I haven't made a major new stock purchase in over two months, as is reflected in my CAPS picks, which all reflect real life money and are my only stock holdings. I am generally not happy when people are as happy as they have been over the last two months. In fact, I sold the last of my MSFT LEAPS when the stock crossed thirty, and I sold one of my BAC 2013 $10 LEAPS when that stock hit $10.
Part of me wants to put more money to work. But I'm really sensitive to the argument that profit margins are at historical highs. I suspect a lot of that, per Montier's recent paper, has to do with government deficit spending.
For me to put more money to work, I need to see more concret evidence that business investment and hiring is actually picking up. Otherwise, I think that the additional austerity we are going to see in 2013 will hurt profits, other things being equal. I invested a lot of money in the market between 10/2008 and 9/2011 in particular, and for that reason I'm happy for now to be building cash. Maybe this is inning three of a massive recovery. If so, I'll sit out innings four and five and put some more money in at inning six. But my read is that new money invested at today's levels does not have an acceptably high risk of generating sustainable gains for people like me who don't want to sell for five years or more. Maybe I'm wrong. Forecasts are stupid. But that's how I see it. There is no harm in holding a little more cash, especially given how much money I already have at play.
That's not to say I'm investing no new money. I have three DRIPS (BDX, UNP, and LMT). I may also make other purchases. But a lot of the stocks I thought were great have had serious run-ups already. I need to reevaluate them to see if the earnings goalposts have moved sufficiently as well to demonstrate that they are still good values. Until I have time to do that, I won't be putting more money to work in them.