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Why You Shouldn’t Stop Freaking Out About Margin Debt

Daily Chart June 3 InvestWithAlex

6/3/2015 – A positive day with the Dow Jones up 66 points (+0.37%) and the Nasdaq up 23 points (+0.46%) 

Quite a few interesting things out there today. A few days ago I displayed this chart of skyrocketing margin debt and why it is yet another bearish indicator. That is to say, most investors are extremely bullish at the precise moment when they shouldn’t be.

Margin Debt Investwithalex

Not everyone agrees with my assessment above. Traders are borrowing tons of money to bet on stocks … and it’s just not a big deal

“Margin debt does not, by any statistical measure, lead equity prices. They are, essentially by definition, coincident. As stock prices move higher, outstanding margin debt does as well. If and when stock prices move lower, margin debt will follow.”

While I would have to agree with the statement above, they are looking at the wrong metric. It’s not the fact that margin debt moves in tandem with the stock market, it is the fact this metric is now 33% higher than at 2000 and 2007 tops. All while the stock market hasn’t gone anywhere over the last 10 months. In other words, the market is storing a tremendous amount of fuel for a correction. And given how much margin debt is out there, any such correction can very quickly turn into a violent sell-off.

Further, I would have to agree with the following sentiment. The stock market is becoming a ‘lose-lose’ situation

Investors are in the grip of “Stockholm syndrome” because there is a trust that central bankers don’t want to hurt markets, which more or less forces investors to maintain a “risk-on” positioning, buying things like stocks and lower-rated bonds.

I couldn’t agree more. I continue to maintain that this is the worst trade out there today. The problem is, everyone is in it. By the time most investors realize the FED is not in control and cannot backstop the market, it will be too late. At least 50% of the down move will be over by that point. Oh well….

This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2015-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years.  If you would be interested in learning when the bear market of 2015-2017 will start (to the day) and its internal composition, please CLICK HERE.

(***Please Note: A bear market might have started already, I am simply not disclosing this information. Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. June 3rd, 2015  InvestWithAlex.com

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!

Why You Shouldn’t Stop Freaking Out About Margin Debt Google

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Are Yields Breaking Out?

10 Year Note InvestWithAlex

About a mount ago we asked if yields were about to break out. At that time the 10-Year Note ran right into resistance at 2.25% and paused. That is no longer the case. As you can see from the chart above, yields have now pushed above that level.

The 2.25% resistance line was nothing to sneeze at. It held for well over a year. The next major long-term resistance line is at around 2.6%. This brings out a number of important questions. In fact, more questions than anyone can answer at this point. For instance,……

  • Was the secondary bottom in yields set in early January?
  • Will yields now stage a multi-year, even a multi-decade advance?
  • Is this signaling the FED will raise rates and soon?
  • Does this spell doom for the stock market?
  • Etc….

Only time and market action can answer the questions above. At least for now, I am sticking to my overall long-term forecast. The secondary bottom in yields of 1.4-1.5% is not yet in and we are on schedule to see it over the next 12-24 months.

Although I might change my opinion if yields are able to break out above 2.6%. Further, this is the most important market to watch over the next few months. Should yields break out and spike, we might have another 2008 on our hands.

z32

Are Yields Breaking Out? Google

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Secret Key To The Stock Maket: Our Holographic Universe

holographic universe

I love science and mathematics. Yet, once you start digging deeper you soon come to a realization that our physical 3-dimensional reality doesn’t make sense. So much so that what is available to our human senses is just a small fraction of our true reality. In other words, human existence is nothing more than an advanced computer simulation. Leading physicists across the globe are starting to come to the same realization.

There Is Growing Evidence that Our Universe Is a Giant Hologram

What does any of this have to do with the stock market?

Everything. Just as our human reality is nothing more than a shadow of higher dimensions, the 2-dimensional chart we all follow is just a shadow representation of true market moves. Here is how the stock market really works.

The markets being, at minimum, a 3-Dimensional phenomena, exactly like a large molecule rotating in space, in and out of the Z plane, with DNA coding sequences governing the entire process. Without understanding that the market is 3-D, twisting like a plant governed by the phyllotactic laws of dual number series and harmonic composition and decomposition, all measurements taken on a 2-D chart become misleading.

Mind blowing. By the way, human beings have the ability to jump to this higher dimension of reality through extensive meditation. Most traditions around the world call this “enlightenment”. In scientific terms, it is identical to electrons jumping between quantum levels. Once enough energy is accumulated within the human mind/body structure (through meditation), this quantum jump is automatically made.

Z30

Secret Key To The Stock Maket: Our Holographic Universe Google

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What Are We Waiting For?

Daily Chart June 2 InvestWithAlex

6/2/2015 – A down day with the Dow Jones down 28 points (-0.16%) and the Nasdaq down 6 points (-0.13%).

The overall stock market continues to trade within a very tight trading range, but that will soon change. A massive and rather rapid stock market decline is coming later on this year. And while we won’t have a crash, considering the amount of margin debt out there, quite a few people will get wiped out. If you would like to find out exactly when this move will develop, to the day, please Click Here. 

Over the last few months a few analysts suggested that a bear market and a possible crash will occur in 2016. Something to do with the presidential cycle, the need to have a blow off top and increased gravitational forces in Andromeda Galaxy. For instance, Analyst Says Bull Market Will Not End With Top Tech Stocks So Cheap.

Excuse my ignorance, but why exactly is it impossible for us to have a large scale decline, maybe even a crash, in 2015? 

Personal preferences and wishful thinking aside, here is our current setup…..

