Check out Brad’s April 10 interview on CNBC's Closing Bell.

I admit I was waiting to see what the markets did before I wrote this post, but now that things seem to be bouncing back, we can move away from worries about stocks and back to worries about bonds. All worries, all the time—that’s the Eeyore channel! (For those who don’t know, I’ve been called Eeyore occasionally because of what some perceived as a dour outlook. I’ve certainly been more cheerful recently, at least about the economy.)

I got a good question from Matt Parsons about yesterday’s post—essentially, what does high-frequency trading (HFT) mean to the average investor? If you’re retired, living off your investments, do you need to worry? This is an excellent question—thanks, Matt!

Yesterday, Erin Payton wrote in, saying she would have liked to hear more about the talk from the Wynn GM, which I mentioned the other day in a post from Commonwealth’s Chairman’s Retreat. This one’s for you, Erin!

Brian Gullbrants is the general manager of both the Wynn and Encore properties in Las Vegas, which employ more than 12,000 people. Essentially, he runs a small city within a city, with thousands of residents, more thousands of customers, multiple restaurants, a casino, spas, a golf course—the list goes on and on. Not only does he have to run it all, but he has to do so at a very high service level, for a very demanding clientele. This is a tough job.

Check out Brad’s February 7 interview on Bloomberg Radio’s Taking Stock with hosts Pimm Fox and Carol Massar.

[audio http://theindependentmarketobserver.files.wordpress.com/2014/02/02072014-mcmillian.mp3]

Today’s topic is a particularly good and timely question from a reader:

“Why would economic problems in other countries, especially smaller, emerging markets, cause a drop in the U.S. equities market?”

One of Commonwealth’s affiliated advisors, Tom Hine, sent in a question, basically asking, How does now compare with 2007? To quote him directly: “Many of us who are long-term optimists like myself need a dose of reality, because back in 2007/2008 many people felt the same way—yet clearly there were some flashing yellow lights!”

I couldn’t agree more. As I’ve written before, we tend to forget what actually happened very quickly, overweighting more recent experience simply because we remember it better. With that said, let’s look first at the real economy and then at the financial markets.

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.

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.

I have to apologize to Micah Crabdree, who posted a question on Halloween. Since then, I’ve either been preparing for our National Conference or attending it, and I meant to respond earlier. Sorry, Micah, but here you go . . .

The question concerned when the Fed was going to start the taper process—specifically, wouldn’t it be better to do so in a strong market environment, when the possible negative market effect would be limited, as opposed to a weaker environment, when the Fed’s action might serve to weaken it further?