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Known Stock Market Leverage Hits WTF High. Out the Other Side of its Mouth, the Fed Warns about Hidden Leverage that Blew up Archegos
WolfStreet ^ | 05/18/2021 | Wolf Richter

Posted on 05/19/2021 12:04:56 PM PDT by aimhigh

Stock market margin debt jumped by another $25 billion in April, to a historic high of $847 billion, according to FINRA data. It has exploded by $188 billion in six months, and by 61% year-over-year, and by 55% from February 2020:

Excess leverage is the precise and predictable result of the policies the Fed is promoting out of one side of its mouth with its interest rate repression and asset purchases.

Out of the other side of its mouth, the Fed – via its blissfully ignored Financial Stability Report – is warning about leverage, stock market leverage, and particularly the vast and unknown parts of leverage among hedge funds and insurance companies.

(Excerpt) Read more at wolfstreet.com ...


TOPICS: Business/Economy
KEYWORDS: investiments; investing; market; stocks
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1 posted on 05/19/2021 12:04:56 PM PDT by aimhigh
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To: aimhigh

Japan 1989. Big bubbles in stocks and real estate feeding each other.


2 posted on 05/19/2021 12:07:38 PM PDT by BiglyCommentary
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To: aimhigh

Predictions anybody?


3 posted on 05/19/2021 12:10:34 PM PDT by Lee'sGhost ("Just look at the flowers, Lizzie. Just look at the flowers.")
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To: aimhigh

Are we going to have to watch out for falling middle aged men moving at terminal velocity into the pavement in vicinity of wall street in the near future?


4 posted on 05/19/2021 12:14:26 PM PDT by suasponte137
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To: aimhigh

It has exploded by $188 billion in six months...\


Meh. In a world where we talk trillions all the time, billions are chump change.


5 posted on 05/19/2021 12:14:43 PM PDT by cuban leaf (We killed our economy and damaged our culture. In 2021 we will pine for the salad days of 2020.)
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To: aimhigh

The greatest quote in the comments about how once inflation takes hold, the government will begin sending out “Inflation supplement payments” to the people.


6 posted on 05/19/2021 12:20:38 PM PDT by aimhigh (THIS is His commandment . . . . 1 John 3:23)
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To: aimhigh

Gasoline meet Fire.


7 posted on 05/19/2021 12:22:01 PM PDT by suasponte137
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To: Lee'sGhost; aimhigh

Any opinions on I bonds?


8 posted on 05/19/2021 12:24:36 PM PDT by Cold Heart
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To: Lee'sGhost

> Predictions anybody? <

The S&P price-to-earnings ratio is now at 43. The historical average is around 15. This suggests that a major correction is due.

On the other hand, with CD and bond rates so low, there is nowhere to put investment money these days except in the stock market. This suggests that the bull market will continue.

(Like all good advisors, I have hedged my comments such that no matter what happens, I can claim to have been right.)


9 posted on 05/19/2021 12:25:40 PM PDT by Leaning Right (I have already previewed or do not wish to preview this composition.)
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To: suasponte137

32 feet per second, make sure to scan above you every 2 seconds


10 posted on 05/19/2021 12:25:47 PM PDT by 1Old Pro
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To: Cold Heart
Any opinions on I bonds?

Not any good ones

11 posted on 05/19/2021 12:27:20 PM PDT by 1Old Pro
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To: aimhigh

12 posted on 05/19/2021 12:33:46 PM PDT by entropy12 (President Trump saved Millions of lives with his warp speed push for covid vaccines. Trump or Bust!!)
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To: suasponte137

I was thinking the same thing, 1929 could happen all over again..

However, I think the NYSE, NASDAQ, Federal Reserve and Treasury will stop that from happening, back in 1929 no single entity could or would step in and stop trading, inject capital in order to prevent an all out catastrophe, however over a period of days, perhaps a month or two, the same type of loses could and probably will happen....

Just like back in 2008, the government and Federal Reserve provided a backstop to most of the banks and wall street types at the expense of the every day American, if that happens again, I’m not sure what the reaction would be from the public...


13 posted on 05/19/2021 12:33:57 PM PDT by srmanuel (`)
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To: Leaning Right

I am going to run with your advice and stay 100% in stocks.


14 posted on 05/19/2021 12:34:41 PM PDT by entropy12 (President Trump saved Millions of lives with his warp speed push for covid vaccines. Trump or Bust!!)
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To: Cold Heart

Bonds usually hate inflation. Why would anyone loan X amount today to get paid in 10, 20, 30 years with inflated bucks? Plus who would your 2% bond in the future when they can get a much higher interest rate that future bonds would pay to compensate for the higher inflation?


15 posted on 05/19/2021 12:34:45 PM PDT by BiglyCommentary
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To: srmanuel

How is the FED or UST can stop the stampede of panicked newbies who have recently flooded the market?

The PPT does have some tools to mitigate mild crashes, but not the mother of all crashes.


16 posted on 05/19/2021 12:37:01 PM PDT by entropy12 (President Trump saved Millions of lives with his warp speed push for covid vaccines. Trump or Bust!!)
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To: Cold Heart

I prefer M bods over I bonds (M=mattress)


17 posted on 05/19/2021 12:38:22 PM PDT by entropy12 (President Trump saved Millions of lives with his warp speed push for covid vaccines. Trump or Bust!!)
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To: entropy12

18 posted on 05/19/2021 12:42:34 PM PDT by Theoria
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To: entropy12

Plus in the 2008 crash, the Central Banks didn’t start the big save till March 2009, after markets had dropped about 40%. A lot of investors had panicked out before that. Takes some real stomach to hold for 6 months waiting for the calvary to come riding over the hill while your bleeding out.


19 posted on 05/19/2021 12:45:10 PM PDT by BiglyCommentary
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To: entropy12

Sure they can, they would just stop trading altogether...which has been done in the past...

Let a semi-orderly melt down happen over a period of days and not all at one time...

We should all know by now the Fed and UST will not allow a 40-50% selloff to happen in a single day or two, it can’t stop the sell off over time but it will stop or slow it down if for no other reason than to allow certain people to get out of the market in a orderly manner trying minimize loses.....

Go back to 1987 and that massive sell off, circuit breakers were put in place to stop trading for short periods of time to allow traders to take stock of what’s happening...

A couple of major difference now verus then is the use of high speed electronic trading that did not exist back then, the sell off will probably happen in the blink of an eye and a massive sell off will create panic...

The Fed will stop in and stop trading but a major sell off will still happen, if they open the next day it will happen again, etc....

The end result will be the same but it will just take a few more days....


20 posted on 05/19/2021 1:00:38 PM PDT by srmanuel (`)
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