) - John Templeton once remarked, “For those properly prepared in advance, a bear market in stocks is not a calamity but an opportunity.” And while I don't think this is just a counter-trend rally in an ongoing bear market, I continue to believe we are into an uptrend within the context of the wide-swinging trading range stock market we have experienced since the turn of the century. Of course there will be pullbacks, which is what I have been preparing for since the beginning of 2011. This is also consistent with my advice of the past 11 years that investors need to be more proactive in their investment strategies. That strategy is confirmed by the astute Bespoke Investment Group's study of last weekend that shows a more proactive approach has beaten a buy and hold strategy since the March 2009 “lows”. While I don't think ANYONE can trade the stock market on a daily basis, Bespoke's study makes the argument for a more tactical approach to investing. That includes raising cash at the appropriate times, hedging long investment positions that may decline significantly during broad market declines, avoiding getting too bullish and too bearish, and above all not letting ANYTHING going more than 15% - 20% against you. Currently, I have a decent cash position and look to redeploy that cash on any subsequent decline. JP Morgan (NYSE:

) - Last Friday escalating protests in Egypt sent global equity markets down -1.4%, as investors worried that political upheaval would spread across the Middle East. But since then investor concerns have abated. Global equity markets are up 1.9% and bond markets have fallen – the 10-year Treasury yield is up 23bp since Friday's close. The bond market sell-off is in part a reaction to fears of another type of contagion: emerging market inflation spilling into the developed world in the form of actual price increases and expectations thereof. [However,] with high unemployment and little wage growth, we do not view inflation as a near term problem in the US. But myths can have a powerful effect on the public imagination, and investors need to consider the market impact of rising inflation expectations. Mad Hedge Fund Trader - Have I seen This movie before? Two years ago, analysts were predicting default rates as high as 17% for Junk bonds in the wake of the financial meltdown, taking yields on individual issues up to 25%. Liquidity in the market vaporized, and huge volumes of unsold paper overhung the market. To me, this was an engraved invitation to come in and buy the junk bond ETF (

) at $18. Since then, the despised ETF has risen to $40, and with the hefty interest income, the total return has been over 160%. What was the actually realized default rate? It came in at less than 0.50%. Fast forward three years to today (has it been that long?). Bank research analyst Meredith Whitney is predicting that the dire straits of state and local finances will trigger a collapse of the municipal bond market that will resemble the Sack of Rome. She believes that total defaults could reach $100 billion. Since September, the main muni bond ETF (

) has plunged from $106 to $97. I don't buy it for a second. States are looking at debt to GDP ratios of 4% compared to nearly 100% for the federal government, which still maintains its triple “A” rating. They are miles away from the 130% of GDP that triggered defaults and emergency refinancing's by Greece, Portugal, and Ireland. The default risk of muni paper is being vastly exaggerated. I have looked into several California issues and found them at the absolute top of the seniority scale in the state's obligations. Teachers will starve, police and firemen will go on strike, and there will be rioting in the streets before a single interest payment is missed to bond holders. Business Insider - In case you had any doubt about whether Ben Bernanke's quantitative easing is pumping up the stock market, take a look at the chart from Northern Trust (below left). The shaded areas are QE1 and QE2. The red line is the S&P 500. Of course, this does beg the question what will happen to stocks when QE2 ends. Pray hard for QE3? Conclusion - While the Northern Trust chart above left implies we should have more good times until at least June when QE2 is slated to come to an end, we prefer to focus on the long-term chart on the right. We suppose there are two ways to interpret it. 1. We're in the clear and no longer have to worry about a repeat of the Dow and Nikkei crashes of 1929 and 1989, respectively. 2. Watch out for the reversion to the mean. We are very much hoping for the former, but even the mere presence of the latter is reason enough to maintain a balanced portfolio. In the meantime, we might be finding religion (read paragraph above if you're confused). Regards eddie