Daily Investment Interpretations

February 7, 2011

2011-2-7 (Monday) TThe markets have defied gravity again today.  The NASDAQ Composite added another 14.69 points (0.53%) to 2,783.99. The Dow gained 69.48 points (0.57%) to end at 12,161.63, while the S&P 500 advanced 8.18 points (0.62%) to close at: 1,319.05. Oil closed down a little more at $87.58 a barrel , while Gold ended at $1,350. The VIX rose 0.35  to 16.28.
    So why are stocks still rising when pundits are calling for a correction? Maybe it's because there's a lot of money coming out of the bond market into the stock market. Or maybe it's because all the pundits are calling for a pullback. Or maybe it's because people who have been afraid to invest are jumping back in. When a correction finally arrives, it will do so in a manner that will trap recent arrivals to the equity markets and strip them of their money. In the meantime, there doesn't seem to be much commentary on the market's relentless rise.
    Stock market futures are a tad positive tonight.
    My projection for Richard Meiers' stock trading program, based upon his reported gain of 24.66% for the 1 months he's been in operation, would be a quadrupling or better in a year's time. My interest in leveraging my money using call options has been inspired by the fact that I'm investing money in a Roth IRA. IRA's can't use margin to boost their gains. But for a taxable account, margins work fine any time we're facing a situation in which we can be pretty sure that our gains will comfortably outweigh our losses.. In that case, by investing with 100% margin, we could square our gains, and 16-fold our (taxable) money in a year. Of course, we'll have to pay income tax on our earnings, and we can't expect capital gains treatment since the holding periods for these stocks would be very brief.
    I'll try to discuss this tomorrow if time permits.