It’s been a very interesting couple of days for the economy and the markets. I’ve pointed out before that, in fact, the economy and the stock market are only loosely connected; good news for one isn’t necessarily good news for the other, and that is now being illustrated very well.

The other key point that we’re getting a much closer look at is the conflict between a recovering economy and the likelihood of continued Federal Reserve support. There is an implicit assumption in current market valuations, in my opinion, that we will get both revenue and EPS growth (which to some extent requires economic growth) and continued Fed support of lower interest rates (which to some extent requires economic weakness). You see the problem here.

“If something cannot go on forever, it will stop.” — Herbert Stein

I’ve been using this quotation in speeches for years. Like several of Churchill’s, it is so wise in its generality that it just keeps suggesting itself.

I spent a week or so recently writing about the problem of money, concluding with a discussion of the dollar’s reserve currency status. There, I noted that, in the next 10 years or so, the dollar would remain the dominant reserve but that other currencies, particularly the euro and the yuan, could also become major reserve currencies if they addressed certain shortcomings.

Per Bloomberg today, the yuan has passed the euro to become the second-most used trade finance currency. Use of the yuan was 8.66 percent in October, up from 1.89 percent in January 2012, while use of the euro dropped from 7.87 percent to 6.64 percent.

I hope everyone had a great holiday. I certainly did, as my sister and her family hosted us for a wonderful Thanksgiving dinner and very fun weekend. Thank you, Beth and Kevin, and thank you, Jake, Jesse, and Max.

Once upon a time, a turkey hatched in the dead of winter. He lived in a nice warm coop, had plentiful corn and seeds to eat, and spent much of his poult-hood playing with all of the other little turkeys. When spring came, he and his friends ventured out into the yard and played some more; they continued to have corn and seeds to eat and shelter from the rain. The summer brought more of the same, along with nice people who regularly cleaned the coop, refilled corn and seed stores after the turkeys gobbled it all up, and chased away scary critters like foxes and cats when they got too near.

One more reason to be grateful we live in the U.S. is the peaceful nature of our geopolitical neighborhood. With Canada and Mexico as our major neighbors, we really don’t have to worry about facing a local war—something Americans don’t appreciate enough. The fact that the Cuban missile crisis continues to resonate suggests what an exception it was. Other countries aren’t nearly so fortunate.

In several posts last year, I wrote about the increasingly serious face-off between China and Japan—with Taiwan and Korea also in the mix—over territorial claims in the local seas. Although the problem hasn’t gone away, it’s been subsumed in other, more urgent news since then. Recent events suggest it’s time to take another look.

I spend quite a bit of my professional life looking for things to worry about, to the extent that I’ve been referred to as “Eeyore.” There’s certainly some justice to this, but I do recognize good things when they happen. For example, I turned bullish on the U.S. economy about two years ago, well ahead of the crowd. That has played out well.

While I do have a bit of bias to the downside, in the spirit of the season (and because I haven’t done it in a while), let’s look at some of the many things we have to be thankful for.

A great comment came in recently from Commonwealth advisor John Smallwood. He writes: “My problem is that it is difficult to match a client’s risk profile with a model, since modern portfolio theory has been shown to be invalid and cannot measure risk, as we saw in 2008.”

I actually think there are at least two issues there, along with an assumption, so let’s unpack this a bit. To start, the fundamental question here seems to be “What is risk?” If we haven’t properly defined risk, at least in our own minds, then the rest of the investment process becomes guesswork.

In many respects, cyberspace seems like old hat today. The ironic Onion article about the man who lives in cyberspace, basically buying books on Amazon and checking his friends on Facebook, sums it up nicely. William Gibson’s seminal novel Neuromancer, which introduced the term cyberspace, holds up pretty well, and The Matrix remains entertaining.

My experience yesterday at the Markets Media Global Markets Summit, however, really brought home for me how technology continues to evolve and affect what we do, as investors, on a daily basis. By and large, the panels were concerned with the changes in the trading infrastructure—legal, technological, and institutional—that underlie the financial system.

Bob Mestjian, one of our advisors and a fellow resident of Melrose, Massachusetts, wrote in with a very good question, to wit: “At the National Conference, you mentioned margin debit balances skyrocketing. However, I'm trying to reconcile skyrocketing margin debt with what I keep hearing about record levels of cash on the sidelines. Is there cash on the sidelines? Are there select investors who want to take risk ‘all in,’ using margin, while others are in cash and want nothing to do with stocks?”

Good question. First, let’s look at the concept of “cash on the sidelines.” This is a commonly used phrase, but unless the cash is actually stuffed in a mattress, it has to be somewhere in the financial system, where its removal—or relocation, really—would have effects. The phrase is usually a misnomer, as it reflects an investor preference for other asset classes over stocks.