliorating a global tapestry of "ills." What may have been a domino effect when the credit crisis began has stopped short of a cataclysm and turned closer to equilibrium. As a result, equities might be poised to perform. The question is when?

Certain studies commissioned by the securities industries governing bodies have recently concluded that terrible things happen to people who are too ignorant to know better. It's amazing that your confidence and trust could be so obfuscated as to propose that an economic tailspin was your fault.

Does a powerful upcycle necessarily have to be followed by a downcycle? Well, yes, if one believes in the notion of parabolic quantitative market theory. Given that you can't fill up a phenomenon greater than 100%, nor empty it more than zero, what happens when you reach a statistical "saturation point", when the laws of probability no longer engender positive outcomes?

For many weeks, I have received feedback from readers of my commentary that I am "too negative," "too pessimistic" in my views about the markets. While it is true that my objective quantitative science leaves little room for interpretation, let me dispel the notion that it is I, not my data, that is contemptuous of the "next move."

In the common parlance of Wall Street, youre either a bull or a bear. It's difficult to be both at the same time, yet this market has as many agnostics as it does true believers. What you believe, however, is another story altogether.

So far, key data has been unable to answer conclusively whether we are in deflation, stagflation, or targeted inflation. I wrote several weeks ago that I saw no empirical statistics indicating inflation. I was partly right...and partly wrong. Indeed, I had been early in identifying targeted inflation in tuition, foodstuffs, energy and healthcare. These demographic price hikes are systemic, and mostly driven by consumer demand or ecological/climatological influences.

Markets are so fixated on anecdotal and factual imagery like jobs' reports and sentiment meters that they are experiencing mania and panic over the least things. While reaction to hype tends to lead to price exaggerations, I also see a "so what?" response to data that sometimes borders on boredom. I prefer to believe that analytics can be useful in cutting through the ambient noise, to place an identity upon sectors' trends and their probability of trend maintenance.

Our collective mood is souring, particularly in light of falling wages, increased competition for jobs, portfolio (net worth) depreciation, and daily news about politics, terrorism, and business corruption. Wheres the good news?

I want to dispel the notion that I am an investment bear. There is nothing wrong with expressing an opinion, bullish or bearish, particularly when the consensus says its alright. Proof of one's courage, though, lies at the margins, during undetectable inflection points, before the consensus has arrived. My track record versus the benchmarks demonstrates a successful delineation between bearishness and being opportunistic.

In order to achieve optimal portfolio returns, particularly in un-optimal market periods, it is vital to adopt an ongoing strategy/methodology that is consistent. Attention to details, without capitulation, is the hallmark of a professional portfolio manager. Ideally, one is seeking durable results over the course of a long-term, and not a reflex change to short cycle events.

This is not your fathers stock market. Nor really is it yours, the one you envisioned two decades ago. Instead we may have leveraged, in a literal sense, all the financial details to our heirs. The bad news is that we have become marginalized. Our goals and expectations have been sequestered, postponed, for another time.

While the Dow Jones, S&P, and global bourses initially followed the EUs announcements about Spain and Greece with a rebound, the rally stalled last week because facts trumped suspicion. Short sellers and profit takers took control of the markets averting a weekend of being long in the face of more bad news.

The big problem last week was in trying to distinguish between macroeconomic factors and underlying stock performance. The resulting decoupling made some equities more vulnerable than aggressive weekly gains might otherwise have one believe. As we muddle through the disappointment of global austerity packages and downwards earning revisions, too many stocks have spurted up simply on traders dreams for a new bull cycle.

Each week produces a newer round in global woes, this past being highlighted by Spain and a verbal, if not political, battle over whether austerity trumps spending. We will not know how the debate concludes, but we can see its effects. Manufacturing slowed and consumer confidence went with it. The unknown consequences of a global economic paralysis is, nevertheless, having specific impact upon our markets. Most notably, the stock market is morphing into a roller coaster ride.

More importantly than not, it is vital to focus upon a bigger broader landscape when evaluating the condition of ones portfolio, than to focus upon tinier exogenous noise as those factors which indicate the probability of outperformance. Too often, and with more frequency, I have seen micro-analysis paralyze investors decision-making, rendering them incapable of reasonable response.

