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by ChrisMartenson.com contributing editor Charles High Smith The Pernicious Dynamics Of Debt, Deleveraging, and Deflation At this moment, the news media is constantly clamoring about the “Three Ds” that are buffeting the markets: debt, deleveraging, and deflation. We intuitively sense that they’re linked — but how, exactly? Understanding this linking is critical; as debt has fueled the global expansion, it will also dominate its contraction. Debt and Deleveraging To illustrate the forces of debt and deleveraging, let’s consider [...] Last week’s volatile action in the markets began to show some of the confusion that market participants are experiencing. Much of this confusion has been due to QE2 and the uncertainty regarding the end of the program. As we near the end of the program it’s difficult to ascertain exactly what QE2 has done. One thing is clear, however [...] by ZH The NYSE has released its monthly margin debt update for March. Not surprisingly, with everyone, and yes EVERYONE, chasing nothing but levered beta, margin debt surged to a fresh 3 year high at $315.7 billion, the highest since February 2008. But far more troubling is that when netting out positive margin balances such as Free Credit Cash Accounts and Credit Balances in Margin Accounts, the [...] Current levels of margin debt are now consistent with the Nasdaq bubble and just shy of the levels seen before the credit crisis (via Gluskin Sheff): If there is one sure way to tell that the Fed has managed to create and nurture a speculative-led rally in the equity market, look no further than what is happening to investor-based leverage growth [...] These are strange days on Wall Street. The less you think, the more money you make. A near double for the S&P since March 2009, the market has not yet reached the euphoria stage. Bottom line says Robert Sinn: the Fed can inflate equity prices longer than most believe. THE BIG BULL MARKET ONE DAY IN FEBRUARY, 1928, an investor asked an astute banker about the wisdom of buying common stocks. The [...] by zh It is not just the stock market that is at the highest levels since Lehman. Probably just as importantly, NYSE margin debt has surged to $269 billion, an increase of $13 billion from the prior month, and the highest since September 2008 when it was at $299 billion, and subsequently tumbled as investors rushed to get out of all margined positions. And this has happened [...] |
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