WARNING!!! Markets Set to Collapse Next Week: Almost Everyone Is All In On Nearly Record Amounts of Leverage, Ron Paul On The Fiscal Cliff: “We Have Passed The Point Of No Return”… Negotiations Are Going Very Badly!!! Middle Class Tax Rates Might Have To Be Hiked Too!!!
It could be fairly normal to have the markets down over the new year though generally this type of futures signal would end up being a 500 point drop…
Check out what happened with the DOW futures since Dec 21st 2012:
Margin Debt Soars To 2008 Levels As Everyone Is “All In”, Levered, And Selling Vol
There were some readers who took offense at our “bloodbath” recap of yesterday’s market action (modestly different from that provided by MarketWatch). And, all else equal, a modest 28 step drop in the E-Mini/SPX would hardly be earthshattering. However, all else was not equal, and based on peripheral facts, the reason for our qualifier is that as of last week virtually nobody was prepared for a move as violent and sharp as the one experienced in the last minutes of trading yesterday. In such a context a “mere” 1.5% drop in the futures market has a far more pronounced impact on participants than a 10% or even 5% drop would have had, had traders been positioned appropriately. They weren’t. So what was the context? Let’s find out.
First as the NYSE just reported margin debt just soared to a near five year high, with Margin Debt at a whopping $327 billion, surpassing the highest print since the Lehman collapse, and the highest level since February 2008. Not only is everyone all in based on , but they are all in on nearly record amounts of leverage.
Ron Paul On The Fiscal Cliff: “We Have Passed The Point Of No Return”
Forward to 5:45 for the Ron Paul interview (ignore everything else)
According To Two Reporters, The Fiscal Cliff Negotiations Are Going Very Badly
John Harwood @JohnJHarwood
Ben White @morningmoneyben
Market Asset Class Correlations Imply Swift Selling in Coming Days
FORMER ROMNEY ECONOMIC ADVISOR: Yes, Middle Class Tax Rates Might Have To Be Hiked Too
Former Mitt Romney economic advisor Greg Mankiw admits something that he probably would never have said during the campaign: Middle class tax rates can’t be set in stone. They might have to rise, too.
$1 Trillion Obamacare Tax Hike Hitting on Jan. 1
Obamacare contains twenty new or higher taxes. Five of the taxes hit for the first time on January 1. In total, Americans face a net $1 trillion tax hike for the years 2013-2022, according to the Congressional Budget Office.
The one thing I am always afraid of in budget negotiations is that virtually nothing is done, or worse yet, something counterproductive is done.
Obama’s latest Fiscal Cliff “Mini-Deal” Proposal is exactly the kind of counterproductive nonsense I am talking about.
Assuming the above Atlantic Wire article is correct …
- The deal would delay or replace the vast majority of spending cuts called for in the automatic sequester.
- The deal would extend unemployment benefits
- The deal would stop planned cuts to Medicare reimbursements
- Out of the blue, and probably an attempt to buy farm-state votes, the deal purportedly would include a “milk fix” that allegedly would avoid a dairy market catastrophe created by the failure to renew the farm bill
Mercy! Isn’t a Late Day Selloff Illegal?
I hope you are as outraged as I am by this late-day stock market action.
S&P 500 Futures 10-Minute Chart
Since when is a late day selloff legal? And for an entire hour with six consecutive red candles!
And in the month of December too! What happened to my Santa Rally? I demand a Congressional inquiry.
KHQ ON THE STREETS: THE FISCAL CLIFF: Just The Red Herring Distracting Everyone From The REAL Issue
Meanwhile in Europe…
Inquiring minds are noting the expected (at least in this corner) collapse in European retail sales as measured by PMI indices in Italy, France, and Germany, the three largest Eurozone economies.
Earlier today I took a look at France. For details, please see France Economic Implosion Underway; French Retail Sales Contract 9th Consecutive Month as Cost Inflation Surges.
This article will look at Germany and Italy, the first and third biggest eurozone economies.
The Markit Italy Retail PMI® shows Steep downturn in high street spending continues in December.
Italy’s retail sector remained in a steep downturn in December, with sales dropping sharply according to both monthly and yearly measures. Gross margins decreased amid a further rise in average wholesale prices, while firms cut employment and purchasing activity in line with lower sales. The month also saw business sentiment hit a record low.