Its not simply the magnitude of the number, two billion dollars, nor the redundancy of these tales of corporate hubris. No, its the laissez-faire manner in which business continues to ignore its customers that encapsulates a feeling of angst, disrespect and depression that overtakes an average observer when confronted with headlines about oil companies, pharmaceutical firms, technology megaliths, or financial institutions.

Celebrations normally reserved for heroic events or political ascension have been breaking out during earnings season, as first quarter (2012) portfolio valuations accelerated and year-over-year comparisons show margin expansion. Doing what they do best, market pundits have been turning flax into gold, proclaiming that the recovery has begun. Another anecdotal elixir. One always wonders whether the chicken or the egg comes first. In this case, proclaiming it to be so precedes the actual fact.

Machines talking to machines. That is how some describe the machinations of Wall Street currently. Clearly, as volatility dissipates, the balance of orders becomes driven by execution systems and tonality that looks to outsiders as more artificial than negotiated between two parties. Thus, a chain reaction a decade in the making has supplanted the human factor, opening up new avenues for greed and opportunity. All the while, obstacles and inefficiencies are being manipulated out of financial trading. Of course, this is not an American phenomenon, it is a global one.

As markets regroup from their phenomenal start to the year, certain groups have transformed the conversational dynamic. Focusing as I do upon longer term demographics, I have noticed a shift from traditional consumer cyclical brands toward epic population issue sectors, such as agriculture, healthcare, energy and infrastructure. Beyond the obvious significance of these topics, trading machinations within those secular themes have transformed during the last year. One notices a steadier stochastic pulse to equities within these sectors, emblematic of a longer attention span.

As markets regroup from their phenomenal start to the year, certain groups have transformed the conversational dynamic. Focusing as I do upon longer term demographics, I have noticed a shift from traditional consumer cyclical brands toward epic population issue sectors, such as agriculture, healthcare, energy and infrastructure. Beyond the obvious significance of these topics, trading machinations within those secular themes have transformed during the last year. One notices a steadier stochastic pulse to equities within these sectors, emblematic of a longer attention span.

Hard data hasnt been collected, but its a safe bet that we waste more food and energy resources than we think. A green boom is a common dialogue amongst some communities but, not universal. In fact, green technology is often a luxury that only wealthy nations can talk about. And yet with so much money being wasted, there are no permanent solutions for spreading the bounty. Alternative energy and agricultural science are in their gestational periods, historically, and far from being the immediate solution to environment mis-management.

Instead of playing old fashioned fundamentals, gamblers are trying to pre-empt the true north of the markets by risking cash on dangerous bets about real estate, commodities, energy and bonds. In the meantime, the game continues for those who seek cover from the mayhem. Right now, there is little support for bonds or stocks. Yields are too low, and equity valuations have gone through a dangerous cycle. Thus, one might expect turmoil to continue. My risk rankings suggest that there is still more potential for the secular (bear) cycle to continue than there is momentum to reverse that course.

What constitutes a recovery? Is it simply the absence of negative news, or must it also imply a robustness of capital, capital gains, and euphoria. It seems to me that we are currently in rejoice only because the steady drumbeat of negative noise has abated somewhat. While it may foretell the redirection of a bear market/economy, we cannot yet proclaim the regeneration of a secular bull cycle.

Spread amongst positive innuendo about the Eurozone austerity discussions and strength in the global oil markets, was consternation about contentious earnings reports and a build up in selling pressure upon equities whose values are bumping up against relative strength resistance points. The state of the financial markets is net-neutral. The most important characteristic of the markets today is the aging of intermediate recovery trends and the high number of equities that amble along laterally. Any entry into long term probabilities would be done today at high risk.

Historically, its difficult to have economic expansion without job growth, fiscal expansion, and consumer confidence. And yet, despite low interest rates, and a leveling-off of unemployment, we find ourselves in the middle of an economic recession. Of course, phrases like recession, expansion, and depression do not represent points in time, but, rather, periods during which these phenomena occur. So to suggest that we might be in any one of these economic cycles also implies that we must define the time line, the trends direction and magnitude, and our place within it.

