First a caveat: We don’t want to make too much of everyday economic data and news, and we won’t make a habit of opining on everything. Human nature makes us inclined to get swept up with the bearishness or bullishness of the day, or find meaning in what is often randomness. Investors want to know why the Dow went down 0.6% or why trading volume was heavy. Most of the time, we find those answers, sometimes because there is a logical answer and sometimes because we force one to belief. (Often times the answer is really unimportant.) Uncertainty makes people crazy—we can’t help it, and it is natural to choose certainty even if it raises the chances of being wrong.

Going forward, we will try to remember this before delving into the news of the day and taking up your time and ours. There are already too many talking without really adding anything to the conversation.

That all said, our views have included the following:

  1. Deflation risks are bigger than inflation risks in the short term. The Federal Reserve and other central bankers have gone through great lengths to fight deflation, but it’s too early to claim victory. Consensus estimates for rate hikes starting in early 2015 and persisting afterward. We have doubts.
  1. Though not great, the U.S. economy, dollar, and stock market seem more attractive than abroad from a risk/return (and value) standpoint. For years now, the Consensus has taken the other view. We think that view is changing.
  1. Big, important places like Europe, Japan, and China might be in bigger trouble than the market sees. Deleveraging and even deflation look like real risks, and so far we see no credible plan to fix their problems in short time. We think many assets have yet to reflect this view in prices.

Yesterday’s inflation numbers suggested inflation is well below the Fed’s target of 2%, and with food and energy prices dropping sharply, the next inflation readings may increase concerns about deflation. At the very least, the Fed may have to reconsider its rate-hiking expectations. We still count more thinking inflation and higher rates than the opposite. Contrarian opportunity?

On the other hand, today’s news showed a rosier economic picture in the U.S. Initial jobless claims fell to the lowest number since 2000.   We have taken jobless numbers (including the official unemployment rate) with a grain of salt knowing that many underemployed and discouraged workers, including those permanently removed from the workforce, are not counted in the statistics. But we also have to consider the low number is still a positive, especially when you consider the same jobless claims number as 2000 is across a U.S. population that is about 12% larger today.

More good news came from industrial bellwether Caterpillar. The company said machinery sales through September were up 8% in U.S. versus 2013. Cat’s foreign sales were another story: sales were down 25% in Asia and down 11% between Europe, Africa and the Middle East. All of this is further evidence of the U.S. being on a different path than the rest of the world.

How long this can continue is something we are looking into. We have expected a rise in capital expenditures in the U.S. because (1) companies have record levels of cash; (2) less economic and policy fear, or even fear fatigue, will green light new spending; (3) equipment age and utilization rates are high; and (4) shale oil and its effects are a positive. Lower oil prices and further weakness abroad are threats to this outlook. The U.S. can’t be immune to world troubles forever, can it?

We have gotten more defensive overall, but are open to putting more money in good individual investment ideas.