201510.03
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The Weekly Snapshot

Top News Headlines Russia, Iran surge into Syria; Obama blusters Obama signs stop gap funding bill; vows to veto any more short term extensions over debt limit. Hurricane Joaquin tracks up US east coast; Trump vows to deport if makes landfall. Education Secretary Aren Duncan steps down having accomplished nothing. Economic News Employment gains fading,…

201507.02
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China’s Stock Bubble Complication

The Shanghai Composite Index for shares on China’s somewhat stock market peaked on June 12, a Friday before a weekend in which every major analyst and China-watcher expected the PBOC to unleash rate cuts. It wasn’t a very good week in terms of economic data for China, which is likely why the call-to-action for the…

201504.20
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China Literally Does It Again

The fact that China did something will always be treated with hyperventilation, but lately that includes an almost bi-polar nature. Last week, the PBOC branch in Shanghai made what looked to be a “tightening” gesture upon Chinese stocks, ordering commercial banks, in a memo, to check for risks in margin debt. They also banned margin…

201504.19
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A Canary In The Coal Mine?

What does GE know that we don’t? That was my initial reaction to the news this week that GE is exiting the finance business that has provided it a seemingly endless stream of profits over the last three decades. Well, except for that little interruption that has come to be known as the Great Recession….

201409.26
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Further Measures of Market Risk

Continuing on with the valuation theme, there are a couple of additional “market” indicators that are also at or above dot-com levels. While not strictly a valuation technique, the level of margin debt and really customer net worth gives us an insight into one aspect of multiple expansion. Margin debt for FINRA accounts (which includes…

201408.26
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The Greater the Stock Bubble, the Less Monetary Theory Holds

The actual total accumulated balance for margin debt in reported stock accounts fell in July from June’s record amount. But even with a decline in stock-related debt investors moved even further toward complacency, as declines in free credit and available cash more than outpaced the drop in margin. As a result, net worth has never…

201407.29
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Margin Debt Returns

Margin debt again escalated in June, putting some emphasis back into the smaller caps and their high beta compatriots. After surpassing the dot-com bubble’s previous levels for both nominal margin usage and negative investor net worth in February, some caution was re-admitted if only briefly. There wasn’t much discernable impact on the broader market indices,…

201406.10
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Leverage Channels

Following up on yesterday’s observations about valuations in stocks, margin debt declined in April for the second consecutive month. The absolute change across both March and April is not very large, amounting to $27 billion or 5%. Total cash balances were essentially unchanged, meaning that investors retired margined positions and reduced overall leverage in retail…

201405.06
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Margin Debt Matches Small Caps

We still may not know the difference between cause and effect, but margin debt balances dropped in March for the first time in ten months. The $14 billion decline in margin debt was also coincident to an increase of $6 billion in relative cash balances in equity accounts at FINRA dealers. That meant total investor…

201403.11
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Valuation Bonanza – March 2014

Margin Debt New Record (FINRA) Stock Margin Accounts Net Worth (total margin debt minus free cash balances and credit) Finally Surpasses Dot-com Peak Rate of Change In Net Worth Total Margin Debt Scaled to Nominal GDP Shiller CAPE Tobins Q (market value of corporate equities divided by corporate net worth) Corporate Equities Scaled to GDP…