Bull will run through 2009 - then it gets ugly
The less bad is good argument is a strong pschological driver, making fund managers more than willing to buy nearly anything on the stock market in hopes of getting in on the next bull market. To be fair, if inflation occurs the stock market needs to readjust its prices to reflect that - and since the March lows of the S&P, the dollar index is down 14% - so one could argue this run isn't 55% off the lows, but 41%.
Truth is that trillions of dollars are being given away to large banks who are profiting right now on INVESTMENTS. Not loaning the money out, but investing in derivatives, stocks and literally creating the newest bubble in equities.
Think logically - we are currently in the deepest recession since the Great Depression, and today (as I write this) the value of the S&P 500 is the same as it was only five years ago (in the middle of 2004). Does anyone actually believe we went from the brink of collapse to where things were in 2004?
PREDICTION: This bubble, like all bubbles, continues to grow. We will see the S&P hit the 1150 - 1220 range by the end of the year. Then the bubble will burst, hard to say exactly, but before May of 2010, and it will get very ugly. In inflation adjusted terms, S&P 700 - but the final price is heavily dependent on the dollar index.
Personally, I'm going to ride this market into the Santa Claus rally, then short it.
Good luck and good investing.