Skeet,
In '29, participants had a measly 10 to 1 leverage availability. Today, we have a market effected by leverage ratios of 20...40...80...even 150 times the participants equity. The keyword is "Derivatives", in the form of call and put options and futures contracts and hedge funds buying both with borrowed $$$.
The big traders who know where the markets should be and will go, they will force the market there using the same leverage (via puts, short calls, and futures contracts). The shorting power of $1,000 in the hands of such a person would require $25,000 in buying power of the average "long-only" investor to offset. Recent mutual fund inflows give a strong hint as to who will win the battle:
amgdata.com
Through the power of derivatives, we climbed to the astronomical level of 9400 Dow, and through derivatives, we will sink to valuations that fit world-wide economic prospects and their impact on corporate earnings expectations.
Regards,
David |