  • Extreme overvaluations in most sectors of the stock market.
  • Outright bubbles in Tech and Biotech.
  • An adjusted P/E ratio above 1937, 1966, 1987, 2007, etc…. tops. Only 1929 and 2000 tops were higher.
  • The FED is about to raise interest rates.
  • Any remaining QE velocity is quickly dissipating.
  • Macroeconomic data is collapsing (previous charts).
  • The US Economy is on a verge of an official recession. Q1 growth of 0.2%. Inventory build up saved the GDP from going negative.
  • Earnings growth estimates are accelerating down (previous charts).
  • We are still in a secular bear market.
  • 10 Months of market distribution. (NYSE since July of 2014)
  • Extreme bullish sentiment.
  • Margin debt is at an all time high.
  • Fund outflows continue to accelerate (weekend update).
  • Etc….

I am sure I have missed quite a  few points, but you get the idea. Sounds like a perfect recipe for a disaster to me. The best part is, I don’t think we have to wait until 2016.

This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2015-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years.  If you would be interested in learning when the bear market of 2015-2017 will start (to the day) and its internal composition, please CLICK HERE.

(***Please Note: A bear market might have started already, I am simply not disclosing this information. Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. June 2nd, 2015  InvestWithAlex.com

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!

What Are We Waiting For?  Google

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My Challenge To Mr. Bernanke

PE Ratio

Forget bubble level valuations. Despite the mountain of evidence to the contrary, including the chart above, Mr. Bernanke believes the stock market is not even that expensive. In his recently published blog post Mr. Bernanke writes…

Stock prices have risen rapidly over the past six years or so, but they were also severely depressed during and just after the financial crisis. Arguably, the Fed’s actions have not led to permanent increases in stock prices, but instead have returned them to trend.To illustrate: From the end of the 2001 recession (2001:q4) through the pre-crisis business cycle peak (2007:q4), the S&P 500 stock price index grew by about 1.2 percent a quarter.If the index had grown at that same rate from the fourth quarter of 2007 on, it would have averaged about 2123 in the first quarter of this year; its actual value was 2063, a little below that. There are of course many ways to calculate the “normal” level of stock prices, but most would lead to a similar conclusion.

I can poke so many holes in the statement above that it will end up looking like a pound of Swiss cheese. But I am not going it. Instead, I would like to issue a rather simple challenge to Mr. Bernanke.

If you truly believe the stock market is nowhere near being expensive, why don’t you BUY today. Why don’t you show us all that you truly believe in your own BS, make that information public and allocate a large chunk of your portfolio/wealth in an index fund of your choosing. I will be waiting right here.

z32

My Challenge To Mr. Bernanke Google

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Carl Icahn: A Matter Of Time Before Stocks Implode

Carl Icahn is extremely worried about today’s stock market valuation levels. He goes on to suggest that it is just a matter of time before it all comes crashing down. I tend to agree. I am still not sure how Apple is supposed to reach $240 a share in such a market environment, but that’s beside the point. Listen below…..I highly recommend it.

Z31

Carl Icahn: A Matter Of Time Before Stocks Implode Google

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The S&P Would Have To Drop 80% To…..

Daily Chart June 1 InvestWithAlex

6/1/2015 – A positive day with the Dow Jones up 29 points (+0.16%) and the Nasdaq up 13 points (+0.25%).

The S&P would have to drop 80% to recreate an environment when interest rates were this low last time.

Most bulls (most investors today) will argue that today’s high valuations are very well justified. Due to low interest rates. In fact, because interest rates are so close to zero, most stocks deserve infinite valuations. This premise is also know as, “this time is different”.

This chart brings that assumption into question.

shiller pe with rates investwithalex

Simply put, just because interest rates are low, doesn’t mean P/E multiple cannot go down. For instance, in 1941 interest rates were at around 2% (exactly where they are today) while the P/E ratio rested at 8.

If such an environment was to repeat itself today, the S&P would have to take a 66% haircut.

But wait, it gets even worse. In 1941 we were at the bottom of that particular economic cycle. The earnings have already contracted and stocks were selling at a massive discount. In fact, they were about to stage a 5 year WW2 rally.

Today, the situation is reversed. Earnings expansion is at its peak (thanks to the FED and their little QE liquidity party) and the P/E ratio has only been higher on two other occasions (1929 and 2000). In other words, for the S&P to reach 1941 levels it would have to fall 80%.

Let me put it this way.  Anyone who believes that this stock market rally will continue hasn’t studied history nor appropriate market valuation metrics. Plus and just FYI, “this time is different” is a terrible investment strategy.

This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2015-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years.  If you would be interested in learning when the bear market of 2015-2017 will start (to the day) and its internal composition, please CLICK HERE.

(***Please Note: A bear market might have started already, I am simply not disclosing this information. Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. June 1st, 2015  InvestWithAlex.com

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!

The S&P Would Have To Drop 80% To…..Google

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Scary Amount Of Margin Debt Points To A Violent Market Correction

Margin Debt Investwithalex

A massive and rather rapid stock market decline is coming later this year. And while we won’t have a crash, considering the amount of margin debt out there, quite a few people will get wiped out. If you would like to find out exactly when this move will develop, to the day, please Click Here. 

The chart above is scary for two reasons. First, the amount of margin debt out there is truly staggering.  It is 33% higher than it was at 2000 tech bubble top and 25% higher than it was at 2007 mortgage finance bubble top.

And we are expected to believe we are not in a bubble and the stock market is climbing the wall of worry?  Yeah….right.

Second, while the margin debt is surging higher off of its 2014 lows, the stock market hasn’t gone anywhere over the same period of time. That should be a massive red flag to anyone who is paying attention. That means the market is stalling despite this surge in margin debt, corporate buybacks, capital inflows, M&A and overall bullish confidence. Not a good sign.

z33

Scary Amount Of Margin Debt Points To A Violent Market Correction Google