Philadelphia, Pennsylvania – (StockNewsDesk) – 09/12/2014 — The stock market has been setting all kinds of records, in terms of time without a correction against the amount gained, and duration, for its bull market that began in March 2009. The S&P 500 bottomed at 666 on March 6, 2009, and recently it has been flirting with the 2000 level, more than tripled. It is strange that this gain has come with a US economy in which most people continue to not feel confident about their prospects. It is not a booming economy that most would assume with a stock market at all-time highs.
Reasons for Market Strength
Much of the stock market strength has to do with a Federal Reserve that has injected trillions of dollars into the economy in an effort to artificially lower interest rates. This, in many ways, has forced investors into stocks as they are lacking alternatives if they want to generate returns. This is the Fed’s intention as they are banking on an improvement in people’s house prices and retirement accounts to give them more confidence to spend money, thus propelling the economy.
This divergence between the real economy and the financial economy has led to much skepticism among the investing public, gurus, and even funds, which have missed the rally, preferring the safety of bonds. Because of the relentless rally, stock market bears have been wiped out. However, in recent months, some billionaires, worshiped for their investing prowess, have begun to position themselves to profit from a collapse in the market.
While some of the billionaires’ bearishness is expressed through their words in speeches or interviews, Soros’ position is made clear as his fund is required to reveal his positions once a quarter. He has been gathering a massive position in puts on the S&P 500 over the past year. The most-recent filing shows that he has an astounding $2.2 billion worth of puts, and it represents 17% of his entire portfolio.
Sam Zell is a real estate and publishing tycoon and, in a recent interview on CNBC, said that the stock market’s rise had more to do with monetary manipulation than it does with economic fundamentals. He pointed out that sales continue to come in short for most companies, and they are meeting earnings by cutting costs. Most of the easy cost cuttings are finished, and if revenue does not increase, they will begin to miss earnings, pushing stock prices lower.
In this bull market cycle, Carl Icahn maybe the most successful as he has used leverage to buy big winners, such as Netflix and Apple. He also stated in an interview on CNBC that he was concerned about valuations, and the market was due for a pullback or correction. He reiterated that his concerns were more of a short-term nature rather than a longer-term nature. His biggest worry centered on Janet Yellen, who he did not believe understood the dangers of over stimulating the economy.
Druckeniller was Soros’ right-hand man for many years and may have the most impressive investing record of all-time. He has been public in the last couple of years giving speeches on TV, and at various conferences, that the Fed’s actions are creating an entire set of adverse disastrous consequences. The cure is worse than the disease, in his opinion. He wants policymakers and investors to let go of their myopic focus on the short-term and worry about long-term effects.