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This goes out to our friends at the FED.
Who knew they would give Caligula a run for his money. 

As you already know, Matt Demeter’s (Demeter Capital) weekly coverage concentrates on some of the most popular worldwide indices, futures, bonds, stocks, commodities and currencies. Matt’s work is some of the most accurate I have ever seen and it shows. The table below represents just a small portion of work available from Demeter Research. To learn more and to see Matt’s work in action, please Click Here.

Report Date: April 17th, 2016  (Including COT Reports). 

For up to the minute long-term and short-term analysis on all of the markets below, please Click Here 

You can find a much more detailed analysis on the subject matter here….

NYSE Margin Debt Falls Again: More Confirmation of a Major Market Turning Point Last Year?

The chart above is truly stunning. As most things in today’s FED induced “bubble everything” financial environment. For our purposes we have to concentrate on two things.

1. Margin debt is now in a clear downtrend. We saw similar formations at 2000 and 2007 tops.
2. Just stop for a second and think about how massive today’s imbalances are. 2015 margin debt peak was about 40% higher than 2000 and 2007 tops. I am sorry, but my vocabulary is limited to only one word……insanity.

To conclude, we are witnessing a bubble of historic proportions. Not only in margin debt, but in the over equity markets. As has been discussed here so many times before.

We sold short 5 contracts of Sugar on April 1 at $0.1542 and covered on April 13 at $0.1430 for a 7.2% gain in 13 days. Why? 

To learn more about Demeter Research and Matt’s trading/analytical framework please Click Here.

The Dow topped out on October 11th, 2007 at 14,280. By March 6th, 2009 it was sitting at 6,460 or with a 55% loss. But here is what’s interesting. The imbalances we are witnessing today are exponentially greater than what we saw in 2007-2009. Consider the following……

2007 Imbalances: 

• U.S. government debt (as narrowly defined) stood about $8 trillion.

• The Federal Reserve’s balance sheet was under $800 billion.

• 10-year Treasuries yielded approximating 4.5%, giving the Fed had some leeway to cut interest rates if necessary to fight a crisis or business downturn.

• The subprime-mortgage bubble peaked at about $1.3 trillion.

• Aggregate government debt was under $10 trillion.

• The derivatives market’s notional value was $182 trillion.

• A homeless man named Johnny Moon was reportedly able to get some $600,000 of mortgages to speculate in the U.S. housing market.

As bad as all of that was, consider Today’s Imbalances:

• U.S. government debt totals about $19 trillion, or some $11 trillion more than it was in 2008.

• The Fed’s balance sheet is approaching $5 trillion vs. $800 billion in 2008.

• Short-term interest rates are 0.25% compared to 4.5% back in the day.  With interest rates at near-record lows, there’s little opportunity for the Fed to further expand its balance sheet.

• The derivatives market is currently larger than $500 trillion vs. $182 trillion in 2008.

• Central-bank capital has dropped to 0.8% of assets from 4.5%.

• The size of the subprime bubble was $1.3 trillion, but the size of sovereign borrowing is $7 trillion today.

• Our government has to borrow money to simply pay interest, and monetary policy is hamstrung by near-zero interest rates.

• There are no more homeless people getting mortgages to buy homes, but there’s a Danish sex therapist whose bank is paying her interest (instead of the other way around) on a loan that’s financing her matchmaking Web site.

Not a big deal???

I would certainly disagree. The imbalances above will have to be addressed one way or another. They will not simply go away. We do not live in a magical world where the FED geniuses have created a perpetual money machine.

If anything, it is highly probable, especially if you consider today’s general overvaluation levels, that the imbalances above will be addressed in a violent fashion. And I would say sooner rather than later.