Q: Your last few letters have been very positive. Are things just great all over?

A: No, and they never are. At any time, there is some looming issue that makes staying in the markets, or getting in, at least a little daunting. Otherwise, there would be no risk premium.

A very basic definition of risk premium is the additional return that someone can expect from investing in something that is NOT risk-free. Each one of us must decide whether any potential investment has a high enough reward for the risk we are taking. Without this risk, we could not reasonably expect to earn more.

Consumer confidence and employment are still sources of confidence in the current economy. There is still weakness in service sector confidence, indicating some concern about future economic activity. We also continue to have an inverted yield curve, which is often a sign of future economic pain.

In other words, a mixture of strengths and weaknesses means that your investment decisions should be appropriate for your specific goals and situations. Those factors should be the main determinant of how you approach the markets.