It has occurred to me that I am getting my ass kicked trying to short a market that refuses to show one day of weakness. The V shaped rally has been quick and forceful from the October lows. Anyone who was in disbelief either shorted prematurely or had no time to react. I'll admit I have a natural tendency to gravitate towards pessimism. I don't know why that is, it is just the kind I person I am.
I have spent so much energy investigating the bear thesis it is time that I take a harder look at the Bull thesis.
- Central Banks are arguably the most accommodating towards markets they have ever been in history. One of the objectives of QE was to essentially force people into risky assets in hopes of creating a wealth effect that in theory spreads to everyone. With interest rates the lowest they have ever been it's frankly one of the best times in history to take out a loan. The fact that margin debt is at an all time high tells me that people must have a lot of confidence in the market right now.
- The trend is up. Long term, short term, we made a new ath today and that's a fact.
- Longs can make more money and lose less. There is unlimited upside and the lowest a stock can go is 0.
- The Feds got our back. Every time in recent history the market has started to drop significantly the fed has jumped in and saved the day. Will next time really be any different?
- Rising USD and falling Oil benefits consumers (as long as their jobs aren't dependent on expensive oil) There is a possibility that consumers benefit more than oil companies suffer.
- Republicans control the house and senate and are notorious for supporting big business. After all why should the top 1% be forced to pay taxes as high as everyone else? Job creators right? wink wink
- Stock valuations are cheap.. Compared to the dot com bubble.
- Buybacks benefit shareholders and are a good use of capital.. Isn't that right IBM?
- A crash benefits nobody but bears. The general public hates bears. profiting from a decline of a companies stock seems immoral to some people.
There is a case to be made for Bulls. They certainly have trend, momentum, sentiment, and central banks on their side, and besides optimism feels great!
They say that nothing ever changes, least of all in the stock market. This leads me to believe this bubble is just going to keep on inflating until it pops. So let's all just keep playing musical chairs until the music stops! Who knows maybe this time is really different and the jukebox plays on forever? (After all there is plenty of power thanks to cheap and abundant coal!)
All we can do is study the charts and determine if the Risk/Reward of putting fresh capital to work is favorable or not.
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