As I have written, the early-season rally is growing tired and overextended. While there is nothing specific which might have accounted for last weeks stall, the evidence is clearer that relative strength quotients in equities are growing outside sustainable levels. Usually, such valuations precede a reversal in equity direction. Last week also saw a continuation of mediocre earnings acceleration patterns. The number of companies that actually beat analysts estimates is at its lowest since the credit crisis in 2008.

Last weeks performance was distracting. Spread amongst positive innuendo about the Eurozone austerity discussions and strength in the global oil markets, was consternation about contentious earnings reports and a build up in selling pressure upon equities whose values are bumping up against relative strength resistance points. The state of the financial markets is net-neutral.The most important characteristic of the markets today is the aging of intermediate recovery trends and the high number of equities that amble along laterally. Entry into long term probabilities would be high risk.

Historically, its difficult to have economic expansion without job growth, fiscal expansion, and consumer confidence. And yet, despite low interest rates, and a leveling-off of unemployment, we find ourselves in the middle of an economic recession. Of course, phrases like recession, expansion, and depression do not represent points in time, but, rather, periods during which these phenomena occur. So to suggest that we might be in any one of these economic cycles also implies that we must define the time line, the trends direction and magnitude, and our place within it.

Time is a luxury many investors seem not willing to indulge. A stop/start economy, seemingly moving valuations laterally, has them on the edge of their seat, hoping that something exciting happens to their net worth. Ominously, however, the recently completed holiday season comes replete with its own set of hangovers. Some economists now worry that households took on too much debt, and might cause spending in the ensuing months to contract. More foreboding is that banks and brokerages are reporting that some cash for our holiday expenditures was withdrawn from retirement fund accounts.

In recent discussions with clients, I have answered questions about good new versus bad news and short-term versus long-term probabilities. As my readers are aware, I have become increasingly bearish in my asset allocations, a factor which derives from a combination of very short-term information along with macro, secular data. In short, my analysis quantifies policies, valuations, and fundamentals which have dragged down the prospects for global earnings acceleration (in the near-term). Notice that I refer to these statistics as decelerators, not necessarily absolute impediments.

Relative strength integers are congesting at resistance points each time our New Year rally attempts to gain traction. I am skeptical that we can sustain an upcycle. Although short cycle rallies are tempting, the dominant secular theme always prevails. We have a lot of work to do to dismantle the negative fundamentals which precipitated our current bear market. Thats not to suggest that portfolios cannot make money in here. Our portfolios have found success in mid-maturity corporate bonds, as well as trading with a shorter pulse in utilities, basic materials and technology shares.

As junctures go, the post-holiday euphoria might be short-lived. Despite a sprinkling of good numbers, the headwinds are too great when considering a secular change from bear to bull. I would be careful about being drawn into a sucker rally. As I wrote in my current Quarterly, markets today are much more synchronized in their direction. While we wait, impatiently, for the Eurozone to get its act together, other regional bourses are held hostage. Growth becomes relative to how the other guy is doing, not absolute in its own right.

Leave it to global austerity to bring confidence in markets to a grinding halt. Our global credit crisis allows for very little wiggle room in addressing both a moral and economic bankruptcy that has now engulfed the worlds financial markets for four years specifically, and nearly two decades, generally. In recent weeks, efforts to create multinational solutions worldwide, and bipartisan solutions domestically, have erased some doubt that the problem of overspending will be addressed, but only quenched an immediate taste for something positive to occur.

I expect that the year-end will be rife with psychological mania of this kind, yielding to an extremely volatile attention span. Despite the numbers, a new landscape is emerging which trades upon hype, happiness, and expectation. It could cost us the opportunity to tune in to dormant themes that might be next years capital gains winners, or, possibly, to overlook them altogether while wallowing in excess negativity.

I expect that the year-end will be rife with psychological mania of this kind, yielding to an extremely volatile attention span. Despite the numbers, a new landscape is emerging which trades upon hype, happiness, and expectation. It could cost us the opportunity to tune in to dormant themes that might be next years capital gains winners, or, possibly, to overlook them altogether while wallowing in excess negativity.