Stock Market Margin Debt Bubble

By: Nadeem_Walayat

A handful of stocks are driving the indices higher, Apple worth $2.3 trillion, Microsoft $2 trillion, Amazon $1.8 trillion, Google 1.8 trillion, Facebook $1 trillion even that over priced pile of poop Tesla came close to being valued at $1 trillion, we are definitely in a bubble, you only need to go onto youtube and watch the to the moon videos of Cathy Wood, literally everything's going to go to the moon because her barely out of puberty Quants decree it to be so. This is clearly a major warning sign of a unsustainable trend when indices are ruled by such a small clique of tech stocks where the greatest similarity is with the dot come bubble in terms of the valuation of stocks that actually produce revenues unlike the largely worthless dot com's of that time.

Margin Debt Bubble

One of the mechanisms for this deflation will be the unwinding of the margin debt bubble where there does exist some correlation between market peaks and troughs i.e. buy deviations from the high. Though has been a poorer indicator for market tops for the past decade, nevertheless is flashing a warning that the current level of leverage could result in a sizeable stock market drop on par with that of March 2020, so the stock market is trading on borrowed time.

Even worse is that the surge in mortgage debt is in large part to do with investors who should NOT be investing on margin such as Robinhood allowing anyone to sign up to a margin account i.e. very weak hands.

Also I suspect the banks will be bailed out again so as to prevent debt deflation and so expect to see much higher QE than what we have seen so far.

Hence why I DE-RISKED over valued AI stocks at the HIGHS!

On a side note it's much worse for crypto markets because the exchanges allow use of other crypto's as collateral, however all crypto's fall together which means margin calls are going to happen far earlier than with stocks which results in far greater price falls due to forced sellers which actually happened on 20th May when Bitcoin had a flash crash which resulted in forced closure of leveraged positions and further selling of Alt Coins. And if that were not bad enough then we have Tether USDT! A ticking bomb! Imagine the amount of forced selling that will create when it implodes! Easily drop crypto prices by 70%!

This analysis is an excerpt from my recent extensive analysis evaluating the prospects for a Financial Crisis 2.0 - Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! the whole of which has first been made available to Patrons who support my work.

• You Don't Know How Big of a Bubble Your in until AFTER it BURSTS
• Stock Market Summer Correction
• REPO Market Brewing Financial Crisis Black Swan Danger
• Margin Debt Bubble
• US Bond Market Long-term Trend
• Michael "Big Short" Burry CRASH and HYPERINFLATION WARNING!
• Michael Burry's Track Record
• Michael Burry's Portfolio
• Investing During Uncertainty
• AI Stocks Portfolio Buying July Levels Update
• HEDGING AI Stocks Portfolio
• Crypto Bear Market Accumulation State
• Bitcoin Bull / Bear Indicator
• Market Oracle AI Coin Thoughts
• Biotech Brief

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• Stock to Flow Infinity and Beyond!
• Bitcoin, Crypto's and the Inflation Mega-trend
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Nadeem Walayat has over 30 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

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