Thursday, June 27, 2013

NYSE Margin Debt updated for May

note: I believe there is enough reason for things to get 2008ish. It doesn't mean I am betting it will happen next week, as, at the end of the day, price is what rules it all. I am just saying we live in a very fragile equilibrium, based on confidence that Central Banks can keep things together.

NYSE Margin Debt numbers for May 2013 were just released today, so I thought I'd update the blog with it, that chart that also contain monthly DeMark counts for all things within it.

From Bloomberg's Description:

NYSE member organizations have been required to report monthly through Form R-1 their aggregate debits in securities margin accounts, as well as aggregate free credits in cash and margin accounts. The margin debt figure is the total amount (aggregate) debit balances in customer securities margin accounts held at NYSE member firms.

I added also the charts showed on the previous post, signs that the market has already repriced things forward and whoever wants to, right now, issue debt to invest, buy back shares, buy a house, etc, needs to pay a higher price. From Gundlach and Bill Gross I hear that mortgage payments have already increased something like 20-40% if you're to get a new mortgage today. 

Really short-term funding barely budged so far, as Fed is holding cash-rates at zero.

The second chart is just to show that with Fed Funds already at zero there isn't much, in my opinion, that the Fed can do if a shock happens due to 1/ a economic slowdown that would increase probability of default in credit or would reduce prospects for profit growth in equities. and 2/ excessive built-in leverage within the system.

On (2) above, in 2011 the Fed/ECB, or was it just ongoing growth, or EM growth, or whatever reason...  did Today valuations are higher, growth is slower, inflation is lower, and I strongly believe there is less cushion available for a sustained recovery in asset prices, new highs IF/AFTER a shock  comes.

Bonds seem to have cracked already.

As I mentioned earlier, I believe the Fed is talking about tapering just to try to keep people from increasing leverage, or actually to make markets reduce leverage already, but in a contained way.

I am afraid that perhaps the leverage within the system will make the brunt work of defeating the Fed in case it wants to fight back at the first signs of a more serious market stress.

Last week Benny was "misinterpreted by the markets" according to all Fed gentlemen that came to the tape right after market started sliding: Kocherlakota, Dudley, Fisher, Lacker, etc, etc.

They better know what they're doing.

click to enlarge:

*Disclaimer: charts and data are presented as I receive/see them. Sources are usually not checked for validation and my own calculations are of 'back of the envelope'-type. I am aware that some math that I do myself might be wrong and/or misleading to some extent. In financial markets the rate of change of economic data is often more important than the actual level and the perception of 'what is priced in' is more important than 'what is actually going to happen'. This is actually the way people pick entry and exit points. So... yes, sometimes you might say 'This guy is an idiot, this is way wrong!' with a high conviction, being right. Not to worry. Markets are made of expectations and the clash of conviction between its participants. Portfolio managers know that being an idiot is sometimes profitable and being smart is often a bad choice. It is all reality, sometimes good, sometimes bad. By the way: corrections to my analysis and intelligent debate is welcome. theintriguedtrader AT gmail do com

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