Why haven't I closed my shorts?
The higher we go the closer I feel we are to setting up big let down.
I still believe that 1030 was a "perfect" price for 2010 earnings and that this market is now way ahead of the coming fundamentals... a typical top overshoots by a decent percentage so I'm prepared to see us breach 1100 and even run at 1200 (after a mid fall dip) but then what - will the economy be right back into the bubble mode of 2007 - I think not - it took years to build up those excesses and we'll not be back to that sort of economy for some time. The USA has implemented many Japanese style policies and I suspect we'll get the same results and politicians will be begging for a 2nd stimulus package next year.
Right now it appears the market is discounting a full recovery and flat or negative inflation OR a double dip recession with mild inflation.
I think neither are likely and the disappointment will be evident in asset prices.
Another issue that continues to haunt me is the simple fact that the large ponzi scheme that the banks and the U.S. government created with low interest rates and infinite debt creation still seems a bit unstable.
Few seem to understand that the US economy MUST grow at about 3-4% a year or else the entire financial system will fail... you can never have a multi-year period of negative or flat "nominal growth" (which includes central bank created inflation).
ONE BIG PROBLEM - it has been taking $6-$7 of debt creation to produce $1 of GDP growth. So since new loans aren't exactly flowing I think we have a BIG PROBLEM.... its a HUGE PROBLEM ACTUALLY. You see the economy and the money supply are exponential systems.
There is no other possible outcome but faiure if the economy doesn't grow or if inflation isn't manufactured.
IF YOU REALLY WANT TO SCARE YOURSELF - READ THIS and then ask yourself how ae we going to create enough new debt to keep this ball rolling. The only answer I see is that the US government will need to keep on borrowing money (which is very possible since the Fed basically prints debt and then buys back whatever debt foreign holders won't accept)... but this continued gov't borrowing will DEFINITELY destroy this countr as our creditors will actually control policy.
So in closing I repeat - I will not close any of my red thumbs because I truly believe "something wicked will come this way".
That said I regret placing so many green thumbs on these toxic 2X shorts... I'll probably never win with those picks because 2x ETFs will all go to zero over-time... I should have covered and taken small losses.