aren't you worried about inflation? I mean if inflation takes hold, wont it wipe out the shorts with a surge in the averages?
There is a credible chance of deflation in this market. Companies are producing less because of less of a demand for products. This causes prices to go down. Consider the price of oil.
Besides, there are funds out there that you can invest in that will make up for inflation when the market goes down again. The fundamentals of the economy are still bad such as real estate and jobs and that leads to a lower performance in financials as well.
I believe partly that the market is being artificially propped up that it has risen again. Also, people think stocks are so cheap now that they are a good buy and that drives the market up, even if temporarily.