I don't trade stocks and I don't carry any futures positions overnight. But if I were a longer term equity trader/investor I would simply never fight the Fed. That would be rule one of my plan. An addiction to cheap money is very similiar to a heroin habit to the markets. Once hooked -- and we certainly are that -- the longer term consequences are both predictable and disasterous. BUT ... and it's a big but, as long as there is a steady supply of the drug all seems well for an incredibly extended period of time.
I never understand the idea of people talking about the market as if there are two choices, long or short. Not referring to you of course. Just in general. I'll buy stocks up here, I'll also short the index against it. I try to stay pretty market neutral. There are a million ways to trade but its always assumed that one, everyone is trading stocks. And two, there are two choices: all in long and all in short. Nobody here trades options, spreads futures, trade volatility, relative value, correlation? Just long or short?
Great post. In life and in trading there are numerous ways to skin the cat. There is a reason that many/most serious traders aim to be market neutral or close to it much of the time. They have enough capital to do it and they have been around long enough to be more risk averse than the rookie. Those of us that are much more directional should keep that in mind when we hear about how leveraged they can be. Frequently they are using that leverage sanely while directional traders working with lower leverage are frequently in over their head.