The value of a fading dollar is pretty damn good reasoning. If you believe the dollar will get weaker you can capitalize by leveraging into some blue chip plays with options. Blue chips are making more and more money overseas with a weaker dollar so profits are larger and options give you good leverage...it's a win win. I think if any market is strong for the next year or two it continues to be blue chips due to emerging markets. Cheers.
Don't forget, there was a full moon recently, which implies that lunatics are have been running the asylum. Gotta start studying up on those gravitational cycles.
It's called 'inflate or die' as James said.. Why do you think all this M&A activity is going on?? INFLATION!!!! Why would Icahn bid $80 for a $35 stock? (or whatever it was).. Because these big smart guys KNOW that inflation is here and going to get worse and worse.. Rising inflation = Rising revenues... Rising Revenues -> discounted the debt accumulated leveraging the buyouts...
Biggest short position in the S&P futures in 3 years ( $45 billion, notional ) combined with the smallest long position by the hedge-fund "community" in 8 years . . . makes for a breakout to new highs. Yesterday's intra-day low at 1506.10 SPX ( holding the .618 retracement at 1503.45 ) certainly helped put pressure on the shorts, as well. Congrats to all that were long today!
What is the role of derivatives here? We see that there is great open interest in the S&P options all the way up to 1600 where there is a huge peak. This is the thursday before expiration next week. We also know that there was prior to today considerable short interest to help propel the market upward. We saw a similar burst before the last expiration (a triple witch) that took the S&P in a few days time to its open interest max. If i were a long time-frame investor (i am not right now) i would be very concerned if the S&P were to reach 1800, and it seems it well could. How much does the real estate collapse mitigate what might otherwise be a pressing need to boost the discount rate in the minds of the Fed board? As a trader, i am enjoying the ride. But i do not expect the market to go straight up forever and ever, amen. I look for it to regain some equilibrium after expiration.
Rising equity prices are doing nothing to help those caught in the coming real estate calamity. Those caught with their pants down in housing cannot afford to buy stocks. Maw and Paw will start to dump their houses soon to buy stock, and that will be the top... The number of people I talked to in the last year that said "you can't lose in real estate" sealed that deal for me.. Now, I wish I had only been long stocks..oh well..