Wednesday, March 3, 2021

Morning Note: We Can Only Hope "This Time is Different"

You gotta love Wall Street! BofA analyst Stephen Suttmeier is out with a note stating that the buying of stocks with borrowed money (margin debt), while it's at an all time nominal high, is not excessive -- when you look at it compared to the total nominal value of the stock market.

Here's from Bloomberg this morning:

"Buying U.S. stocks with borrowed money has yet to become
excessive even after a bull-market surge, according to Stephen
Suttmeier, a Bank of America Corp. analyst. He cited a
comparison between the total amount of margin debt and the S&P
500’s market value in a report Monday."


"Margin loans increased 66% to a record $798.6 billion for the 10 months ended in January, data compiled by the Financial Industry Regulatory Authority show."
"“Investors are not over-levered,” Suttmeier wrote."

Well, you know, the S&P 500's market cap is WAY into its record all time high as well... Hmm.... 

So, I'm thinking about mortgage debt in 2007 -- I suppose it wasn't so bad at the time, considering the value of all residential real estate -- at the time... Well.... 

Asian equities had a good night last night, with all but 2 of the 16 markets we track closing higher.

Europe, on the other hand, is rolling over as I type, with all but 5 of the 19 bourses we follow in the red so far this morning.

U.S. major averages are lower (tech by a lot), as interest rates are notably higher, to start the day: Dow down 53 points (0.19%), SP500 down 0.78%, SP500 Equal Weight down 0.40%, Nasdaq 100 down 1.64%, Russell 2000 down 0.95%%.

The VIX (SP500 implied volatility) is up 8.63%. VXN (Nasdaq i.v.) is up 10.63%.

Oil futures are up 1.87%, gold's down 1.35%, silver's down 2.38%, copper futures are down 1.99% and the ag complex is down 0.29%.

The 10-year treasury is down a bunch (yield up a bunch) and the dollar is up 0.29%.

Our core leaders this morning are energy, oil services, financials, India, banks and AT&T. Our biggest losers are silver, utilities, tech, healthcare and gold. Al in, our core portfolio is off 0.37% to start the session.

Can't emphasize enough the main message in Reinhart and Rogoff's essential volume This Time is Different:

"If there is one common theme to the vast range of crises we consider in this book, it is that excessive debt accumulation, whether it be by the government, banks, corporations, or consumers, often poses greater systemic risks than it seems during a boom."

Have a nice day!

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